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Mankiw 6e PowerPoints

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The Data of Macroeconomics
2
CHAPTER

CHAPTER 2 The Data of Macroeconomics
This PowerPoint chapter contains in-class exercises requiring students to have calculators.

To help motivate the chapter it may be helpful to remind students that much of macroeconomics—and this book—is devoted to understanding the behavior of aggregate output, prices, and unemployment.

Much of Chapter 2 will be familiar to students who have taken an introductory economics course. Therefore, you might consider going over Chapter 2 fairly quickly. This would allow more class time for the subsequent chapters, which are more challenging.

Instructors who wish to shorten the presentation might consider omitting:
a couple of slides on GNP vs. GDP
a slide on chain-weighted real GDP vs. constant dollar real GDP
some of the in-class exercises (though I suggest you ask your students to try them within 8 hours of the lecture, to reinforce the concepts while the material is still fresh in their memory).
the slides on stocks vs. flows. Subsequent chapters do not refer to these concepts very much.

There are hidden slides you may want to “unhide.” They show that the GDP deflator and CPI are weighted averages of prices. If your students are comfortable with algebra, then this material might be helpful. However, it’s a bit technical, and doesn’t appear in the textbook, so I’ve hidden these slides—they won’t appear in the presentation unless you intentionally “unhide” them.

Other hidden slides toward the end of the file contain an in-class exercise asking students to use the growth rate rules to determine the percentage changes in unemployment and labor force participation.

IN THIS CHAPTER, YOU WILL LEARN:
. . . the meaning and measurement of the
most important macroeconomic statistics:
gross domestic product (GDP)
the consumer price index (CPI)
the unemployment rate

CHAPTER 2 The Data of Macroeconomics

Gross Domestic Product:
Expenditure and Income
Two definitions:
Total expenditure on domestically produced
final goods and services.
Total income earned by domestically located
factors of production.
Expenditure equals income because
every dollar a buyer spends
becomes income to the seller.

CHAPTER 2 The Data of Macroeconomics

Most students, having taken principles of economics, will have seen this definition and be familiar with it. It’s not worth spending a lot of time on.

It might be worthwhile, however, to briefly review the factors of production.

The Circular Flow
Households
Firms
Goods

Labor

Expenditure ($)

Income ($)

CHAPTER 2 The Data of Macroeconomics

Value added
Value added: The value of output minus
the value of the intermediate goods
used to produce that output

CHAPTER 2 The Data of Macroeconomics

It might be useful here to remind students what the term “intermediate goods” means.

NOW YOU TRY
Identifying value added
A farmer grows a bushel of wheat
and sells it to a miller for $1.00.
The miller turns the wheat into flour
and sells it to a baker for $3.00.
The baker uses the flour to make a loaf of
bread and sells it to an engineer for $6.00.
The engineer eats the bread.
Compute value added at each stage
of production and GDP.

CHAPTER 2 The Data of Macroeconomics
This is end-of-chapter problem 2.

When students compute GDP, they should assume that these are the only transactions in the economy.

Lessons of this problem:

GDP = value of final goods = sum of value at all stages of production
We don’t include the value of intermediate goods in GDP because their value is already embodied in the value of the final goods.

Answer:
Each person’s value added (VA) equals the value of what he/she produced minus the value of the intermediate inputs he/she started with.
Farmer’s VA = $1
Miller’s VA = $2
Baker’s VA = $3
GDP = $6
Note that GDP = value of final good = sum of value added at all stages of production.

Even though this problem is highly simplified, its main lesson holds in the real world: The value of all final goods produced equals the sum of value added in all stages of production of all goods.

Final goods, value added, and GDP
GDP = value of final goods produced
= sum of value added at all stages of production.
The value of the final goods already includes the value of the intermediate goods, so including intermediate and final goods in GDP would be double counting.

CHAPTER 2 The Data of Macroeconomics

The expenditure components of GDP
consumption, C
investment, I
government spending, G
net exports, NX
An important identity:
Y = C + I + G + NX

aggregate expenditure
value of total output

CHAPTER 2 The Data of Macroeconomics

This slide lists the expenditure components; the following slides will define and discuss each of them.

We can define GDP not just as total expenditure on final goods and services, but also as (the value of) aggregate output of final goods and services.

An identity is an equation that always holds because of the way the variables are defined.

Consumption (C)
Durable goods
last a long time.
E.g., cars, home appliances
Nondurable goods
last a short time.
E.g., food, clothing
Services
are intangible items purchased by consumers.
E.g., dry cleaning,
air travel

Definition: The value of all goods and services bought by households. Includes:

CHAPTER 2 The Data of Macroeconomics

A consumer’s spending on a new house counts under investment, not consumption. More on this in a few moments, when we get to Investment.

A tenant’s spending on rent counts under services—rent is considered spending on “housing services.”

So what happens if a renter buys the house she had been renting? Conceptually, consumption should remain unchanged: Just because she is no longer paying rent, she is still consuming the same housing services as before.

In national income accounting, (the services category of) consumption includes the imputed rental value of owner-occupied housing.

To help students keep all this straight, you might suggest that they think of a house as a piece of capital which is used to produce a consumer service, which we might call “housing services.” Thus, spending on the house counts in aggregate investment, and the value of the housing services that the house provides counts in aggregate consumption (regardless of whether the housing services are being consumed by the owner of the house or a tenant).

U.S. Consumption, 2014
45.4
15.3
7.5
68.2
7,990
2,691
1,320
12,002
Services
Nondurables
Durables
Consumption
% of GDP
$ billions

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CHAPTER 2 The Data of Macroeconomics

Source: Bureau of Economic Analysis, U.S. Department of Commerce
http://www.bea.gov
Third quarter advance estimate (released 12/23/2014)

Investment (I)
Spending on capital, a physical asset used in future production
Includes:
Business fixed investment
Spending on plant and equipment
Residential fixed investment
Spending by consumers and landlords on housing units
Inventory investment
The change in the value of all firms’ inventories

CHAPTER 2 The Data of Macroeconomics

Note that aggregate investment equals total spending on newly produced capital goods. If I pay $1,000 for a used computer for my business, then I’m doing $1,000 of investment, but the person who sold it to me is doing $1,000 of disinvestment, so there is no net impact on aggregate investment.

The housing issue

A consumer’s spending on a new house counts under investment, not consumption.
A tenant’s spending on rent counts under services—rent is considered spending on “housing services.”
So what happens if a renter buys the house she had been renting? Conceptually, consumption should remain unchanged: Just because she is no longer paying rent, she is still consuming the same housing services as before.
In national income accounting, (the services category of) consumption includes the imputed rental value of owner-occupied housing.
To help students keep all this straight, you might suggest that they think of a house as a piece of capital which is used to produce a consumer service, which we might call “housing services.” Thus, spending on the house counts in aggregate investment, and the value of the housing services that the house provides counts in aggregate consumption (regardless of whether the housing services are being consumed by the owner of the house or a tenant).

Inventories

If total inventories are $10 billion at the beginning of the year and $12 billion at the end, then inventory investment equals $2 billion for the year.
Note that inventory investment can be negative (which means inventories fell over the year).

U.S. Investment, 2014
0.5
3.2
12.8
16.5
94
566
2,244
2,905
Inventory
Residential
Business fixed
Investment
% of GDP
$ billions

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CHAPTER 2 The Data of Macroeconomics

Source: Bureau of Economic Analysis, U.S. Department of Commerce
http://www.bea.gov
Third quarter advance estimate (released 12/23/2014)

Investment vs. capital
Note: Investment is spending on new capital.
Example (assumes no depreciation):
1/1/2016:
Economy has $10 trillion worth of capital
During 2016:
Investment = $2 trillion
1/1/2017:
Economy will have $12 trillion worth of capital

CHAPTER 2 The Data of Macroeconomics

If you teach the stocks vs. flows concepts, this is a good example of the difference.

Stocks vs. Flows
A flow is a quantity measured per unit of time.
E.g., “U.S. investment was $2 trillion during 2016.”

Flow

Stock

A stock is a
quantity measured
at a point in time.
E.g.,
“The U.S. capital stock was $10 trillion on January 1, 2016.”

CHAPTER 2 The Data of Macroeconomics

The bathtub example is the classic means of explaining stocks and flows, and appears in Chapter 2.

Stocks vs. Flows: Examples
the govt budget deficit
the govt debt
# of new college graduates this year
# of people with college degrees
a person’s
annual savings
a person’s wealth
Flow
Stock

CHAPTER 2 The Data of Macroeconomics

Point out that a specific quantity of a flow variable only makes sense if you know the size of the time unit.

If someone tells you his/her salary is $5,000 but does not say whether it is per month or per year or otherwise, then you’d have no idea what his/her salary really is.

A pitfall with flow variables is that many of them have a very standard time unit (e.g., per year). Therefore, people often omit the time unit: “John’s salary is $50,000.” And omitting the time unit makes it easy to forget that John’s salary is a flow variable, not a stock.

Another point: It is often the case that a flow variable measures the rate of change in a corresponding stock variable, as the examples on this slide (and the investment/capital example) make clear.

NOW YOU TRY
Stock or Flow?
The balance on your credit card statement
How much time you spend studying
The size of your MP3/iTunes collection
The inflation rate
The unemployment rate

CHAPTER 2 The Data of Macroeconomics
You can use this slide to get some class participation. I suggest you display the entire slide, give students a few moments to formulate their answers, and then ask for volunteers. Doing so results in wider participation than if you ask for someone to volunteer the answer immediately after displaying each item on the list.

Here are the answers, and explanations:

The balance on your credit card statement is a stock. (A corresponding flow would be the amount of new purchases on your credit card statement.)
How much time you study is a flow. The statement “I study 10 hours” is only meaningful if we know the time period—whether 10 years per day, per week, per month, etc.
The size of your compact disc or MP3 collection is a stock. (A corresponding flow would be how many CDs you buy per month or how many MP3 tracks you buy per month.)
The inflation rate is a flow: We say “prices are increasing by 3.2% per year” or “by 0.4% per month.”
The unemployment rate is a stock: It’s the number of unemployed people divided by the number of people in the workforce. In contrast, the number of newly unemployed people per month would be a flow.

Note: Students have not yet seen official definitions of the inflation and unemployment rates. However, it is likely they are familiar with these terms, either from their introductory economics course or from reading the newspaper.

Note: The stocks vs. flows concept is not mentioned very much in the subsequent chapters. If you do not want your students to forget it, then a good idea would be to do the following: As subsequent chapters introduce new variables, ask students whether each new variable is a stock or a flow.

Government spending (G)
G includes all government spending on goods and services.
G excludes transfer payments
(e.g., unemployment insurance payments) because they do not represent spending on goods and services.

CHAPTER 2 The Data of Macroeconomics

Transfer payments are included in “government outlays,” but not in government spending. People who receive transfer payments use these funds to pay for their consumption. Thus, we avoid double-counting by excluding transfer payments from G.

U.S. Government Spending, 2014
– Federal
18.2
3,209
Govt spending
– State & local
Defense
7.1
11.2
4.5
2.6
1,241
1,968
784
457
Nondefense
% of GDP
$ billions

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CHAPTER 2 The Data of Macroeconomics

Source: Bureau of Economic Analysis, U.S. Department of Commerce
http://www.bea.gov
Third quarter advance estimate (released 12/23/2014)

Net exports (NX)
NX = exports – imports
Exports: the value of g&s sold to other countries
Imports: the value of g&s purchased from other countries
Hence, NX equals net spending from abroad on our g&s

CHAPTER 2 The Data of Macroeconomics

“g&s” is short for “goods & services”

U.S. Net Exports, 2014
$ billions % of GDP
Net exports of g&s –517 –2.9

Exports 2,367 13.4
Goods 1,645 9.3
Services 721 4.1

Imports 2,883 16.4
Goods 2,394 13.6
Services 489 2.8

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CHAPTER 2 The Data of Macroeconomics

Source: Bureau of Economic Analysis, U.S. Department of Commerce
http://www.bea.gov
Third quarter advance estimate (released 12/23/2014)

NOW YOU TRY
An expenditure-output puzzle?
Suppose a firm:
produces $10 million worth of final goods
only sells $9 million worth

Does this violate the
expenditure = output identity?

