Transcript Examples - jmdunlap

Unemployment

Employed – people work as paid employees, own their own business,
unpaid workers in a family business, people who had jobs but temporarily
absent
 Full-time and part-time workers


Unemployed – workers without jobs, were available for work and tried to
find employment in the past 4 weeks
Not in labor force – do not fit in previous two categories, full-time student,
homemaker, or retiree
Labor Force

Labor force – Total number of workers; number of
employed + unemployed workers
 2007, labor force = 146.0 + 7.1 = 153.1 million
 Unemployment rate = (7.1/153.1) X 100 = 4.6%
Use the following formula to calculate the unemployment rate:
Unemployment rate = Number of people unemployed X100
labor force
1. 2006, the number of people unemployed = 9.4 million
Number of people in the civilian labor force = 147.1 million
9.4
147.1 = _________
.064
_________
÷ _________
.064
6.4%
_________
x 100 = __________
2. In March 2010, the number of people
unemployed = 15.2 million
Number of people in the civilian labor
force = 156.2 million
15.2 ÷ _________
156.2 = _________
.097
_________
9.7%
.097 x 100 = __________
_________
Types of Unemployment
1.
2.
3.
4.
Frictional Unemployment – always present in the economy, resulting from
temporary transitions made by workers and employers; occurs when
people take time to find a job
Seasonal Unemployment – occurs as a result of season, vacations, or
when industries slow or shut down for a season
Structural Unemployment – workers skill do not match the jobs that are
available
Cyclical Unemployment – rises during economic downturns and falls when
the economy improves
Measuring Unemployment
Number of unemployed people divided by the total
labor force multiplied by 100
 Unemployment rate – percentage of the nations’
labor force that is unemployed

 Unemployment rate is an indication of the health of a
nation’s economy
Full Employment

Natural rate of unemployment – normal rate of unemployment
around which the unemployment rate fluctuates (4-6%)
 Zero unemployment is not an achievable goal because of frictional
unemployment
Underemployment – working at a job for which one is overqualified,
or working part-time when full-time work is desired
 Discouraged workers – a person who wants a job, but has given up
looking (do not count against unemployment rate)

The breakdown of the population in 2007
The Bureau of
Labor Statistics
divides the adult
population into
three categories:
employed,
unemployed, and
not in the labor
force.

