3a395fac98ab3055ca4276405f5d4e3a_EC103 Week 02 S14.ppt

8/9/2019 3a395fac98ab3055ca4276405f5d4e3a_EC103 Week 02 S14.ppt

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Source: Economic Report of the President, various issues.

Annual growthrate of real GDP

6

8

4

2

0

- 2

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Long-run growth rate(approx. 3%)

2009

C9: What motivatesmacroeconomists !" that #u"$ne"" c%cle" are a &a'or (a$n L$terall%: )ece""$on" *"ha+e+ area", are correlate+ w$th h$gher +$orce an+

"u$c$+e rate". $ncrea"e+ (h%"$cal an+ &ental $llne"". etc

An+ variance *$e /olat$l$t%, wa"te" re"ource" e(en+e+ to (rotectour"ele" *$e. r$"-ao$+$ng "trateg$e"o((ortun$t% co"t,


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Some evidence

3n general &entalhealth

An+ how #out (ro(ert%

cr$&e an+ "(ou"ea#u"e

2


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!

"pecial concern: #o$ %usinesscycles a&ect the la%or market

Pol$c% &aer" generall% ranunemployment a" the &o"thar&ful &acro (ro#le&. ahea+of other &acro $""ue" "uch a"

inflation, etc< A" we=ll "ee later $n the

"e&e"ter. that=" ha+ $ntere"t$ng(ol$c% $&(l$cat$on". an+ ha"

occa"$onall% le+ to (ol$c$e"wh$ch were ult$&atel% har&ful Pre$ew: The Phillips Curve

controvers!


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>$gure 91

Data fro&?ou"ehol+ Sure%.Se(teer 2011

!n Se(teer 2011.the wor$ng-age(o(ulat$on of then$te+ State" wa"2401 &$ll$on@he wor$ng-age

(o(ulat$on $"+$$+e+ $nto tho"e$n the la#or force *1540 &$ll$on,an+ tho"e not $n the la#or force *861 &$ll$on,@he la#or force $" +$$+e+ $nto the e&(lo%e+ *1400 &$ll$on,an+ the une&(lo%e+ *140 &$ll$on,

@ho"e not $n the la#or force are +$$+e+ $nto tho"enot aa$la#le for wor *799 &$ll$on,an+ tho"e aa$la#le for wor #ut not currentl% wor$ng *62 &$ll$on,>$nall%. tho"e aa$la#le for wor #ut not $n the la#or force are +$$+e+ $nto+$"courage+ worer" *10 &$ll$on,an+ tho"e not currentl% loo$ng for wor for other rea"on" *52 &$ll$on,


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The unemplo!ment rate. @he (ercentage of the la#or force that $"une&(lo%e+:

"a#or force participation rate. @he (ercentage of the wor$ng-age (o(ulat$on$n the la#or force:

ratentUnemployme100forceLabor

unemployedofNumber=

Be can u"e the $nfor&at$on $n >$gure 91 to calculate three $&(ortant&acroecono&$c $n+$cator":

"$ng the nuer" fro& >$gure 91. we can calculate the une&(lo%&ent ratefor Se(teer 2011:

%1.9100million1!.0

million1!.0=

rateionparticipatforceLabor100

populationage"#orking

forceLabor=


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>or Se(teer 2011. the la#or force (art$c$(at$on rate wa"

%1.$!100

million!0.1

million1!.0=

The emplo!ment$population ratio. @he (ercentage of the wor$ng-age(o(ulat$on that $" e&(lo%e+:

ratiopopulation&mployment100populationage"#orking

&mployment=

>or Se(teer 2011. the e&(lo%&entC(o(ulat$on rat$o wa"

%'.(100million!0.1

million1!0.0=


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What's happene( to la%or forceparticipation recently) #o$ $oul(

you *n( out) @han" to the worl+-w$+e $nterwe# an+ theureau of La#or Stat$"t$c". &o"t e% u(-to-the-&$nute &acro +ata $" at our f$ngert$(" C

eg. la#or force (art$c=n *L>P, rate:ureau of La#or Stat$"t$c" Data

Bhat=" u( w$th that D$"courage&ent

Bhat $f L>P wa"n=t $n the tan


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G$en the discouragedworker phenomenon. "o&eargue that the employment /population ratio$" a #etter

$n+$cator of 'o# aa$la#$l$t% thanthe unemployment rate ut th$" rat$o &$""e" the fact that