CHAPTER 2 The Data of Macroeconomics
If you do not wish to pose this as a question, you can “hide” this slide and skip right to the next one, which simply gives students the information.

Suggestion (applies generally, not just here):
When you pose a question like this to your class, don’t ask for students to volunteer their answers right away. Instead, tell them to think about it for a minute and write their answer down on paper. Then, ask for volunteers (or call on students at random). Giving students this extra minute will increase the quality of participation as well as the number of students who participate.

Correct answer to the question:
Unsold output adds to inventory, and thus counts as inventory investment—whether intentional or unplanned. Thus, it’s as if a firm “purchased” its own inventory accumulation.

Here’s where the “goods purchased for future use” definition of investment is handy: When firms add newly produced goods to their inventory, the “future use” of those goods, of course, is future sales.

Note, also, that inventory investment counts intentional as well as unplanned inventory changes. Thus, when firms sell fewer units than planned, the unsold units go into inventory and are counted as inventory investment. This explains why “output = expenditure”—the value of unsold output is counted under inventory investment, just as if the firm “purchased” its own output. Remember, the definition of investment is goods bought for future use. With inventory investment that future use is to give the firm the ability in the future to sell more than its output.

Why output = expenditure
Unsold output goes into inventory,
and is counted as “inventory investment” . . . whether or not the inventory buildup was intentional.
In effect, we are assuming that
firms purchase their unsold output.

CHAPTER 2 The Data of Macroeconomics

GDP:
An important and versatile concept
We have now seen that GDP measures:
total income
total output
total expenditure
the sum of value added at all stages
in the production of final goods

CHAPTER 2 The Data of Macroeconomics

This is why economists often use the terms income, output, expenditure, and GDP interchangeably.

GNP vs. GDP
Gross national product (GNP):
Total income earned by the nation’s factors of production, regardless of where located.
Gross domestic product (GDP):
Total income earned by domestically-located factors of production, regardless of nationality.
GNP – GDP = factor payments from abroad
minus factor payments to abroad
Examples of factor payments: wages, profits, rent, interest & dividends on assets

CHAPTER 2 The Data of Macroeconomics

Emphasize that the difference between GDP and GNP boils down to two things: location of the economic activity, and ownership (domestic vs. foreign) of the factors of production.

From the perspective of the U.S., factor payments from abroad include things like:

wages earned by U.S. citizens working abroad
profits earned by U.S.-owned businesses located abroad
income (interest, dividends, rent, etc) generated from the foreign assets owned by U.S. citizens

Factor payments to abroad include things like:

wages earned by foreign workers in the U.S.
profits earned by foreign-owned businesses located in the U.S.
income (interest, dividends, rent, etc) that foreigners earn on U.S. assets

Chapter 3 introduces factor markets and factor prices. Unless you’ve already covered that material, it might be worth mentioning to your students that factor payments are simply payments to the factors of production, for example, the wages earned by labor.

NOW YOU TRY
Discussion Question
In your country,
which would you
want to be bigger,
GDP or GNP?
Why?

CHAPTER 2 The Data of Macroeconomics
This issue is subjective, and the question is intended to get students to think a little deeper about the difference between GNP and GDP. Of course, there is no single correct answer.

Some students offer this response:
It’s better to have GNP > GDP, because it means our nation’s income is greater than the value of what we are producing domestically.
If, instead, GDP > GNP, then a portion of the income generated in our country is going to people in other countries, so there’s less income left over for us to enjoy.

GNP vs. GDP in Select Countries, 2012
Country GNP GDP GNP – GDP (% of GDP)
Bangladesh 127,672 116,355 9.7
Japan 6,150,132 5,961,066 3.2
China 8,184,963 8,227,103 -0.5
United States 16,514,500 16,244,600 1.7
India 1,837,279 1,858,740 -1.2
Canada 1,821,424 1,779,635 2.3
Greece 250,167 248,939 0.5
Iraq 216,453 215,838 0.3
Ireland 171,996 210,636 -18.3

GNP and GDP in millions of current U.S. dollars.

CHAPTER 2 The Data of Macroeconomics
How to interpret the numbers in this table:

In Japan, GNP is 3.2% bigger than GDP. This means that the income earned by all Japanese citizens is 3.2% larger than the value of production occurring within Japan’s borders.
In India, GNP is 1.2% smaller than GDP. This means that 1.2% of all the income earned in India leaves the country and is paid to foreigners.
In Ireland, 18.3% of the value of domestic production is paid to foreigners.

Teaching suggestion:
Point out a few countries with positive numbers. Ask your students to take a moment to think of possible reasons why GNP might exceed GDP in a country, and write them down. Point out a few countries with negative numbers. Ask your students to take a moment to think of possible reasons why a country’s GDP might be bigger than its GNP, and write them down. After students have had a chance to think of some reasons, ask for volunteers. (Better yet, have them pair up and compare answers with a classmate before volunteering their answers to the class.)

Reasons GNP may exceed GDP:

Country has done a lot of lending or investment overseas and is earning lots of income from these foreign investments (income on nationally owned capital located abroad).
A significant number of citizens have left the country to work overseas; their income is counted in GNP, not GDP.

Reasons GDP may exceed GNP:

Country has done a lot of borrowing from abroad, or foreigners have done a lot of investment in the country (income earned by foreign-owned domestically located capital).
Country has a large immigrant labor force.

If one of your students asks a question like “Why is the figure for country X so negative?” or otherwise inquires into the particular circumstances of a country’s figure, you may refer them to the CIA World Factbook for more details on any of these countries.

Source: World Development Indicators, World Bank.
http://datacatalog.worldbank.org/
At the time I write this (June 2014), the latest available GNP figures are for 2012.

Real vs. nominal GDP
GDP is the value of all final goods and services produced.
Nominal GDP measures these values using current prices.
Real GDP measures these values using the prices of a base year.

CHAPTER 2 The Data of Macroeconomics

NOW YOU TRY
Real and nominal GDP

Compute nominal GDP in each year.
Compute real GDP in each year using 2010 as the base year.
2010 2011 2012
P Q P Q P Q
good A $30 900 $31 1,000 $36 1,050
good B $100 192 $102 200 $100 205

CHAPTER 2 The Data of Macroeconomics
This slide (and a few of the following ones) contain exercises that you can have your students do in class for immediate reinforcement of the material.

This problem requires calculators. If most of your students do not have calculators, consider distributing copies of this slide for a homework exercise. Or, just have them write down the expressions that they would enter into a calculator if they had calculators, i.e., Nominal GDP in 2010 = $30 x 900 + $100 x 192.

NOW YOU TRY
Answers

Nominal GDP multiply Ps & Qs from same year
2010: $46,200 = $30 × 900 + $100 × 192
2011: $51,400
2012: $58,300
Real GDP multiply each year’s Qs by 2010 Ps
2010: $46,200
2011: $50,000
2012: $52,000 = $30 × 1050 + $100 × 205

CHAPTER 2 The Data of Macroeconomics

Real GDP controls for inflation
Changes in nominal GDP can be due to:
changes in prices
changes in quantities of output produced
Changes in real GDP can only be due to changes in quantities because real GDP is constructed using constant base-year prices.

CHAPTER 2 The Data of Macroeconomics

Suppose from 2010 to 2011, nominal GDP rises by 10%. Some of this growth could be due to price increases, because an increase in the price of output causes an increase in the value of output, even if the real quantity remains the same.

Hence, to control for inflation, we use real GDP. Remember, real GDP is the value of output using constant base-year prices. If real GDP grows by 6% from 2010 to 2011, we can be sure that all of this growth is due to an increase in the economy’s actual production of goods and services, because the same prices are used to construct real GDP in 2010 and 2011.

U.S. Nominal and Real GDP,
1960-2014
(billions)
Nominal GDP
Real GDP
(in 2009 dollars)

CHAPTER 2 The Data of Macroeconomics
Notice that nominal GDP is steeper than real GDP. That’s because prices generally rise over time. So, nominal GDP grows at a faster rate than real GDP.

If you’re anal like me, you might ask students if they know why the two lines cross in 2009.

Answer: 2009 is the base year for this real GDP data, so RGDP = NGDP in 2009 only.