Unemployment
Insurance
Unemployment insurance - government program to protect workers’ incomes
when they become unemployed
 Eligible – people who are laid off through no fault of their own
 Ineligible – people who quit, were fired for cause, or just entered the labor
force
 Unemployment Insurance can increase frictional unemployment by taking
away incentive to find a job
○ 1985 case study in Illinois showed people not receiving checks were
unemployed by a 7% shorter period
Unemployment Insurance
Flow Chart Types of Unemployment
Types of Unemployment
1.
Frictional
Seasonal
Structural
Cyclical
Examples
Examples
Examples
Examples
1.
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2.
2.
2.
3.
3.
3.
1.
2.
4.
5.
1.
Your Example
1.
Your Example
1.
Your Example
1.
Your Example
Flow Chart Types of Unemployment
Types of Unemployment
Frictional
Seasonal
Structural
Cyclical
Examples
1. Hannah left her job at
a large hospital to look
for a job at a smaller
health clinic.
Examples
Examples
Examples
2. Jorge graduated from
law school, he is
currently interviewing
for jobs.
1.
2.
2.
3.
3.
1.
1.
2.
4.
3. Liz left the labor force
to take care of an aging
parent, she has returned
to the labor force.
Your Example
1.
5.
1.
Your Example
1.
Your Example
1.
Your Example
Flow Chart Types of Unemployment
Types of Unemployment
Frictional
Seasonal
Structural
Cyclical
Examples
1. Hannah left her job at
a large hospital to look
for a job at a smaller
health clinic.
Examples
1. Brick mason lays off
his workers every winter,
hires every spring.
Examples
Examples
2. Jorge graduated from
law school, he is
currently interviewing
for jobs.
3. Liz left the labor force
to take care of an aging
parent, she has returned
to the labor force.
1.
Your Example
2. School ends, students
find a summer job.
Begins, leave the job for
school.
3. Migrant farmers lose
their job during the
winter, droughts or too
much rain.
1.
Your Example
1.
2.
1.
2.
3.
4.
5.
1.
Your Example
1.
Your Example
Flow Chart Types of Unemployment
Types of Unemployment
Frictional
Examples
1. Hannah left her job at
a large hospital to look
for a job at a smaller
health clinic.
2. Jorge graduated from
law school, he is
currently interviewing
for jobs.
3. Liz left the labor force
to take care of an aging
parent, she has returned
to the labor force.
1.
Your Example
Seasonal
Examples
1. Gregory lays off his
workers every winter,
hires every spring.
2. School ends, students
find a summer job.
Begins, leave the job for
school.
3. Migrant farmers lose
their job during the
winter, droughts or too
much rain.
1.
Your Example
Structural
Cyclical
Book
Examples
Examples
1. New technology puts
people out of work, CD’s
put out the workers in
2. phonographic
the
market.
2. Discovery of new
3.
resources,
oil
supplanted whale-oil as
an energy source.
4. Changes in consumer
3.
demand, people favor
one item over another.
5. Globalization, GM
4.
moves their factory,
people lose their jobs.
5. Lack
of Education
Your
Example can
affect
the marketability
1.
of an individual looking
for a job.
Examples
1.
2.
1.
Your Example
Flow Chart Types of Unemployment
Types of Unemployment
Frictional
Examples
1. Hannah left her job at
a large hospital to look
for a job at a smaller
health clinic.
2. Jorge graduated from
law school, he is
currently interviewing
for jobs.
3. Liz left the labor force
to take care of an aging
parent, she has returned
to the labor force.
1.
Your Example
Seasonal
Examples
1. Gregory lays off his
workers every winter,
hires every spring.
2. School ends, students
find a summer job.
Begins, leave the job for
school.
3. Migrant farmers lose
their job during the
winter, droughts or too
much rain.
1.
Your Example
Structural
Cyclical
Examples
1. New technology puts
people out of work, CD’s
put out the workers in
the phonographic
market.
2. Discovery of new
resources, oil
supplanted whale-oil as
an energy source.
3. Changes in consumer
demand, people favor
one item over another.
4. Globalization, GM
moves their factory,
people lose their jobs.
5. Lack
of Education
Your
Example can
affect
the marketability
1.
of an individual looking
for a job.
Examples
1. Workers in the steel
industry are affected by
the downturn in the
economy.
2. During the great
depression the
unemployment rate
spiked to 25%.
1.
Your Example
Review - Unemployment Statistics
The country of Ecoland has collected the following information:
Population 240,000
Employed 180,000
Unemployed 30,000
Determine the following:
180,000 + _______
30,000
210,000
1. Labor Force = __________
= _____________
2. Unemployment rate = (_________/_________)
30,000 210,000
X 100% = ______
14.3%
Types of Unemployment Chart
Unemployed
Type of Unemployment
1. A computer programmer is laid off because
of a recession.
Cyclical Unemployment
2. A literary editor leaves her job in New York
to look for a job in San Francisco.
Frictional
3. An unemployed college graduate is looking
for his first job.
Frictional
4. Advances in technology make the
assembly-line worker’s job obsolete.
Structural
5. Slumping sales lead to a cashier being laid
off.
Cyclical
6. Workers are laid off when the local
manufacturing plant closes because of a
downturn in the economy.
Cyclical
7. A high school graduate lacks the skills
necessary for a particular job.
Structural
8. Summer ends and local teens lose their
jobs.
Seasonal
Inflation
Inflation – a general increase in prices
 Inflation rate – percentage change in the price
level from the previous period or base year.
 Normal rate is about 3%
 Hyperinflation – inflation that is out of control

http://www.youtube.com/watch?v=Vg4-gMW89E0&feature=player_detailpage#t=0s

Deflation – sustained drop in the price levels

In 2009, the Consumer Price Index fell for the first time
since 1955
Purchasing power – the ability to purchase
goods and services
 Fixed Income – income that does not increase
when prices go up

