Inflation and Unemployment

1. Inflation and Unemployment

2. Warm-up • Why would an unemployed person work a job for no pay? • What is a product or service everyone uses?

3. Content Objective • Today I will be able to analyze inflation and unemployment in the United States by constructing a short response.

4. 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

5. Price Index • * FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)

6. 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)

7. 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)

8. 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)

9. 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)*

10. 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);*

11. 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);

12. 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).

13. Price Index and Inflation • CPI= Market basket/by base year average • Inflation= change in CPI from previous year Inflation- 1951

14. High-level Thinking Question • In times of prolonged inflation, who suffers more? Creditors or debtors? Why?

15. 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

16. Unemployment Rate • Unemployed / labor force

17. Sources of Unemployment • Frictional- workers between jobs

18. Sources of Unemployment • Frictional- workers between jobs • Structural- fundamental change in tastes or how business is done. • Outsourcing

19. Sources of Unemployment • Frictional- workers between jobs • Structural- fundamental change in tastes or how business is done. • Outsourcing • Technological- machines replace workers

20. 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

21. 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

22. Read

23. Exit Ticket