"o&e worer" w$th+raw fro& thela#or force #ecau"e the% +on=tnee+want to wor *affluent ant$-&ater$al$"t$c,. not 'u"t #ecau"ethe%=re +$"courage+

otto& l$ne: @here are no(erfect (erfor&ance &ea"ure".Eacro-w$"e

What's $ron $ith the unemployment rateas a aue of the health of la%or markets)


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>$gure 92 @he 3ff$c$al ne&(lo%&ent )ate an+ a roa+ Eea"ure of thene&(lo%&ent )ate. 1994C2011

@he re+ l$ne "how" the u"ual &ea"ure of the une&(lo%&ent rate@he #lue l$ne "how" what $t woul+ #e $f the LS ha+ counte+ a" une&(lo%e+ all (eo(lewho were aa$la#le for wor #ut not act$el% loo$ng for 'o#" an+ all (eo(le who were $n(art-t$&e 'o#" #ut wante+ full-t$&e 'o#"@he +$fference #etween the &ea"ure" wa" (art$cularl% large +ur$ng the 2007C2009rece""$on an+ the wea recoer% that followe+

Sha+e+ area" $n+$cate &onth" of rece""$on


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Fote how the +urat$on of une&(lo%&ent "($e+ follow$ngthe 2007C2009 rece""$on Why?

Ea$ngthe

;onnect$on

@he aerage (er$o+ of une&(lo%&ent wa" tw$ce a" h$gh follow$ng the 2007C2009rece""$on a" follow$ng an% other rece""$on "$nce the en+ of Borl+ Bar !!


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@a#le 91 ?ou"ehol+ an+ "ta#l$"h&ent Sure% Data for Augu"t an+ Se(teer2011 Household Survey Establishment Survey

August September Change August September Change

&(lo%e+19.627.00

0 140.025.000 98.000 11.21.000 11.4.000 10.000

ne&(lo%e+ 1.967.000 1.992.000 25.000

La#or force15.594.00

0154.017.000 42.000

ne&(lo%&ent rate 91 91 0

!" Go=t Stat-ee($ng L$e a Sau"age >actor%De"($te $t" +raw#ac". the e"ta#l$"h&ent "ure% ha" the a+antage of #e$ng+eter&$ne+ #% actual (a%roll" rather than #% uner$f$e+ an"wer". a" $" the ca"e w$th

the hou"ehol+ "ure%

ote& @he "u& of e&(lo%e+ an+ une&(lo%e+ &a% not eHual the la#or force +ue

to roun+$ng

@he +$"cre(anc% #etween the two "ure%" $" (artl% +ue to the "l$ghtl% +$fferentgrou(" the% coer an+ (artl% to $naccurac$e"


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>$gure 95The Sausage Factory *cont,: )e$"$on" to &(lo%&ent ;hange".a" )e(orte+ $n the "ta#l$"h&ent Sure%

3er t$&e. the LS re$"e" $t" (rel$&$nar% e"t$&ate" of change" $n e&(lo%&ent Dur$ng the2007C2009 rece""$on. &an% &ore 'o#" were lo"t than the (rel$&$nar% e"t$&ate" "howe+@he green #ar" "how &onth" for wh$ch the LS re$"e+ $t" (rel$&$nar% e"t$&ate" to "howfewer 'o#" lo"t *or &ore 'o#" create+,. an+ the re+ #ar" "how &onth" for wh$ch the LS

re$"e+ $t" (rel$&$nar% e"t$&ate" to "how &ore 'o#" lo"t *or fewer 'o#" create+,


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Frictional:

;au"e+ #% imperfect informationan+ search costs 3ccur" #ecau"e: e&(lo%er" are not aware of all aa$la#le worer"

an+ the$r Hual$f$cat$on". an+. aa$la#le worer" are not full% aware of all the 'o#"

#e$ng offere+ #% e&(lo%er" Structural:

)eflect" an $&(erfect &atch of e&(lo%ee "$ll" to "$llreHu$re&ent" of the aa$la#le 'o#"

E$ght #e a funct$on of the (ace of techn$cal change.co&(o"$t$on of la#or force. or la#or &t regulat$on"

Cyclical: )eflect" #u"$ne"" c%cle con+$t$on" Bhen there $" a general +ownturn $n #u"$ne"" act$$t%.

c%cl$cal une&(lo%&ent $ncrea"e"

+,econstructin- unemployment: 3 types


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Full EmploymentI Leel of e&(lo%&ent thatre"ult" fro& eff$c$ent u"e of re"ource"< $t allow"for "o&e une&(lo%&ent that re"ult" fro&J Search factor":

$&(erfect an+ co"tl% $nfor&at$on Structural factor":

+%na&$c change" $n econo&% *technolog%.+e&ogra(h%,$gure 97

The CPI Market asket!