Before 2009, RGDP > NGDP, while after 2009, RGDP < NGDP. This is intuitive if you think about it for a minute. Take 1975. When the economy’s output of 1975 is measured in the (then) current prices, GDP is about $1.5 trillion. Between 1975 and 2005, most prices have risen. Hence, if you value the country’s 1975 output using the higher prices of 2009 (to get real GDP), you get a bigger value than if you measure 1975’s output using the lower prices of 1975 (nominal GDP). This explains why real GDP is larger than nominal GDP in 1975 (as in most or all years before the base year). Source: Bureau of Economic Analysis Obtained from FRED Series: “GDP” for nominal GDP, “GDPC1” for real GDP. Both are quarterly, seasonally adjusted series. Nominal GDP 1960 1960.25 1960.5 1960.75 1961 1961.25 1961.5 1961.75 1962 1962.25 1962.5 1962.75 1963 1963.25 1963.5 1963.75 1964 1964.25 1964.5 1964.75 1965 1965.25 1965.5 1965.75 1966 1966.25 1966.5 1966.75 1967 1967.25 1967.5 1967.75 1968 1968.25 1968.5 1968.75 1969 1969.25 1969.5 1969.75 1970 1970.25 1970.5 1970.75 1971 1971.25 1971.5 1971.75 1972 1972.25 1972.5 1972.75 1973 1973.25 1973.5 1973.75 1974 1974.25 1974.5 1974.75 1975 1975.25 1975.5 1975.75 1976 1976.25 1976.5 1976.75 1977 1977.25 1977.5 1977.75 1978 1978.25 1978.5 1978.75 1979 1979.25 1979.5 1979.75 1980 1980.25 1980.5 1980.75 1981 1981.25 1981.5 1981.75 1982 1982.25 1982.5 1982.75 1983 1983.25 1983.5 1983.75 1984 1984.25 1984.5 1984.75 1985 1985.25 1985.5 1985.75 1986 1986.25 1986.5 1986.75 1987 1987.25 1987.5 1987.75 1988 1988.25 1988.5 1988.75 1989 1989.25 1989.5 1989.75 1990 1990.25 1990.5 1990.75 1991 1991.25 1991.5 1991.75 1992 1992.25 1992.5 1992.75 1993 1993.25 1993.5 1993.75 1994 1994.25 1994.5 1994.75 1995 1995.25 1995.5 1995.75 1996 1996.25 1996.5 1996.75 1997 1997.25 1997.5 1997.75 1998 1998.25 1998.5 1998.75 1999 1999.25 1999.5 1999.75 2000 2000.25 2000.5 2000.75 2001 2001.25 2001.5 2001.75 2002 2002.25 2002.5 2002.75 2003 2003.25 2003.5 2003.75 2004 2004.25 2004.5 2004.75 2005 2005.25 2005.5 2005.75 2006 2006.25 2006.5 2006.75 2007 2007.25 2007.5 2007.75 2008 2008.25 2008.5 2008.75 2009 2009.25 2009.5 2009.75 2010 2010.25 2010.5 2010.75 2011 2011.25 2011.5 2011.75 2012 2012.25 2012.5 2012.75 2013 2013.25 2013.5 2013.75 2014 2014.25 2014.5 543.3 542.7 546 541.1 545.9 557.4 568.2 581.6 595.2 602.6 609.6 613.1 622.7 631.8 645 654.8 671.1 680.8 692.8 698.4 719.2 732.4 750.2 773.1 797.3 807.2 820.8 834.9 846 851.1 866.6 883.2 911.1 936.3 952.3 970.1 995.4 1011.4 1032 1040.7 1053.5 1070.1 1088.5 1091.5 1137.8 1159.4 1180.3 1193.6 1233.8 1270.1 1293.8 1332 1380.7 1417.6 1436.8 1479.1 1494.7 1534.2 1563.4 1603 1619.6 1656.4 1713.8 1765.9 1824.5 1856.9 1890.5 1938.4 1992.5 2060.2 2122.4 2168.7 2208.7 2336.6 2398.9 2482.2 2531.6 2595.9 2670.4 2730.7 2796.5 2799.9 2860 2993.5 3131.8 3167.3 3261.2 3283.5 3273.8 3331.3 3367.1 3407.8 3480.3 3583.8 3692.3 3796.1 3912.8 4015 4087.4 4147.6 4237 4302.3 4394.6 4453.1 4516.3 4555.2 4619.6 4669.4 4736.2 4821.5 4900.5 5022.7 5090.6 5207.7 5299.5 5412.7 5527.4 5628.4 5711.6 5763.4 5890.8 5974.7 6029.5 6023.3 6054.9 6143.6 6218.4 6279.3 6380.8 6492.3 6586.5 6697.6 6748.2 6829.6 6904.2 7032.8 7136.3 7269.8 7352.3 7476.7 7545.3 7604.9 7706.5 7799.5 7893.1 8061.5 8159 8287.1 8402.1 8551.9 8691.79999999999 8788.29999999999 8889.7 8994.7 9146.5 9325.7 9447.1 9557 9712.29999999999 9926.1 10031 10278.3 10357.4 10472.3 10508.1 10638.4 10639.5 10701.3 10834.4 10934.8 11037.1 11103.8 11230.1 11370.7 11625.1 11816.8 11988.4 12181.4 12367.7 12562.2 12813.7 12974.1 13205.4 13381.6 13648.9 13799.8 13908.5 14066.4 14233.2 14422.3 14569.7 14685.3 14668.4 14813 14843 14549.9 14383.9 14340.4 14384.1 14566.5 14681.1 14888.6 15057.7 15230.2 15238.4 15460.9 15587.1 15785.3 15956.5 16094.7 16268.9 16332.5 16502.4 16619.2 16872.3 17078.3 17044 17328.2 17599.8 Real GDP 1960 1960.25 1960.5 1960.75 1961 1961.25 1961.5 1961.75 1962 1962.25 1962.5 1962.75 1963 1963.25 1963.5 1963.75 1964 1964.25 1964.5 1964.75 1965 1965.25 1965.5 1965.75 1966 1966.25 1966.5 1966.75 1967 1967.25 1967.5 1967.75 1968 1968.25 1968.5 1968.75 1969 1969.25 1969.5 1969.75 1970 1970.25 1970.5 1970.75 1971 1971.25 1971.5 1971.75 1972 1972.25 1972.5 1972.75 1973 1973.25 1973.5 1973.75 1974 1974.25 1974.5 1974.75 1975 1975.25 1975.5 1975.75 1976 1976.25 1976.5 1976.75 1977 1977.25 1977.5 1977.75 1978 1978.25 1978.5 1978.75 1979 1979.25 1979.5 1979.75 1980 1980.25 1980.5 1980.75 1981 1981.25 1981.5 1981.75 1982 1982.25 1982.5 1982.75 1983 1983.25 1983.5 1983.75 1984 1984.25 1984.5 1984.75 1985 1985.25 1985.5 1985.75 1986 1986.25 1986.5 1986.75 1987 1987.25 1987.5 1987.75 1988 1988.25 1988.5 1988.75 1989 1989.25 1989.5 1989.75 1990 1990.25 1990.5 1990.75 1991 1991.25 1991.5 1991.75 1992 1992.25 1992.5 1992.75 1993 1993.25 1993.5 1993.75 1994 1994.25 1994.5 1994.75 1995 1995.25 1995.5 1995.75 1996 1996.25 1996.5 1996.75 1997 1997.25 1997.5 1997.75 1998 1998.25 1998.5 1998.75 1999 1999.25 1999.5 1999.75 2000 2000.25 2000.5 2000.75 2001 2001.25 2001.5 2001.75 2002 2002.25 2002.5 2002.75 2003 2003.25 2003.5 2003.75 2004 2004.25 2004.5 2004.75 2005 2005.25 2005.5 2005.75 2006 2006.25 2006.5 2006.75 2007 2007.25 2007.5 2007.75 2008 2008.25 2008.5 2008.75 2009 2009.25 2009.5 2009.75 2010 2010.25 2010.5 2010.75 2011 2011.25 2011.5 2011.75 2012 2012.25 2012.5 2012.75 2013 2013.25 2013.5 2013.75 2014 2014.25 2014.5 3123.2 3111.3 3119.1 3081.3 3102.3 3159.9 3212.6 3277.7 3336.8 3372.7 3404.8 3418 3456.1 3501.1 3569.5 3595 3672.7 3716.4 3766.9 3780.2 3873.5 3926.4 4006.2 4100.6 4201.9 4219.1 4249.2 4285.6 4324.9 4328.7 4366.1 4401.2 4490.6 4566.4 4599.3 4619.8 4691.6 4706.7 4736.1 4715.5 4707.1 4715.4 4757.2 4708.3 4834.3 4861.9 4900 4914.3 5002.4 5118.3 5165.4 5251.2 5380.5 5441.5 5411.9 5462.4 5417 5431.3 5378.7 5357.2 5292.4 5333.2 5421.4 5494.4 5618.5 5661 5689.8 5732.5 5799.2 5913 6017.6 6018.2 6039.2 6274 6335.3 6420.3 6433 6440.8 6487.1 6503.9 6524.9 6392.6 6382.9 6501.2 6635.7 6587.3 6662.9 6585.1 6475 6510.2 6486.8 6493.1 6578.2 6728.3 6860 7001.5 7140.6 7266 7337.5 7396 7469.5 7537.9 7655.2 7712.6 7784.1 7819.8 7898.6 7939.5 7995 8084.7 8158 8292.7 8339.29999999999 8449.5 8498.29999999999 8610.9 8697.7 8766.1 8831.5 8850.2 8947.1 8981.7 8983.9 8907.4 8865.6 8934.4 8977.29999999999 9016.4 9123 9223.5 9313.2 9406.5 9424.1 9480.1 9526.29999999999 9653.5 9748.2 9881.4 9939.7 10052.5 10086.9 10122.1 10208.8 10281.2 10348.7 10529.4 10626.8 10739.1 10820.9 10984.2 11124 11210.3 11321.2 11431 11580.6 11770.7 11864.7 11962.5 12113.1 12323.3 12359.1 12592.5 12607.7 12679.3 12643.3 12710.3 12670.1 12705.3 12822.3 12893 12955.8 12964 13031.2 13152.1 13372.4 13528.7 13606.5 13706.2 13830.8 13950.4 14099.1 14172.7 14291.8 14373.4 14546.1 14589.6 14602.6 14716.9 14726 14838.7 14938.5 14991.8 14889.5 14963.4 14891.6 14577 14375 14355.6 14402.5 14541.9 14604.8 14745.9 14845.5 14939 14881.3 14989.6 15021.1 15190.3 15275 15336.7 15431.3 15433.7 15538.4 15606.6 15779.9 15916.2 15831.7 16010.4 16205.6 GDP deflator Inflation rate: the percentage increase in the overall level of prices. One measure of the price level: GDP deflator Definition: CHAPTER 2 The Data of Macroeconomics After revealing the first bullet point, mention that there are several measures of the overall price level. Your students are probably familiar with one of them—the CPI, which will be covered shortly. For now, though, we learn about a different one , the GDP deflator.

The GDP deflator is so named because it is used to deflate (remove the effects of inflation from) GDP and other economic variables.

NOW YOU TRY
GDP deflator and the inflation rate

Use your previous answers to compute
the GDP deflator in each year.
Use GDP deflator to compute the inflation rate from 2010 to 2011 and from 2011 to 2012.
Nom. GDP Real GDP GDP
deflator Inflation
rate
2010 $46,200 $46,200 n.a.
2011 51,400 50,000
2012 58,300 52,000

CHAPTER 2 The Data of Macroeconomics

NOW YOU TRY
Answers

Nom. GDP Real GDP GDP
deflator Inflation
rate
2010 $46,200 $46,200 100.0 n.a.
2011 51,400 50,000 102.8 2.8%
2012 58,300 52,000 112.1 9.1%

CHAPTER 2 The Data of Macroeconomics

Understanding the GDP deflator
Example with 3 goods
For good i = 1, 2, 3
Pit = the market price of good i in month t
Qit = the quantity of good i produced in month t
NGDPt = Nominal GDP in month t
RGDPt = Real GDP in month t

CHAPTER 2 The Data of Macroeconomics

This slide and the next one use simple algebra to show that the GDP deflator is a weighted average of prices; the weight on each price reflects that good’s relative importance in real GDP.

This material is not in the textbook, so I have hidden this slide—it will not automatically display when viewing this PowerPoint presentation in Slide Show mode. If you wish to include this material, please unhide this slide and the next one, by unselecting “Hide Slide” on the Slide Show drop-down menu.

Understanding the GDP deflator

The GDP deflator is a weighted average of prices.
The weight on each price reflects
that good’s relative importance in GDP.
Note that the weights change over time.

CHAPTER 2 The Data of Macroeconomics

(I have omitted the “100 x” from the formula for the GDP deflator so that this slide remains legible.)

The formula for the GDP deflator is 100*NGDP/RGDP. It’s not obvious to most students that this is a measure of the average level of prices. But, using some simple algebra, this slide shows that the GDP deflator really is a weighted average of prices.

Note: Because the weights don’t all sum to 1, the GDP deflator is a weighted sum, not a weighted average.

Two arithmetic tricks for
working with percentage changes
Ex.: If your hourly wage rises 5%
and you work 7% more hours,
then your wage income rises
approximately 12%.
1. For any variables X and Y,
percentage change in (X × Y )
≈ percentage change in X
+ percentage change in Y

CHAPTER 2 The Data of Macroeconomics

These handy arithmetic tricks will be useful in many different contexts later in this book. For example, in the Quantity Theory of Money in Chapter 4, they help us understand how the Quantity Equation, MV = PY, gives us a relation between the rates of inflation, money growth, and GDP growth.

The example on this slide uses
wage income = (hourly wage) x (number of hours worked)

Another example would be
revenue = price x quantity

Students will see many more examples later in the textbook.

Two arithmetic tricks for
working with percentage changes
Ex.: GDP deflator = 100 × NGDP/RGDP.
If NGDP rises 9% and RGDP rises 4%,
then the inflation rate is approximately 5%.
2. Percentage change in (X/Y )
≈ percentage change in X
− percentage change in Y

CHAPTER 2 The Data of Macroeconomics

Again, we will see uses for this in many different contexts later in the textbook. For example, if your wage rises 10% while prices rise 6%, then your real wage – the purchasing power of your wage – rises by about 4%, because
real wage = (nominal wage)/(price level)

Chain-weighted real GDP
Over time, relative prices change, so the base year should be updated periodically.
In essence, chain-weighted real GDP
updates the base year every year, so it is more accurate than constant-price GDP.
Your textbook usually uses
constant-price real GDP because:
the two measures are highly correlated
constant-price real GDP is easier to compute

CHAPTER 2 The Data of Macroeconomics

Since constant-price GDP is easier to understand and compute, and because the two measures of real GDP are so highly correlated, this textbook emphasizes the constant-price version of real GDP.

