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Inflation and Unemployment. Warm-up. Why would an unemployed person work a job for no pay ? What is a product or service everyone uses?. Content Objective. Today I will be able to analyze inflation and unemployment in the United States by constructing a short response. Price Index.
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Warm-up • Why would an unemployed person work a job for no pay? • What is a product or service everyone uses?
Content Objective • Today I will be able to analyze inflation and unemployment in the United States by constructing a short response.
Price Index • Measures changes in prices over time • Consumer Price Index • 364 goods and services- The Basket • What’s a good product or service for the CPI? • Base years- 1982-1984
Price Index • * FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
Price Index • * FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)* HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
Price Index • * FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)* HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)* APPAREL (men's shirts and sweaters, women's dresses, jewelry)
Price Index • * FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)* HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)* APPAREL (men's shirts and sweaters, women's dresses, jewelry)* TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
Price Index • * FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)* HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)* APPAREL (men's shirts and sweaters, women's dresses, jewelry)* TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)* MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)*
Price Index • * FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)* HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)* APPAREL (men's shirts and sweaters, women's dresses, jewelry)* TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)* MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)* RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);*
Price Index • * FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)* HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)* APPAREL (men's shirts and sweaters, women's dresses, jewelry)* TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)* MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)* RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);* EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
Price Index • * FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)* HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)* APPAREL (men's shirts and sweaters, women's dresses, jewelry)* TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)* MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)* RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);* EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);* OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).
Price Index and Inflation • CPI= Market basket/by base year average • Inflation= change in CPI from previous year Inflation- 1951
High-level Thinking Question • In times of prolonged inflation, who suffers more? Creditors or debtors? Why?
Unemployment • Labor force- all persons 16 and older who are either employed or actively seeking employment. 154,000,000. • Excludes military and incarcerated • Unemployed- all persons seeking work. • worked <1hr., family business <15 hrs
Unemployment Rate • Unemployed / labor force
Sources of Unemployment • Frictional- workers between jobs
Sources of Unemployment • Frictional- workers between jobs • Structural- fundamental change in tastes or how business is done. • Outsourcing
Sources of Unemployment • Frictional- workers between jobs • Structural- fundamental change in tastes or how business is done. • Outsourcing • Technological- machines replace workers
Sources of Unemployment • Frictional- workers between jobs • Structural- fundamental change in tastes or how business is done. • Outsourcing • Technological- machines replace workers • Cyclical- swings in the business cycle
Sources of Unemployment • Frictional- workers between jobs • Structural- fundamental change in tastes or how business is done. • Outsourcing • Technological- machines replace workers • Cyclical- swings in the business cycle • Seasonal- centers around weather