"ecember #$%$@he ureau of La#orStat$"t$c" "ure%"0.000 hou"ehol+" onthe$r "(en+$ng ha#$t"@he re"ult" are u"e+to con"truct a mar-et#as-et of goo+" an+"er$ce" (urcha"e+#% the t%($cal ur#anfa&$l% of four@he chart "how" the"egoo+" an+ "er$ce".

grou(e+ $nto e$ght#roa+ categor$e"@he (ercentage" re(re"entthe e(en+$ture "hare" of thecategor$e" w$th$n the &aret #a"et@he categor$e" of hou"$ng. tran"(ortat$on. an+ foo+ &ae u( a#out three-Huarter" of the&aret #a"et

;on"u&er (r$ce $n+e *;P!, An aerage of the (r$ce" of the goo+" an+"er$ce" (urcha"e+ #% the t%($cal ur#an fa&$l% of four


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ase &ear '%((() #$%# #$%*

Product +uantity Price E,penditures Price

E,penditures'on base-year

.uantities) Price

E,penditures'on base-year

.uantities)

%eea&$nat$on" 1 M5000 M5000 M10000 M10000 M8500 M8500

P$KKa" 20 1000 20000 1500 0000 1400 28000

oo" 20 2500 50000 2500 50000 2750 55000

@3@AL M75000 M90000 M91500

@he alue of the ;P! $" "et eHual to 100 for the #a"e %ear !n an% other %ear.$t eHual" the rat$o of the +ollar a&ount nece""ar% to #u% the &aret #a"et of goo+"$n that %ear +$$+e+ #% the +ollar a&ount nece""ar% to #u% the &aret #a"et ofgoo+" $n the #a"e %ear. &ult$(l$e+ #% 100

ecau"e the ;P! &ea"ure" the co"t to the t%($cal fa&$l% to #u% a re(re"entat$e#a"et of goo+" an+ "er$ce". $t $" "o&et$&e" referre+ to a" the cost+of+livin* index

@he follow$ng ta#le "how" how the ;P! $" con"tructe+. a""u&$ng that the &aret#a"et ha" onl% three (ro+uct":

ssumin* that households #u! the same mar-et #as-et of products each month.the Huant$t$e" of the (ro+uct" (urcha"e+ $n 2012 an+ 201 are $rreleant $n

calculat$ng the ;P! @he nuer" $n the ta#le can g$e u" the ;P! for tho"e %ear"


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Formula Applied to 2012 Applied to 2013

10100-0

900=

1100-0

91=

/ 2 100yearbasein thees&*penditur

yearcurrentin thees&*penditur

@he alue" of 120 an+ 122 are index num#ers. wh$ch &ean" the% are not &ea"ure+$n +ollar" or an% other un$t"The CP/ is intended to measure chan*es in the price level over time @hu". the$nflat$on rate $n 201 woul+ #e the (ercentage change $n the ;P! fro& 2012 to 201:

Don=t Let @h$" ?a((en to ouDon=t E$"calculate the !nflat$on )ate

Su((o"e %ou are g$en the +ata $n the follow$ng ta#le an+ are a"e+ to calculatethe $nflat$on rate for 2010:

our @urn:@e"t %our un+er"tan+$ng #% +o$ng relate+ (ro#le& 45 at the en+ of th$" cha(terE%conLa#

&ear CPI

2009 216

2010 219

ecau"e the $nflat$on rate $" the (ercentage $ncrea"e $n the (r$ce leel fro& the(re$ou" %ear. an+ notthe (ercentage $ncrea"e fro& the #a"e %ear. the correctcalculat$on of the $nflat$on rate for 2010 $":