However, if this topic is important to you and your students, you should have them carefully read pp. 25-26, and give them one or two exercises requiring students to computer or compare constant-price and chain-weighted real GDP.

Consumer price index (CPI)
A measure of the overall level of prices
Published by the Bureau of Labor Statistics (BLS)
Uses:
tracks changes in the typical household’s
cost of living
adjusts many contracts for inflation (“COLAs”)
allows comparisons of dollar amounts over time

CHAPTER 2 The Data of Macroeconomics

Regarding the comparison of dollar figures from different years:
If we want to know whether the average college graduate today is better off than the average college graduate of 1975, we can’t simply compare the nominal salaries because the cost of living is so much higher now than in 1975. We can use the CPI to express the 1975 salary in “current dollars,” i.e., what it would be worth at today’s prices.

Also: when the price of oil (and hence gasoline) shot up in 2000, some in the news reported that oil prices were even higher than in the 1970s. This was true, but only in nominal terms. If you use the CPI to adjust for inflation, the highest oil price in 2000 is still substantially less than the highest oil prices of the 1970s.

How the BLS constructs the CPI
1. Survey consumers to determine composition of the typical consumer’s “basket” of goods
2. Every month, collect data on prices of all items in the basket; compute cost of basket
3. CPI in any month equals

CHAPTER 2 The Data of Macroeconomics

NOW YOU TRY
Compute the CPI

Basket: 20 pizzas, 10 compact discs
Prices:
pizza CDs
2012 $10 $15
2013 11 15
2014 12 16
2015 13 15
For each year, compute:
the cost of the basket
the CPI (use 2012 as the base year)
the inflation rate from the preceding year

CHAPTER 2 The Data of Macroeconomics
From 2012 to 2013, it’s not obvious that the inflation rate will be positive (that the basket’s cost will increase): The price of pizza rises by $1, but the price of CDs falls by $1.

However, since the basket contains twice as many pizzas as CDs, a given change in the price of pizza will have a bigger impact on the basket’s cost (and CPI) than will the same price change in CDs.

NOW YOU TRY
Answers

Cost of Inflation
basket CPI rate
2012 $350 100.0 n.a.
2013 370 105.7 5.7%
2014 400 114.3 8.1%
2015 410 117.1 2.5%

CHAPTER 2 The Data of Macroeconomics

The composition of the CPI’s “basket”

CHAPTER 2 The Data of Macroeconomics

Each number is the percent of the “typical” household’s total expenditure.

Ask students for examples of how the breakdown of their own expenditure differs from that of the typical household shown here. Then, ask students how the typical elderly person’s expenditure might differ from that shown here. (This is relevant because the CPI is used to give Social Security COLAs to the elderly; however, the elderly spend a much larger fraction of their income on medical care, a category in which prices grow much faster than the CPI.)

The Web site listed below also gives a very fine disaggregation of each category, which enables students to compare their own spending on individual goods to that of the “typical” household.

Source: Bureau of Labor Statistics, http://www.bls.gov/news.release/cpi.t03.htm
U.S. city average, CPI-U.
Data in this graph is from December 2014.

Understanding the CPI
Example with 3 goods
For good i = 1, 2, 3
Ci = amount of good i in the CPI’s basket
Pit = price of good i in month t
Et = cost of the CPI basket in month t
Eb = cost of the basket in the base period

CHAPTER 2 The Data of Macroeconomics

The next slide uses simple algebra to show that the CPI is a weighted average of prices; the weight on each price reflects that good’s relative importance in the CPI basket. The algebra is very similar to that of an earlier slide that showed that the GDP deflator is a weighted average of prices.

I chose “E” to represent the cost of the basket because “E” stands for “Expenditure.”

Understanding the CPI

The CPI is a weighted average of prices.
The weight on each price reflects
that good’s relative importance in the CPI’s basket.
Note that the weights remain fixed over time.

CHAPTER 2 The Data of Macroeconomics

Note: Because the weights don’t all sum to 1, the CPI is a weighted sum, not a weighted average.

Why the CPI may overstate inflation
Substitution bias:
The CPI uses fixed weights, so it cannot reflect consumers’ ability to substitute toward goods whose relative prices have fallen.
Introduction of new goods:
The introduction of new goods makes consumers better off and, in effect, increases the real value of the dollar. But it does not reduce the CPI because the CPI uses fixed weights.
Unmeasured changes in quality:
Quality improvements increase the value of the dollar but are often not fully measured.

CHAPTER 2 The Data of Macroeconomics

The size of the CPI’s bias
In 1995, a Senate-appointed panel of experts estimated that the CPI overstates inflation by about 1.1% per year.
So the BLS made adjustments to reduce the bias.
Now, the CPI’s bias is probably under 1% per year.

CHAPTER 2 The Data of Macroeconomics

NOW YOU TRY
Discussion Questions
1. If your grandmother receives Social Security,
how is she affected by the CPI’s bias?
2. Where does the government get the money to pay COLAs to Social Security recipients?
3. If you pay income and Social Security taxes,
how does the CPI’s bias affect you?
4. Is the government giving your grandmother
too much of a COLA?
5. How does your grandmother’s “basket” differ from the CPI’s? Does this affect your answer to Q4?

CHAPTER 2 The Data of Macroeconomics
If you can afford a few minutes of class time, you can use these questions to illustrate one reason why the CPI’s bias is important, and also to get students to think about the implications of applying a measure of the “typical household’s cost of living” to groups (like the elderly) that are not typical.

CPI vs. GDP deflator
Prices of capital goods:
included in GDP deflator (if produced domestically)
excluded from CPI
Prices of imported consumer goods:
included in CPI
excluded from GDP deflator
The basket of goods:
CPI: fixed
GDP deflator: changes every year

CHAPTER 2 The Data of Macroeconomics

The PCE deflator
Another measure of the price level:
Personal Consumption Deflator,
the ratio of nominal to real consumer spending
How the PCE is like the CPI:
– only includes consumer spending
– includes imported consumer goods
How the PCE is like the GDP deflator:
– the “basket” changes over time
The Federal Reserve prefers PCE.

CHAPTER 2 The Data of Macroeconomics
This slide corresponds to new material in the 9th edition.

The GDP deflator, CPI, and PCE deflator
CPI
GDP deflator
PCE deflator

CHAPTER 2 The Data of Macroeconomics
Source: http://research.stlouisfed.org/fred2/
Series GDPDEF, DPCERD3Q086SBEA, and CPIAUCSL

