Economics and Statistics

Employment and unemployment: Unemployment: to be actively seeking job opportunities but unable to find work.  Employment: to have a paid job, either part time or full time. Unemployment rate:  Labor force: population of a nation that are either employed or unemployed (i.e seeking to work). Unemployment increases during recessions and falls during expansionary phases of the business cycle. Example: This graph represents the unemployment rate from 2008-2010. The shaded area indicates a period of recession, notice how sharply the unemployment rate increases over that period, the rate almost doubles. Look how over a period of economic expansion (2010-2017), the unemployment falls. It is even lower than at the start of the economic crisis in 2007. The unemployment rate is a very important (though not perfect) economic indicator, as it shows a degree of how a society is using its available resources. Shortcomings of the unemployment rate as an economic indicator: discourag...

Inflation and deflation: Inflation: an increase in the average price level of a nation's output over time. If a country is experiencing inflation, the inflation rate must be positive. Inflation rate is the percentage change in the price level between one period and a previous period. Deflation: a decrease in the average price level of a nation's output over time. deflation means that the inflation rate must be negative.  Inflation as a macroeconomic indicator: Inflation reduces real incomes of households, thereby reducing their standard of living. Deflation reduces the incentive for firms to invest, it negatively impact borrowers (both firms and households). By knowing the rate of change in price level, policy-makers can implement targeted policies to keep the price level stable. Shortcomings of inflation as an economic indicator: Inflation is derived from a price index (e.g CPI), which estimates a change in prices based on a particular selection of goods. If the index fails to...

Per Capita GDP: Real GDP adjusts for prices, per capita gdp adjusts for population size. Countries with large populations have large GDP's  since their supply of labor and human capital allows them to produce more output than countries with smaller populations. The real average income is given by the following formula: The following table shows the top five largest economies, and the top five per capita GDP: Countries  Nominal GDP ($ million)  Countries  p.c GDP U.S.A $21,439,453 Luxembourg $ 113,196 China $ 14,140,163 Switzerland $ 83,716 Japan $ 5,154,475 Norway $77,975 Germany $ 3,863,344 Ireland $ 77,771 India $ 2,935,570 Qatar $68,687 Notice that the top five countries with the largest economies are not in the top five countries with largest per capita GDP's. Per Capita GDP provides a much better measure (though still imperfect) of the standard of living in a country than GDP. Furthermore, real per capita GDP provides a way to estimate how productive, on av...

You have the following table containing information about country Y's GDP deflator, nominal, and real GDP. If the base year is 2015, fill in the blanks and then find the annual inflation rate for each year. Year  Nominal GDP  GDP Deflator  Real GDP 2015 $23,457 100 $23,457 2016 $25,752 ... $23,943 2017 $25,982 108.1 ... 2018 $26,016 ... $25,431.1 2019 $26,323 105.5 ... Solution: Year  Nominal GDP  GDP Deflator  Real GDP   Inflation rate 2015 $23,457 100 $23,457 n.a 2016 $25,752 107.6 $23,943 7.6% 2017 $25,982 108.1 $24,035.2 0.45% 2018 $26,016 102.3 $25,431.1 -5.37% 2019 $26,323 105.5 $24,950.6 3.13%  GDP deflator for the year 2018: Real GDP for the year 2017: General formula to find real GDP by re-arranging the GDP deflator formula: Notice that the sub-index i is for the year. The (annual) inflation rate is simply the growth rate of prices from a year to its previous year: Inflation rate of the year 2018: Notice that in 2018 country Y experienced...