What are the measures of unemployment
1) Unemployment rate
2) Labour force participation
Definitions of labour force and adult population?
Labour force = unemployed + employed
Adult population = unemployed + employed + not in the Labour force
How to calculate unemployment rate
1) Unemployment rate
100x #of unemployed/Labour force
How to calculate labour participation rate
2) Labour force participation rate
Percentage of adult population that are not in the workforce
100x Labour force/adult population
What is Classical unemployment?
Surplus of Labour = Ls - Ld
What is Compensation differentials
Changes in wages due to nonmonetary factors such as safety, unpleasantness and difficulty
Earn more in order to compensated
How to calculate Private saving
Y-T-C
Amounts households have after paying for shit
How to calculate Public saving (budget deficit or budget surplus)
T-G
The amount the gov has public taxpayer money after spending
How to calculate national savings
S=I
The sum of Public saving and private saving
What is a Foreign portfolio
- Financed foreign but operated domestically
What is the GDP deflator
Nominal GDP / Real GDP x 100
Rise in nominal relative prices rather than quantity
can also calculate the % change in deflator
-The inflation rise
How often is CPI collected
- Stats NZ collect prices on a quarterly basis
- 100,000 prices are collected
- Renew the fixed baskets every 3 years
How to calculate the CPI
- Find the prices through going to the supermarket. sum the basket
- Calculate the basket price:
Baskets in the current year, divide by the basket in base year, and multiply by 100. - Calculate the inflation rate:
(CPI year 2 - year 1) / year 1 x 100.
New - old/old
What is included in the CPI
- Can be produced outside the country or inside the country
- Only includes goods bought directly by a consumer
How to calculate the CPI Equivalent prices
- Price x (old CPI/new CPI)
What does a lower interest rate mean for borrowers and lenders
- Lower interest rate is good for borrower
- Lower interest rate is bad for lenders
how to calculate the GDP over time - compounding
Old x (avg grwth) to the power of time
What will happen if the government has to borrow more money to cover a larger budget deficit
What is this phenomenom called
1) Supply will shift to the left
2) Interest will go down
Crowding out, banks has less money for the private sector
What will happen if Increase the OCR in order to control inflation to 1-3%
1) The curve will not be affected
2) Reserve requirement goes up the supply will shift to the right
3) higher interest rate, discourage spending
what will happen if If the gov increases the tax on investment earnings
1) Less incentive to sav so the suply curve will shift to the left
Interest rate will go up and prices will go up
what will happen if If bsns communities become more optimistic about profitability
1) Demand to the right
Interest rate goes up, prices increase
What is supply and demand in loanable funds
Demand= ppl borrowing
supply = ppl savings
What is the VMPL?
Value of marginal product of labour
= P x MPL
In order to convert units to money
What is the MPL? and what does it have to do with the marginal diminishing returns
change in output / change in labor
The marginal product of a product declines a L increases