GDP deflator 1960 1960.25 1960.5 1960.75 1961 1961.25 1961.5 1961.75 1962 1962.25 1962.5 1962.75 1963 1963.25 1963 .5 1963.75 1964 1964.25 1964.5 1964.75 1965 1965.25 1965.5 1965.75 1966 1966.25 1966.5 1966.75 1967 1967.25 1967.5 1967.75 1968 1968.25 1968.5 1968.75 1969 1969.25 1969.5 1969.75 1970 1970.25 1970.5 1970.75 1971 1971.25 1971.5 1971.75 1972 1972.25 1972.5 1972.75 1973 1973.25 1973.5 1973.75 1974 1974.25 1974.5 1974.75 1975 1975.25 1975.5 1975.75 1976 1976.25 1976.5 1976.75 1977 1977.25 1977.5 1977.75 1978 1978.25 1978.5 1978.75 1979 1979.25 1979.5 1979.75 1980 1980.25 1980.5 1980.75 1981 1981.25 1981.5 1981.75 1982 1982.25 1982.5 1982.75 1983 1983.25 1983.5 1983.75 1984 1984.25 1984.5 1984.75 1985 1985.25 1985.5 1985.75 1986 1986.25 1986.5 1986.75 1987 1987.25 1987.5 1987.75 1988 1988.25 1988.5 1988.75 1989 1989.25 1989.5 1989.75 1990 1990.25 1990.5 1990.75 1991 1991.25 1991.5 1991.75 1992 1992.25 1992.5 1992.75 1993 1993.25 1993.5 1993.75 1994 1994.25 1994.5 1994.75 1995 1995.25 1995.5 1995.75 1996 1996.25 1996.5 1996.75 1997 1997.25 1997.5 1997.75 1998 1998.25 1998.5 1998.75 1999 1999.25 1999.5 1999.75 2000 2000.25 2000.5 2000.75 2001 2001.25 2001.5 2001.75 2002 2002.25 2002.5 2002.75 2003 2003.25 2003.5 2003.75 2004 2004.25 2004.5 2004.75 2005 2005.25 2005.5 2005.75 2006 2006.25 2006.5 2006.75 2007 2007.25 2007.5 2007.75 2008 2008.25 2008.5 2008.75 2009 2009.25 2009.5 2009.75 2010 2010.25 2010.5 2010.75 2011 2011.25 2011.5 2011.75 2012 2012.25 2012.5 2012.75 2013 2013.25 2013.5 2013.75 2014 2014.25 2014.5 1.32666 1.44683 1.42981 1.34933 1.15424 1.13409 1.03869 1.05826 1.3568 1.27995 1.22006 1.08659 1.00818 1.01213 0.92634 1.54832 1.42509 1.50022 1.79144 1.42599 1.61282 1.82711 1.81423 2.04402 2.18982 2.56561 3.15301 3.32786 3.09061 2.76777 2.75149 3.01041 3.72319 4.28884 4.32375 4.64503 4.5694 4.80437 5.23497 5.10490999999999 5.48571 5.60231 4.99748 5.02897 5.16025 5.08057 5.28361 4.77955 4.80941 4.08078 3.99818 4.45048 4.04196 4.9835 5.99401999999999 6.74569 7.52461999999999 8.43175 9.48153 10.50651 10.90435 9.95085 8.76005 7.40778 6.11738999999999 5.61219999999999 5.10317 5.21228 5.8078 6.21536 6.15116 6.56997 6.44261 6.8924 7.35810999999999 7.28481999999999 7.60133 8.2209 8.71366 8.59882 8.9123 8.67205 8.85001 9.67143 10.11514 9.7749 9.23622 8.28922 7.13076 6.42387 6.04706 5.25471999999999 4.64091999999999 4.09566 3.69308 3.30604999999999 3.57035 3.7376 3.49659 3.43055 3.51837 3.29019 3.05389 2.95873 2.28405 2.0635 1.88279 1.85986 2.1022 2.37503 2.70538 2.98429 3.04369 3.34841 3.81149 3.78348 4.10585 4.17511 3.70839 3.60106 3.60595 3.60482 3.77659 3.83789 3.72927 3.37128 3.209 2.98845 2.41045 2.3621 2.09974 2.23762 2.37799 2.34875 2.47888 2.32052 2.23627 2.1243 2.06194 2.09239 2.18189 2.1222 2.0554 1.99713 1.96437 1.90393 1.707 1.721 1.80211 1.69091 1.76813 1.58962 1.12696 1.06619 1.08284 1.0627 1.30141 1.42436 1.41652 1.56595 1.92767 2.16662 2.45551 2.53864 2.42223 2.55191 2.22625 1.98426 1.65161 1.3356 1.45383 1.7023 2.00819 1.92865 2.04328 1.99013 2.23779 2.77463 2.85806 3.09002 3.14954 3.00197 3.32916 3.38816 3.24483 3.32521 3.08228 2.6638 3.0075 2.75619 2.39798 2.48588 1.92646 1.853 2.19622 1.89779 1.56929 0.90914 0.20066 0.35466 0.45971 1.07413 1.55798 1.777 1.86725 2.15613 2.30604999999999 1.93038 2.01369 1.74221 1.59972 1.83512 1.66857 1.47319 1.41803 1.39571 1.36906 1.6368 1.57122 CPI 1960 1960.25 1960.5 1960.75 1961 1961.25 1961.5 1961.75 1962 1962.25 1962.5 1962.75 1963 1963.25 1963.5 1963.75 1964 1964.25 1964.5 1964.75 1965 1965.25 1965.5 1965.75 1966 1966.25 1966.5 1966.75 1967 1967.25 1967.5 1967.75 1968 1968.25 1968.5 1968.75 1969 1969.25 1969.5 1969.75 1970 1970.25 1970.5 1970.75 1971 1971.25 1971.5 1971.75 1972 1972.25 1972.5 1972.75 1973 1973.25 1973.5 1973.75 1974 1974.25 1974.5 1974.75 1975 1975.25 1975.5 1975.75 1976 1976.25 1976.5 1976.75 1977 1977.25 1977.5 1977.75 1978 1978.25 1978.5 1978.75 1979 1979.25 1979.5 1979.75 1980 1980.25 1980.5 1980.75 1981 1981.25 1981.5 1981.75 1982 1982.25 1982.5 1982.75 1983 1983.25 1983.5 1983.75 1984 1984.25 1984.5 1984.75 1985 1985.25 1985.5 1985.75 1986 1986.25 1986.5 1986.75 1987 1987.25 1987.5 1987.75 1988 1988.25 1988.5 1988.75 1989 1989.25 1989.5 1989.75 1990 1990.25 1990.5 1990.75 1991 1991.25 1991.5 1991.75 1992 1992.25 1992.5 1992.75 1993 1993.25 1993.5 1993.75 1994 1994.25 1994.5 1994.75 1995 1995.25 1995.5 1995.75 1996 1996.25 1996.5 1996.75 1997 1997.25 1997.5 1997.75 1998 1998.25 1998.5 1998.75 1999 1999.25 1999.5 1999.75 2000 2000.25 2000.5 2000.75 2001 2001.25 2001.5 2001.75 2002 2002.25 2002.5 2002.75 20 03 2003.25 2003.5 2003.75 2004 2004.25 2004.5 2004.75 2005 2005.25 2005.5 2005.75 2006 2006.25 2006.5 2006.75 2007 2007.25 2007.5 2007.75 2008 2008.25 2008.5 2008.75 2009 2009.25 2009.5 2009.75 2010 2010.25 2010.5 2010.75 2011 2011.25 2011.5 2011.75 2012 2012.25 2012.5 2012.75 2013 2013.25 2013.5 2013.75 2014 2014.25 2014.5 1.39344 1.82488 1.35992 1.39598 1.50696 0.86904 1.20649 0.70517 0.89477 1.30741 1.20212 1.30043 1.22895 1.03574 1.36272 1.39236 1.48637 1.46399 1.07422 1.26611 1.16392 1.64622 1.71659 1.78566 2.4193 2.68974 3.27391 3.5685 2.87078 2.56672 2.70718 2.99243 3.7401 4.11854999999999 4.47761 4.62396999999999 4.87427 5.50198 5.52285999999999 5.83355 6.22578 6.03848 5.68597 5.6 4.81102 4.31495999999999 4.27075 3.53535 3.50587 3.22581 3.02948 3.33415 4.11293999999999 5.60817 6.8371 8.41693 9.91565 10.54788 11.45759 12.04798 11.13531 9.5394 8.67963 7.38337 6.34048 6.01503999999999 5.58903 5.18573 5.9034 6.7961 6.57417 6.59522 6.47466 7.02937 8.02397 8.92895 9.78376 10.75434 11.72253 12.64148 14.20954 14.42577 12.93487 12.53929 11.26112 9.87393 10.85387 9.58313 7.58191 6.90677 5.81573 4.44293 3.59408 3.29905 2.52681 3.23384 4.62550999999999 4.40519 4.2957 4.1543 3.64175 3.60676 3.35248999999999 3.51377 3.10539 1.67859 1.66821 1.34587 2.03802 3.6998 4.16317 4.40494 3.96512 3.97994 4.14205 4.30666 4.67509 5.15961 4.70588 4.62759999999999 5.23231 4.58373 5.56421 6.27647 5.25958 4.84687 3.85226999999999 2.96486 2.89388 3.07302 3.07467 3.12198 3.17307 3.12525 2.81747 2.76978 2.53937 2.38237 2.85493 2.60333 2.84049 3.09558 2.6642 2.62608 2.78391 2.82709 2.89991 3.23162 2.94453 2.30179 2.22505 1.89075 1.48278 1.58313 1.59639 1.52536 1.68704 2.1128 2.34624999999999 2.61983 3.258 3.29343 3.4689 3.44351 3.40976 3.32491 2.67803 1.87508 1.23195 1.31765 1.57628 2.25352 2.97641 2.00594 2.21689 2.00165 1.81767 2.78587 2.67523 3.38513 3.03535 2.92294 3.81957 3.6745 3.69086 3.92426 3.34028 1.9654 2.43148 2.66512 2.34881 4.03147 4.1372 4.31057999999999 5.2525 1.5958 -0.18424 -0.94229 -1.60696 1.4875 2.33686999999999 1.78589 1.22873 1.2155 2.12109 3.37521 3.73182 3.3364 2.80602 1.91805 1.68668 1.90179 1.67369 1.42643 1.53823 1.21999 1.40044 2.0583 1.79076 PCE 1960 1960.25 1960.5 1960.75 1961 1961.25 1961.5 1961.75 1962 1962.25 1962.5 1962.75 1963 1963.25 1963.5 1963.75 1964 1964.25 1964.5 1964.75 1965 1965.25 1965.5 1965.75 1966 1966.25 1966.5 1966.75 1967 1967.25 1967.5 1967.75 1968 1968.25 1968.5 1968.75 1969 1969.25 1969.5 1969.75 1970 1970.25 1970.5 1970.75 1971 1971.25 1971.5 1971.75 1972 1972.25 1972.5 1972.75 1973 1973.25 1973.5 1973.75 1974 1974.25 1974.5 1974.75 1975 1975.25 1975.5 1975.75 1976 1976.25 1976.5 1976.75 1977 1977.25 1977.5 1977.75 1978 1978.25 1978.5 1978.75 1979 1979.25 1979.5 1979.75 1980 1980.25 1980.5 1980.75 1981 1981.25 1981.5 1981.75 1982 1982.25 1982.5 1982.75 1983 1983.25 1983.5 1983.75 1984 1984.25 1984.5 1984.75 1985 1985.25 1985.5 1985.75 1986 1986.25 1986.5 1986.75 1987 1987.25 1987.5 1987.75 1988 1988.25 1988.5 1988.75 1989 1989.25 1989.5 1989.75 1990 1990.25 1990.5 1990.75 1991 1991.25 1991.5 1991.75 1992 1992.25 1992.5 1992.75 1993 1993.25 1993.5 1993.75 1994 1994.25 1994.5 1994.75 1995 1995.25 1995.5 1995.75 1996 1996.25 1996.5 1996.75 1997 1997.25 1997.5 1997.75 1998 1998.25 1998.5 1998.75 1999 1999.25 1999.5 1999.75 2000 2000.25 2000.5 2000.75 2001 2001.25 2001.5 2001.75 2002 2002.25 2002.5 2002.75 2003 2003.25 2003.5 2003.75 2004 2004.25 2004.5 2004.75 2005 2005.25 2005.5 2005.75 2006 2006.25 2006.5 2006.75 2007 2007.25 2007.5 2007.75 2008 2008.25 2008.5 2008.75 2009 2009.25 2009.5 2009.75 2010 2010.25 2010.5 2010.75 2011 2011.25 2011.5 2011.75 2012 2012.25 2012.5 2012.75 2013 2013.25 2013.5 2013.75 2014 2014.25 2014.5 1.68175 1.80888 1.60162 1.50095 1.55057 1.0112 0.98452 0.65156 0.90482 1.27255 1.16653 1.3566 1.19935 0.9885 1.20878 1.27735 1.47865 1.56501 1.4255 1.39285 1.2279 1.50278 1.53571 1.50352 1.96776 2.29589 2.69895 3.18627 2.69113 2.32826 2.48751 2.56119 3.33624999999999 3.89976 4.01645 4.28455999999999 4.21504 4.49322 4.69124 4.74098 4.92422 4.73898 4.47636 4.61397 4.3924 4.42541999999999 4.43185 3.73634 3.84531 3.27119 3.17108 3.37665999999999 3.54321 4.93105 5.91525 7.21065 9.07246000000001 10.03982 10.97814 11.50073 10.31262 8.58456 7.71074 6.81217 6.00857 5.60944 5.24473 5.14207 5.86531999999999 6.77902 6.77091 6.61362 6.46325 6.83041 7.09274 7.58124 7.81025 8.51293 9.27925 9.8407 11.04476 10.74142 10.58616 10.64497 10.08774 9.25291 8.50863 7.50213999999999 6.23246 5.4832 5.4156 4.98938 4.57002 4.53892 4.27788 3.82049 4.04629 4.10105 3.54408 3.50003 3.6183 3.4824 3.50292 3.56994 3.07871 2.09682 1.8057 1.71471 2.07043 3.16404 3.6044 3.89229 3.59098 3.74743 4.04966 4.17818 4.53501 4.77118 4.08608 3.86136 4.17655 3.73114 4.43873 4.9851 4.01965 3.63875 3.04483 2.43899 2.56028 2.69522 2.65565 2.64389 2.62492 2.63712 2.43355 2.3002 2.05531 1.93625 2.21644 2.11176 2.23919 2.2469 1.92997 1.8984 1.98037 2.07683 2.10381 2.3457 2.22395 1.80451 1.63173 1.26101 0.81125 0.74108 0.78577 0.72936 0.99429 1.35345 1.58052 1.92423 2.51346 2.43706 2.53499 2.4956 2.32451 2.34529 1.78856 1.29436 0.80345 1.09565 1.52851 1.92557 2.45932 1.7639 1.87229 1.81871 1.87595 2.5037 2.47368 2.86658 2.61625999999999 2.57787 3.10335 3.0967 3.04125 3.1498 2.76082 1.78701 2.26128 2.28519 2.13358 3.33677 3.26119 3.51964999999999 3.98483 1.47514 0.04337 -0.55003 -0.93283 1.19303 2.11429 1.77363 1.43637 1.28497 1.69828 2.61162 2.85172 2.66157 2.43595 1.74643 1.53834 1.63786 1.36577 1.14682 1.23821 1.04431 1.12577 1.59519 1.48442
Percentage change
from 12 months earlier

Categories of the population
Employed
working at a paid job
Unemployed
not employed but looking for a job
Labor force
the amount of labor available for producing goods and services; all employed plus unemployed persons
Not in the labor force
not employed, not looking for work

CHAPTER 2 The Data of Macroeconomics

Two important labor force concepts
Unemployment rate
percentage of the labor force that is unemployed
Labor force participation rate
the fraction of the adult population that “participates” in the labor force, i.e. is working or looking for work

CHAPTER 2 The Data of Macroeconomics

NOW YOU TRY
Computing labor statistics

U.S. adult population by group, Dec 2014
Number employed = 147.4 million
Number unemployed = 8.7 million
Adult population = 249.0 million
Calculate
the labor force
the unemployment rate
the labor force participation rate

CHAPTER 2 The Data of Macroeconomics
Source: Bureau of Labor Statistics, U.S. Department of Labor.
http://www.bls.gov
http://bls.gov/news.release/empsit.a.htm

The population measured used here is the adult civilian non-institutional population.