%-.1100

10

101=

%!.11001$

1$19=


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!" the ;P! Accurate

0 1u#stitution #ias. !n con"truct$ng the ;P!. the LS a""u&e" that con"u&er"(urcha"e the "a&e &onthl% a&ount of each (ro+uct $n the &aret #a"et. #utcon"u&er" actuall% #u% fewer of tho"e (ro+uct" that $ncrea"e &o"t $n (r$ce

0 /ncrease in ualit! #ias. @he LS atte&(t" to &ae a+'u"t&ent" "o that onl%

the (ure $nflat$on (art of (r$ce $ncrea"e" $" $nclu+e+ $n the ;P!. #ut "o&e (r$ce$ncrea"e" are $nclu+e+ that (artl% reflect an $&(roe+ Hual$t% of (ro+uct"

0 2utlet #ias. ecau"e the LS cont$nue+ to collect (r$ce "tat$"t$c" fro&tra+$t$onal full-(r$ce reta$l "tore". the ;P! +$+ not reflect the (r$ce" "o&econ"u&er" actuall% (a$+ at +$"count "tore" an+ oer the !nternet

0 e product #ias. >or &an% %ear". the LS u(+ate+ the &aret #a"et ofgoo+" u"e+ $n co&(ut$ng the ;P! onl% eer% 10 %ear". wh$ch eclu+e+ new(ro+uct" $ntro+uce+ #etween u(+ate"

@here are four #$a"e" that cau"e change" $n the ;P! to oer"tate the true$nflat$on rate #% 05 (ercentage (o$nt to 1 (ercentage (o$nt. accor+$ng to &o"tecono&$"t". wh$ch the LS cont$nue" to tae "te(" to re+uce:

Producer price inde, 'PPI) An aerage of the (r$ce" rece$e+ #% (ro+ucer" of

goo+" an+ "er$ce" at all "tage" of the (ro+uct$on (roce""


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&ear/ominal AverageHourly Earnings

CPI'%(0#1%(02 3 %$$)

4eal Average Hourly Earnings'%(0#1%(02 dollars)

2008 M2162 2162 M1000

2009 2221 2159 1029

2010 2259 2186 10

;alculat$ng )eal Aerage ?ourl% arn$ng"

Sole+ Pro#le& 95

@he"e are the re"ult" for all three %ear":

Ste( : ;alculate the (ercentage change $n real aerage earn$ng" fro& 2009 to 2010@h$" (ercentage change $" eHual to

%!.01009.10

9.10''.10=

Be can conclu+e that real aerage hourl% earn$ng" $ncrea"e+ "l$ghtl% #etween 2009an+ 2010>or (ur(o"e" of calculat$ng the chan*e$n the alue of real aerage hourl% earn$ng" oer t$&e.the #a"e %ear of the (r$ce $n+e +oe"n=t &atter@o (roe $t. tr% calculat$ng real aerage hourl% earn$ng" for 2009 an+ 2010 $n 2010 +ollar".an+ then calculate the (ercentage changenle"" %ou &ae an ar$th&et$c error. %ou "houl+ f$n+ that the an"wer $" "t$ll 04 (ercent

our @urn:>or &ore (ract$ce. +o relate+ (ro#le&" 5. 54. 55. an+ 56 at the en+ of th$" cha(ter

E%conLa#


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2 kin(s of in


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29

=nanticipate( in


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Wealth transfer eectof unanticipated ination, details

?ere=" ane T S(eculator=" #alance "heet:

3;


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Wealth transfer eect (cont. Fow there=" an unant$c$(ate+ 44% increase

in the price levelof /real *non-&onetar%,a""et" Few #alance "heet:

3

e% Hue"t$on: Bhat=" ane=" real net worth


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32

Takin a(vantae ofunanticipate( in


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S$nce unanticipated$nflat$on can "h$ft "o&uch wealth th$" wa%. $t $ncrea"e" r$" an+re+uce" olu&e of &an% (ro+uct$e act$$t$e"

!t +$"tort" the /"$gnal" "ent #% (r$ce". lea+$ngto &$"tae" $n re"ource allocat$on< !t force" (eo(le to "(en+ le"" t$&e (ro+uc$ng

an+ &ore t$&e tr%$ng to (rotect the$r wealth

an+ $nco&e fro& the uncerta$nt% relate+ to(r$ce olat$l$t% ;urrent ea&(le": Batch UeneKuela an+ Argent$na

"o in


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"o: What causes in

3a395fac98ab3055ca4276405f5d4e3a_EC103 Week 02 S14.ppt

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