NOW YOU TRY
Answers

Data: E = 147.4, U = 8.7, POP = 249.0
Labor force
L = E + U = 147.4 + 8.7 = 156.1
Unemployment rate
U/L x 100% = (8.7/156.1) x 100% = 5.6%
Labor force participation rate
L/POP x 100% = (156.1/249.0) x 100% = 62.7%

CHAPTER 2 The Data of Macroeconomics

NOW YOU TRY
Computing percentage changes

Suppose
population increases by 1%
labor force increases by 3%
number of unemployed persons increases by 2%
Compute the percentage changes in the labor force participation and unemployment rates.

CHAPTER 2 The Data of Macroeconomics
Allow two minutes of class time for your students to work this exercise. This will give them immediate reinforcement of the definitions of the labor force participation rate, the unemployment rate, and the arithmetic tricks for working with percentage changes introduced earlier.

*** NOTE ***
This problem is distinct from the preceding one. Tell students to disregard the data and answers from the previous problem.

NOW YOU TRY
Answers

LFPR = L/POP
L increases 3%, POP increases 1%,
so LFPR increases 3% – 1% = 2%.
U rate = U/L
U increases 2%, L increases 3%,
so U-rate increases 2% – 3% = –1%.
Note: the changes in LFPR and U-rate are shown as a percent of their initial values, not in percentage points! E.g., if initial value of LFPR is 60.0%, a 2% increase would bring it to 61.2%, because 2% of 60 equals 1.2.

CHAPTER 2 The Data of Macroeconomics

The establishment survey
The BLS obtains a second measure of employment by surveying businesses,
asking how many workers are on their payrolls.
Neither measure is perfect, and they occasionally diverge due to:
treatment of self-employed persons
new firms not counted in establishment survey
technical issues involving population inferences from sample data

CHAPTER 2 The Data of Macroeconomics

Two measures of employment growth
Percentage change
from 12 months earlier

CHAPTER 2 The Data of Macroeconomics
This graph shows the percentage change in total U.S. non-farm employment from 12 months earlier (based on monthly, seasonally adjusted data from the Bureau of Labor Statistics), from two surveys: The household survey, which is used to generate the widely known unemployment rate data, and the establishment survey.

The textbook discusses the establishment survey in detail and contrasts it with the household survey to help explain the divergences.

Source: Bureau of Labor Statistics, obtained from
http://research.stlouisfed.org/fred2/

Series used in graph:
Household survey: CE16OV, seasonally adjusted
Establishment survey: PAYEMS, seasonally adjusted

household survey 1960 1960.08333333333 1960.16666666667 1960.25 1960.33333333333 1960.41666666667 1960.5 1960.58333333333 1960.66666666667 1960.75 1960.83333333333 1960.91666666667 1961 1961.08333333333 1961.16666666667 1961.25 1961.33333333333 1961.41666666667 1961.5 1961.58333333333 1961.66666666666 1961.75 1961.83333333333 1961.91666666666 1962 1962.08333333333 1962.16666666666 1962.25 1962.33333333333 1962.41666666666 1962.5 1962.58333333333 1962.66666666666 1962.75 1962.83333333333 1962.91666666666 1963 1963.08333333333 1963.16666666666 1963.25 1963.33333333333 1963.41666666666 1963.5 1963.58333333333 1963.66666666666 1963.75 1963.83333333333 1963.91666666666 1964 1964.08333333333 1964.16666666666 1964.25 1964.33333333333 1964.41666666666 1964.5 1964.58333333333 1964.66666666666 1964.75 1964.83333333333 1964.91666666666 1964.99999999999 1965.08333333333 1965.16666666666 1965.24999999999 1965.33333333333 1965.41666666666 1965.49999999999 1965.58333333333 1965.66666666666 1965.74999999999 1965.83333333333 1965.91666666666 1965.99999999999 1966.08333333333 1966.16666666666 1966.24999999999 1966.33333333333 1966.41666666666 1966.49999999999 1966.58333333333 1966.66666666666 1966.74999999999 1966.83333333333 1966.91666666666 1966.99999999999 1967.08333333333 1967.16666666666 1967.24999999999 1967.33333333333 1967.41666666666 1967.49999999999 1967.58333333333 1967.66666666666 1967.74999999999 1967.83333333333 1967.91666666666 1967.99999999999 1968.08333333333 1968.16666666666 1968.24999999999 1968.33333333333 1968.41666666666 1968.49999999999 1968.58333333333 1968.66666666666 1968.74999999999 1968.83333333333 1968.91666666666 1968.99999999999 1969.08333333333 1969.16666666666 1969.24999999999 1969.33333333333 1969.41666666666 1969.49999999999 1969.58333333332 1969.66666666666 1969.74999999999 1969.83333333332 1969.91666666666 1969.99999999999 1970.08333333332 1970.16666666666 1970.24999999999 1970.33333333332 1970.41666666666 1970.49999999999 1970.58333333332 1970.66666666666 1970.74999999999 1970.83333333332 1970.91666666666 1970.99999999999 1971.08333333332 1971.16666666666 1971.24999999999 1971.33333333332 1971.41666666666 1971.49999999999 1971.58333333332 1971.66666666666 1971.74999999999 1971.83333333332 1971.91666666666 1971.99999999999 1972.08333333332 1972.16666666666 1972.24999999999 1972.33333333332 1972.41666666666 1972.49999999999 1972.58333333332 1972.66666666665 1972.74999999999 1972.83333333332 1972.91666666665 1972.99999999999 1973.08333333332 1973.16666666665 1973.24999999999 1973.33333333332 1973.41666666665 1973.49999999999 1973.58333333332 1973.66666666665 1973.74999999999 1973.83333333332 1973.91666666665 1973.99999999999 1974.08333333332 1974.16666666665 1974.24999999999 1974.33333333332 1974.41666666665 1974.49999999999 1974.58333333332 1974.66666666665 1974.74999999999 1974.83333333332 1974.91666666665 1974.99999999999 1975.08333333332 1975.16666666665 1975.24999999999 1975.33333333332 1975.41666666665 1975.49999999999 1975.58333333332 1975.66666666665 1975.74999999999 1975.83333333332 1975.91666666665 1975.99999999998 1976.08333333332 1976.16666666665 1976.24999999998 1976.33333333332 1976.41666666665 1976.49999999998 1976.58333333332 1976.66666666665 1976.74999999998 1976.83333333332 1976.91666666665 1976.99999999998 1977.08333333332 1977.16666666665 1977.24999999998 1977.33333333332 1977.41666666665 1977.49999999998 1977.58333333332 1977.66666666665 1977.74999999998 1977.83333333332 1977.91666666665 1977.99999999998 1978.08333333332 1978.16666666665 1978.24999999998 1978.33333333332 1978.41666666665 1978.49999999998 1978.58333333332 1978.66666666665 1978.74999999998 1978.83333333332 1978.91666666665 1978.99999999998 1979.08333333332 1979.16666666665 1979.24999999998 1979.33333333332 1979.41666666665 1979.49999999998 1979.58333333332 1979.66666666665 1979.74999999998 1979.83333333332 1979.91666666665 1979.99999999998 1980.08333333332 1980.16666666665 1980.24999999998 1980.33333333332 1980.41666666665 1980.49999999998 1980.58333333331 1980.66666666665 1980.74999999998 1980.83333333331 1980.91666666665 1980.99999999998 1981.08333333331 1981.16666666665 1981.24999999998 1981.33333333331 1981.41666666665 1981.49999999998 1981.58333333331 1981.66666666665 1981.74999999998 1981.83333333331 1981.91666666665 1981.99999999998 1982.08333333331 1982.16666666665 1982.24999999998 1982.33333333331 1982.41666666665 1982.49999999998 1982.58333333331 1982.66666666665 1982.74999999998 1982.83333333331 1982.91666666665 1982.99999999998 1983.08333333331 1983.16666666665 1983.24999999998 1983.33333333331 1983.41666666665 1983.49999999998 1983.58333333331 1983.66666666664 1983.74999999998 1983.83333333331 1983.91666666664 1983.99999999998 1984.08333333331 1984.16666666664 1984.24999999998 1984.33333333331 1984.41666666664 1984.49999999998 1984.58333333331 1984.66666666664 1984.74999999998 1984.83333333331 1984.91666666664 1984.99999999998 1985.08333333331 1985.16666666664 1985.24999999998 1985.33333333331 1985.41666666664 1985.49999999998 1985.58333333331 1985.66666666664 1985.74999999998 1985.83333333331 1985.91666666664 1985.99999999998 1986.08333333331 1986.16666666664 1986.24999999998 1986.33333333331 1986.41666666664 1986.49999999998 1986.58333333331 1986.66666666664 1986.74999999998 1986.83333333331 1986.91666666664 1986.99999999997 1987.08333333331 1987.16666666664 1987.24999999997 1987.33333333331 1987.41666666664 1987.49999999997 1987.58333333331 1987.66666666664 1987.74999999997 1987.83333333331 1987.91666666664 1987.99999999997 1988.08333333331 1988.16666666664 1988.24999999997 1988.33333333331 1988.41666666664 1988.49999999997 1988.58333333331 1988.666666666 64 1988.74999999997 1988.83333333331 1988.91666666664 1988.99999999997 1989.08333333331 1989.16666666664 1989.24999999997 1989.33333333331 1989.41666666664 1989.49999999997 1989.58333333331 1989.66666666664 1989.74999999997 1989.83333333331 1989.91666666664 1989.99999999997 1990.08333333331 1990.16666666664 1990.24999999997 1990.33333333331 1990.41666666664 1990.49999999997 1990.58333333331 1990.66666666664 1990.74999999997 1990.83333333331 1990.91666666664 1990.99999999997 1991.08333333331 1991.16666666664 1991.24999999997 1991.33333333331 1991.41666666664 1991.49999999997 1991.5833333333 1991.66666666664 1991.74999999997 1991.8333333333 1991.91666666664 1991.99999999997 1992.083333333 3 1992.16666666664 1992.24999999997 1992.3333333333 1992.41666666664 1992.49999999997 1992.5833333333 1992.66666666664 1992.74999999997 1992.8333333333 1992.91666666664 1992.99999999997 1993.0833333333 1993.16666666664 1993.24999999997 1993.3333333333 1993.41666666664 1993.49999999997 1993.5833333333 1993.66666666664 1993.74999999997 1993.8333333333 1993.91666666664 1993.99999999997 1994.0833333333 1994.16666666664 1994.24999999997 1994.3333333333 1994.41666666664 1994.49999999997 1994.5833333333 1994.66666666663 1994.74999999997 1994.8333333333 1994.91666666663 1994.99999999997 1995.0833333333 1995.16666666663 1995.24999999997 1995.3333333333 1995.41666666663 1995.49999999997 1995.5833333333 1995.66666666663 1995.74999999997 1995.8333333333 1995.91666666663 1995.99999999997 1996.0833333333 1996.16666666663 1996.24999999997 1996.3333333333 1996.41666666663 1996.49999999997 1996.5833333333 1996.66666666663 1996.74999999997 1996.8333333333 1996.91666666663 1996.99999999997 1997.0833333333 1997.16666666663 1997.24999999997 1997.3333333333 1997.41666666663 1997.49999999997 1997.5833333333 1997.66666666663 1997.74999999997 1997.8333333333 1997.91666666663 1997.99999999996 1998.0833333333 1998.16666666663 1998.24999999996 1998.3333333333 1998.41666666663 1998.49999999996 1998.5833333333 1998.66666666663 1998.74999999996 1998.8333333333 1998.91666666663 1998.99999999996 1999.0833333333 1999.16666666663 1999.24999999996 1999.3333333333 1999.41666666663 1999.49999999996 1999.5833333333 1999.66666666663 1999.74999999996 1999.8333333333 1999.91666666663 1999.99999999996 2000.0833333333 2000.16666666663 2000.24999999996 2000.3333333333 2000.41666666663 2000.49999999996 2000.5833333333 2000.66666666663 2000.74999999996 2000.8333333333 2000.91666666663 2000.99999999996 2001.0833333333 2001.16666666663 2001.24999999996 2001.3333333333 2001.41666666663 2001.49999999996 2001.5833333333 2001.66666666663 2001.74999999996 2001.8333333333 2001.91666666663 2001.99999999996 2002.0833333333 2002.16666666663 2002.24999999996 2002.3333333333 2002.41666666663 2002.49999999996 2002.5833333333 2002.66666666663 2002.74999999996 2002.83333333329 2002.91666666663 2002.99999999996 2003.08333333329 2003.16666666663 2003.24999999996 2003.33333333329 2003.41666666663 2003.49999999996 2003.58333333329 2003.66666666663 2003.74999999996 2003.83333333329 2003.91666666663 2003.99999999996 2004.08333333329 2004.16666666663 2004.24999999996 2004.33333333329 2004.41666666663 2004.49999999996 2004.58333333329 2004.66666666663 2004.74999999996 2004.83333333329 2004.91666666663 2004.99999999996 2005.08333333329 2005.16666666663 2005.24999999996 2005.33333333329 2005.41666666663 2005.49999999996 2005.58333333329 2005.66666666662 2005.74999999996 2005.83333333329 2005.91666666662 2005.99999999996 2006.08333333329 2006.16666666662 2006.24999999996 2006.33333333329 2006.41666666662 2006.49999999996 2006.58333333329 2006.66666666662 2006.74999999996 2006.83333333329 2006.91666666662 2006.99999999996 2007.08333333329 2007.16666666662 2007.24999999996 2007.33333333329 2007.41666666662 2007.49999999996 2007.58333333329 2007.66666666662 2007.74999999996 2007.83333333329 2007.91666666662 2007.99999999996 2008.08333333329 2008.16666666662 2008.24999999996 2008.33333333329 2008.41666666662 2008.49999999996 2008.58333333329 2008.66666666662 2008.74999999996 2008.83333333329 2008.91666666662 2008.99999999995 2009.08333333329 2009.16666666662 2009.24999999995 2009.33333333329 2009.41666666662 2009.49999999995 2009.58333333329 2009.66666666662 2009.74999999995 2009.83333333329 2009.91666666662 2009.99999999995 2010.08333333329 2010.16666666662 2010.24999999995 2010.33333333329 2010.41666666662 2010.49999999995 2010.58333333329 2010.66666666662 2010.74999999995 2010.83333333329 2010.91666666662 2010.99999999995 2011.08333333329 2011.16666666662 2011.24999999995 2011.33333333329 2011.41666666662 2011.49999999995 2011.58333333329 2011.66666666662 2011.74999999995 2011.83333333329 2011.91666666662 2011.99999999995 2012.08333333329 2012.16666666662 2012.24999999995 2012.33333333329 2012.41666666662 2012.49999999995 2012.58333333329 2012.66666666662 2012.74999999995 2012.83333333329 2012.91666666662 2012.99999999995 2013.08333333329 2013.16666666662 2013.24999999995 2013.33333333329 2013.41666666662 2013.49999999995 2013.58333333329 2013.66666666662 2013.74999999995 2013.83333333328 2013.91666666662 2013.99999999995 2014.08333333328 2014.16666666662 2014.24999999995 2014.33333333328 2014.41666666662 2014.49999999995 2014.58333333328 2014.66666666662 2014.74999999995 2014.83333333328 2014.91666666662 0.0231571 0.0304001 0.0063174 0.0183887 0.0209895 0.0203396 0.013813 0.0162081 0.0231126 0.0111075 0.0244692 0.006688 0.006565 -0.0004877 0.0181992 -0.0088691 -0.0092042 -0.0026448 -0.0045669 -0.0006526 -0.0109557 0.0043729 -0.0004235 0.0018547 0.0050474 0.0144844 0.0097646 0.015266 0.0189308 0.0102587 0.0133368 0.0169471 0.0251903 0.0181283 0.0115918 0.0158877 0.0145822 0.0073041 0.0129036 0.0191346 0.0139006 0.0146843 0.0213889 0.0140366 0.0146148 0.017582 0.0212425 0.0189105 0.0187112 0.0257669 0.0209648 0.0253393 0.0298159 0.0231932 0.0220013 0.0228986 0.0205944 0.0188596 0.0215038 0.0234706 0.0244413 0.0200143 0.0243736 0.0184122 0.0201491 0.0261059 0.0296978 0.0273383 0.024548 0.030367 0.0285223 0.0321998 0.0314442 0.0286195 0.02483 0.026574 0.0205958 0.0246392 0.0195914 0.0249993 0.0276632 0.0237952 0.029502 0.0231329 0.0204022 0.0204065 0.0173298 0.0189215 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0.0364941 0.0400275 0.0407418 0.0477853 0.0482763 0.0479711 0.0557094 0.0492681 0.0417655 0.0349874 0.0340535 0.0352708 0.0315685 0.0313313 0.0300482 0.0263041 0.0290669 0.0249195 0.0165315 0.008656 0.0130128 0.0183715 0.0205422 0.020911 0.0192032 0.0187624 0.0243175 0.0180658 0.0172728 0.0188524 0.0201717 0.0288343 0.0281161 0.0272655 0.0225531 0.0224948 0.0228504 0.0232128 0.0189738 0.0255992 0.0236225 0.0260849 0.030663 0.0243666 0.0257171 0.0276508 0.0256529 0.0272868 0.027427 0.0276804 0.0276063 0.0266949 0.0235979 0.025547 0.0165253 0.023885 0.0215388 0.0196803 0.0216723 0.0207977 0.0228624 0.0203 088 0.0236107 0.0223152 0.0261757 0.0213432 0.0245599 0.0216746 0.020963 0.0205843 0.0173203 0.0168024 0.0156072 0.014866 0.0203328 0.0195503 0.0186375 0.0149876 0.0175236 0.0133285 0.0113899 0.0097488 0.0099698 0.0081221 0.0033415 0.0034881 -0.0095817 -0.0109526 -0.0130114 -0.0062515 -0.0143599 -0.0112957 -0.0104537 -0.0110941 -0.0050285 -0.0062091 -0.0045306 -0.0065544 0.0003222 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0.0229881 0.0238282 0.0230982 0.0224333 0.0229775 0.0089265 0.0074232 0.0079151 0.0002113 0.0033814 -0.0004893 0.0039551 -0.0030806 -0.0003433 -0.005077 -0.0078939 -0.0113869 -0.015075 -0.0085312 -0.011656 -0.0085434 -0.0040338 -0.0033462 -0.0048004 0.0034057 0.0033322 0.0045164 0.0020772 0.0027858 0.0126454 0.0076518 0.0092306 0.0110706 0.0073605 0.0100795 0.0077779 0.0061739 0.0022359 0.0071237 0.0139392 0.01455 0.0076774 0.0077101 0.0074145 0.0076072 0.0095097 0.0100443 0.0151447 0.0147148 0.0136474 0.0126681 0.0130541 0.0123834 0.012804 0.0133028 0.0158971 0.0185607 0.0198557 0.0182505 0.017699 0.0204982 0.0208908 0.0201529 0.0161733 0.0187475 0.0207138 0.0218827 0.0219475 0.0177482 0.017513 0.018622 0.0153211 0.0153826 0.0169521 0.019404 0.0212984 0.0225426 0.0201048 0.0181239 0.017942 0.0126947 0.0125894 0.011846 0.0118098 0.0073086 0.0098678 0.0043492 0.0072904 0.0020758 0.0023968 0.0006778 -0.0015992 0.0037504 3.43e-5 -0.0022319 -0.0025565 -0.003288 -0.0079867 -0.0078385 -0.0170197 -0.0198533 -0.0288705 -0.0308985 -0.0368208 -0.037473 -0.0387916 -0.0393037 -0.0386925 -0.0393311 -0.043136 -0.0439911 -0.0377585 -0.0373581 -0.0260355 -0.0214699 -0.0138941 -0.0095766 -0.0071374 -0.0061496 -0.0051608 -0.000466 0.0041421 0.0049049 0.0026756 0.0090789 0.0060382 0.005938 0.006508 0.0022468 0.0029157 0.0018757 0.0024788 0.0034211 0.0054594 0.0087987 0.0123499 0.0112734 0.0169889 0.0180129 0.0173292 0.0167825 0.0185621 0.0215794 0.0197104 0.0167 0.0199563 0.021477 0.0177511 0.0169636 0.0119675 0.0106968 0.0091857 0.0120603 0.0116641 0.0114115 0.0140929 0.0141344 0.0094017 0.0007185 0.008452 0.0097083 0.0131028 0.0130518 0.0168929 0.014332 0.0137466 0.0154279 0.0147357 0.0149909 0.0160086 0.0265383 0.0196623 0.0191538 establishment survey 1960 1960.08333333333 1960.16666666667 1960.25 1960.33333333333 1960.41666666667 1960.5 1960.58333333333 1960.66666666667 1960.75 1960.83333333333 1960.91666666667 1961 1961.08333333333 1961.16666666667 1961.25 1961.33333333333 1961.41666666667 1961.5 1961.58333333333 1961.66666666666 1961.75 1961.83333333333 1961.91666666666 1962 1962.08333333333 1962.16666666666 1962.25 1962.33333333333 1962.41666666666 1962.5 1962.58333333333 1962.66666666666 1962.75 1962.83333333333 1962.91666666666 1963 1963.08333333333 1963.16666666666 1963.25 1963.33333333333 1963.41666666666 1963.5 1963.58333333333 1963.66666666666 1963.75 1963.83333333333 1963.91666666666 1964 1964.08333333333 1964.16666666666 1964.25 1964.33333333333 1964.41666666666 1964.5 1964.58333333333 1964.66666666666 1964.75 1964.83333333333 1964.91666666666 1964.99999999999 1965.08333333333 1965.16666666666 1965.24999999999 1965.33333333333 1965.41666666666 1965.49999999999 1965.58333333333 1965.66666666666 1965.74999999999 1965.83333333333 1965.91666666666 1965.99999999999 1966.08333333333 1966.16666666666 1966.24999999999 1966.33333333333 1966.41666666666 1966.49999999999 1966.58333333333 1966.66666666666 1966.74999999999 1966.83333333333 1966.91666666666 1966.99999999999 1967.08333333333 1967.16666666666 1967.24999999999 1967.33333333333 1967.41666666666 1967.49999999999 1967.58333333333 1967.66666666666 1967.749999999 99 1967.83333333333 1967.91666666666 1967.99999999999 1968.08333333333 1968.16666666666 1968.24999999999 1968.33333333333 1968.41666666666 1968.49999999999 1968.58333333333 1968.66666666666 1968.74999999999 1968.83333333333 1968.91666666666 1968.99999999999 1969.08333333333 1969.16666666666 1969.24999999999 1969.33333333333 1969.41666666666 1969.49999999999 1969.58333333332 1969.66666666666 1969.74999999999 1969.83333333332 1969.91666666666 1969.99999999999 1970.08333333332 1970.16666666666 1970.24999999999 1970.33333333332 1970.41666666666 1970.49999999999 1970.58333333332 1970.66666666666 1970.74999999999 1970.83333333332 1970.91666666666 1970.99999999999 1971.08333333332 1971.16666666666 1971.24999999999 1971.33333333332 1971.41666666666 1971.49999999999 1971.58333333332 1971.66666666666 1971.74999999999 1971.83333333332 1971.91666666666 1971.99999999999 1972.08333333332 1972.16666666666 1972.24999999999 1972.33333333332 1972.41666666666 1972.49999999999 1972.58333333332 1972.66666666665 1972.74999999999 1972.83333333332 1972.91666666665 1972.99999999999 1973.08333333332 1973.16666666665 1973.24999999999 1973.33333333332 1973.41666666665 1973.49999999999 1973.58333333332 1973.66666666665 1973.74999999999 1973.83333333332 1973.91666666665 1973.99999999999 1974.08333333332 1974.16666666665 1974.24999999999 1974.33333333332 1974.41666666665 1974.49999999999 1974.58333333332 1974.66666666665 1974.74999999999 1974.83333333332 1974.91666666665 1974.99999999999 1975.08333333332 1975.16666666665 1975.24999999999 1975.33333333332 1975.41666666665 1975.49999999999 1975.58333333332 1975.66666666665 1975.74999999999 1975.83333333332 1975.91666666665 1975.99999999998 1976.08333333332 1976.16666666665 1976.24999999998 1976.33333333332 1976.41666666665 1976.49999999998 1976.58333333332 1976.66666666665 1976.74999999998 1976.83333333332 1976.91666666665 1976.99999999998 1977.08333333332 1977.16666666665 1977.24999999998 1977.33333333332 1977.41666666665 1977.49999999998 1977.58333333332 1977.66666666665 1977.74999999998 1977.83333333332 1977.91666666665 1977.999999999 98 1978.08333333332 1978.16666666665 1978.24999999998 1978.33333333332 1978.41666666665 1978.49999999998 1978.58333333332 1978.66666666665 1978.74999999998 1978.83333333332 1978.91666666665 1978.99999999998 1979.08333333332 1979.16666666665 1979.24999999998 1979.33333333332 1979.41666666665 1979.49999999998 1979.58333333332 1979.66666666665 1979.74999999998 1979.83333333332 1979.91666666665 1979.99999999998 1980.08333333332 1980.16666666665 1980.24999999998 1980.33333333332 1980.41666666665 1980.49999999998 1980.58333333331 1980.66666666665 1980.74999999998 1980.83333333331 1980.91666666665 1980.99999999998 1981.08333333331 1981.16666666665 1981.24999999998 1981.33333333331 1981.4166666 6665 1981.49999999998 1981.58333333331 1981.66666666665 1981.74999999998 1981.83333333331 1981.91666666665 1981.99999999998 1982.08333333331 1982.16666666665 1982.24999999998 1982.33333333331 1982.41666666665 1982.49999999998 1982.58333333331 1982.66666666665 1982.74999999998 1982.83333333331 1982.91666666665 1982.99999999998 1983.08333333331 1983.16666666665 1983.24999999998 1983.33333333331 1983.41666666665 1983.49999999998 1983.58333333331 1983.66666666664 1983.74999999998 1983.83333333331 1983.91666666664 1983.99999999998 1984.08333333331 1984.16666666664 1984.24999999998 1984.33333333331 1984.41666666664 1984.49999999998 1984.58333333331 1984.66666666664 1984.74999999998 1984.83333 333331 1984.91666666664 1984.99999999998 1985.08333333331 1985.16666666664 1985.24999999998 1985.33333333331 1985.41666666664 1985.49999999998 1985.58333333331 1985.66666666664 1985.74999999998 1985.83333333331 1985.91666666664 1985.99999999998 1986.08333333331 1986.16666666664 1986.24999999998 1986.33333333331 1986.41666666664 1986.49999999998 1986.58333333331 1986.66666666664 1986.74999999998 1986.83333333331 1986.91666666664 1986.99999999997 1987.08333333331 1987.16666666664 1987.24999999997 1987.33333333331 1987.41666666664 1987.49999999997 1987.58333333331 1987.66666666664 1987.74999999997 1987.83333333331 1987.91666666664 1987.99999999997 1988.08333333331 1988.16666666664 1988.249 99999997 1988.33333333331 1988.41666666664 1988.49999999997 1988.58333333331 1988.66666666664 1988.74999999997 1988.83333333331 1988.91666666664 1988.99999999997 1989.08333333331 1989.16666666664 1989.24999999997 1989.33333333331 1989.41666666664 1989.49999999997 1989.58333333331 1989.66666666664 1989.74999999997 1989.83333333331 1989.91666666664 1989.99999999997 1990.08333333331 1990.16666666664 1990.24999999997 1990.33333333331 1990.41666666664 1990.49999999997 1990.58333333331 1990.66666666664 1990.74999999997 1990.83333333331 1990.91666666664 1990.99999999997 1991.08333333331 1991.16666666664 1991.24999999997 1991.33333333331 1991.41666666664 1991.49999999997 1991.5833333333 1991.66 666666664 1991.74999999997 1991.8333333333 1991.91666666664 1991.99999999997 1992.0833333333 1992.16666666664 1992.24999999997 1992.3333333333 1992.41666666664 1992.49999999997 1992.5833333333 1992.66666666664 1992.74999999997 1992.8333333333 1992.91666666664 1992.99999999997 1993.0833333333 1993.16666666664 1993.24999999997 1993.3333333333 1993.41666666664 1993.49999999997 1993.5833333333 1993.66666666664 1993.74999999997 1993.8333333333 1993.91666666664 1993.99999999997 1994.0833333333 1994.16666666664 1994.24999999997 1994.3333333333 1994.41666666664 1994.49999999997 1994.5833333333 1994.66666666663 1994.74999999997 1994.8333333333 1994.91666666663 1994.99999999997 1995.0833333333 1995.16666666663 1995.24999999997 1995.3333333333 1995.41666666663 1995.49999999997 1995.5833333333 1995.66666666663 1995.74999999997 1995.8333333333 1995.91666666663 1995.99999999997 1996.0833333333 1996.16666666663 1996.24999999997 1996.3333333333 1996.41666666663 1996.49999999997 1996.5833333333 1996.66666666663 1996.74999999997 1996.8333333333 1996.91666666663 1996.99999999997 1997.0833333333 1997.16666666663 1997.24999999997 1997.3333333333 1997.41666666663 1997.49999999997 1997.5833333333 1997.66666666663 1997.74999999997 1997.8333333333 1997.91666666663 1997.99999999996 1998.0833333333 1998.16666666663 1998.24999999996 1998.3333333333 1998.41666666663 1998.49999999996 1998.5833333333 1998.66666666663 1998.74999999996 1998.8333333333 1998.91666666663 1998.99999999996 1999.0833333333 1999.16666666663 1999.24999999996 1999.3333333333 1999.41666666663 1999.49999999996 1999.5833333333 1999.66666666663 1999.74999999996 1999.8333333333 1999.91666666663 1999.99999999996 2000.0833333333 2000.16666666663 2000.24999999996 2000.3333333333 2000.41666666663 2000.49999999996 2000.5833333333 2000.66666666663 2000.74999999996 2000.8333333333 2000.91666666663 2000.99999999996 2001.0833333333 2001.16666666663 2001.24999999996 2001.3333333333 2001.41666666663 2001.49999999996 2001.5833333333 2001.66666666663 2001.74999999996 2001.8333333333 2001.91666666663 2001.99999999996 2002.0833333333 2002.16666666663 2002.24999999996 2002.3333333333 2002.41666666663 2002.49999999996 2002.5833333333 2002.66666666663 2002.74999999996 2002.83333333329 2002.91666666663 2002.99999999996 2003.08333333329 2003.16666666663 2003.24999999996 2003.33333333329 2003.41666666663 2003.49999999996 2003.58333333329 2003.66666666663 2003.74999999996 2003.83333333329 2003.91666666663 2003.99999999996 2004.08333333329 2004.16666666663 2004.24999999996 2004.33333333329 2004.41666666663 2004.49999999996 2004.58333333329 2004.66666666663 2004.74999999996 2004.83333333329 2004.91666666663 2004.99999999996 2005.08333333329 2005.16666666663 2005.24999999996 2005.33333333329 2005.41666666663 2005.49999999996 2005.58333333329 2005.66666666662 2005.74999999996 2005.83333333329 2005.91666666662 2005.99999999996 2006.08333333329 2006.16666666662 2006.24999999996 2006.33333333329 2006.41666666662 2006.49999999996 2006.58333333329 2006.66666666662 2006.74999999996 2006.83333333329 2006.91666666662 2006.99999999996 2007.08333333329 2007.16666666662 2007.24999999996 2007.33333333329 2007.41666666662 2007.49999999996 2007.58333333329 2007.66666666662 2007.74999999996 2007.83333333329 2007.91666666662 2007.99999999996 2008.08333333329 2008.16666666662 2008.24999999996 2008.33333333329 2008.41666666662 2008.49999999996 2008.58333333329 2008.66666666662 2008.74999999996 2008.83333333329 2008.91666666662 2008.99999999995 2009.08333333329 2009.16666666662 2009.24999999995 2009.33333333329 2009.41666666662 2009.49999999995 2009.58333333329 2009.66666666662 2009.74999999995 2009.83333333329 2009.91666666662 2009.99999999995 2010.08333333329 2010.16666666662 2010.24999999995 2010.33333333329 2010.41666666662 2010.49999999995 2010.58333333329 2010.66666666662 2010.74999999995 2010.83333333329 2010.91666666662 2010.99999999995 2011.08333333329 2011.16666666662 2011.24999999995 2011.33333333329 2011.41666666662 2011.49999999995 2011.58333333329 2011.66666666662 2011.74999999995 2011.83333333329 2011.91666666662 2011.99999999995 2012.08333333329 2012.16666666662 2012.24999999995 2012.33333333329 2012.41666666662 2012.49999999995 2012.58333333329 2012.66666666662 2012.74999999995 2012.83333333329 2012.91666666662 2012.99999999995 2013.08333333329 2013.16666666662 2013.24999999995 2013.33333333329 2013.41666666662 2013.49999999995 2013.58333333329 2013.66666666662 2013.74999999995 2013.83333333328 2013.91666666662 2013.99999999995 2014.08333333328 2014.16666666662 2014.24999999995 2014.33333333328 2014.41666666662 2014.49999999995 2014.58333333328 2014.66666666662 2014.74999999995 2014.83333333328 2014.91666666662 0.0341845 0.0346575 0.0271993 0.027982 0.0172552 0.0124443 0.0093117 0.0175685 0.0149544 0.0147117 0.0060968 -0.0079557 -0.0108892 -0.0175554 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CHAPTER SUMMARY
Gross domestic product (GDP) measures both total income and total expenditure on the economy’s output of goods & services.
Nominal GDP values output at current prices;
real GDP values output at constant prices. Changes in output affect both measures,
but changes in prices only affect nominal GDP.
GDP is the sum of consumption, investment, government purchases, and net exports.

CHAPTER 2 The Data of Macroeconomics

CHAPTER SUMMARY
The overall level of prices can be measured
by either:
the consumer price index (CPI),
the price of a fixed basket of goods purchased by the typical consumer, or
the GDP deflator,
the ratio of nominal to real GDP.
The unemployment rate is the fraction of the labor force that is not employed.

CHAPTER 2 The Data of Macroeconomics

Young couple home shopping

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Nominal GDP
GDP deflator = 100
Real GDP

=
t
t
t
NGDP
GDP deflator
RGDP

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=
1t1t2t2t3t3t
t
PQPQPQ
RGDP

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PPP
RGDPRGDPRGDP

Cost of basket in that month
Cost of basket in base period
100
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15.1%

41.9%

3.5%

15.7%
7.7% 5.7%

3.3%

3.7%

3.4%

Food and bev.

Housing

Apparel

Transportation

Medical care

Recreation

Education

Communication

Other goods
and services

15.1%
41.9%
3.5%
15.7%
7.7%
5.7%
3.3%
3.7%
3.4%
Food and bev .
Housing
Apparel
Transportation
Medical care
Recreation
Education
Communication
Other goods
and services

t
b
E
CPI in month
E
=
t

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PC+PC+PC
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3
12
1t2t3t
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C
CC
PPP
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