Causes of Inflation



Quantity Theory – too much money in
the economy causes inflation
Demand-Pull Theory – inflation
occurs when demand for goods and
services exceeds existing supplies
Cost – Push Theory – inflation occurs
when producers raise prices in order
to meet increasing costs of inputs
Inflation Chart
Scenario
1. Prices for meat, poultry and pork increase as a
result of an increase in the price for corn.
2. Prices rise in the United States as a result of
successive stimulus packages
3. Real Estate prices in the mid-2000’s increased
exponentially as a result of significant increases in
demand.
4. Zimbabwe experienced out of control price
increases in their economy.
5. In 2009 the general price level decreased.
6. A teacher makes $60,000 dollars per year; paid
once per month.
7. Prices go up and a person on a fixed income loses
the ability to consume at the same rate.
Term
Inflation Chart
Scenario
Term
1. Prices for meat, poultry and pork increase as a
result of an increase in the price for corn.
Cost-Push Theory
2. Prices rise in the United States as a result of
successive stimulus packages
3. Real Estate prices in the mid-2000’s increased
exponentially as a result of significant increases in
demand.
4. Zimbabwe experienced out of control price
increases in their economy.
5. In 2009 the general price level decreased.
6. A teacher makes $60,000 dollars per year; paid
once per month.
7. Prices go up and a person on a fixed income loses
the ability to consume at the same rate.
Inflation Chart
Scenario
Term
1. Prices for meat, poultry and pork increase as a
result of an increase in the price for corn.
Cost-Push Theory
2. Prices rise in the United States as a result of
successive stimulus packages
Quantity Theory
3. Real Estate prices in the mid-2000’s increased
exponentially as a result of significant increases in
demand.
4. Zimbabwe experienced out of control price
increases in their economy.
5. In 2009 the general price level decreased.
6. A teacher makes $60,000 dollars per year; paid
once per month.
7. Prices go up and a person on a fixed income loses
the ability to consume at the same rate.
Inflation Chart
Scenario
Term
1. Prices for meat, poultry and pork increase as a
result of an increase in the price for corn.
Cost-Push Theory
2. Prices rise in the United States as a result of
successive stimulus packages
Quantity Theory
3. Real Estate prices in the mid-2000’s increased
exponentially as a result of significant increases in
demand.
Demand-Pull Theory
4. Zimbabwe experienced out of control price
increases in their economy.
5. In 2009 the general price level decreased.
6. A teacher makes $60,000 dollars per year; paid
once per month.
7. Prices go up and a person on a fixed income loses
the ability to consume at the same rate.
Inflation Chart
Scenario
Term
1. Prices for meat, poultry and pork increase as a
result of an increase in the price for corn.
Cost-Push Theory
2. Prices rise in the United States as a result of
successive stimulus packages
Quantity Theory
3. Real Estate prices in the mid-2000’s increased
exponentially as a result of significant increases in
demand.
Demand-Pull Theory
4. Zimbabwe experienced out of control price
increases in their economy.
Hyperinflation
5. In 2009 the general price level decreased.
6. A teacher makes $60,000 dollars per year; paid
once per month.
7. Prices go up and a person on a fixed income loses
the ability to consume at the same rate.
Inflation Chart
Scenario
Term
1. Prices for meat, poultry and pork increase as a
result of an increase in the price for corn.
Cost-Push Theory
2. Prices rise in the United States as a result of
successive stimulus packages
Quantity Theory
3. Real Estate prices in the mid-2000’s increased
exponentially as a result of significant increases in
demand.
Demand-Pull Theory
4. Zimbabwe experienced out of control price
increases in their economy.
Hyperinflation
5. In 2009 the general price level decreased.
Deflation
6. A teacher makes $60,000 dollars per year; paid
once per month.
7. Prices go up and a person on a fixed income loses
the ability to consume at the same rate.
Inflation Chart
Scenario
Term
1. Prices for meat, poultry and pork increase as a
result of an increase in the price for corn.
Cost-Push Theory
2. Prices rise in the United States as a result of
successive stimulus packages
Quantity Theory
3. Real Estate prices in the mid-2000’s increased
exponentially as a result of significant increases in
demand.
Demand-Pull Theory
4. Zimbabwe experienced out of control price
increases in their economy.
Hyperinflation
5. In 2009 the general price level decreased.
Deflation
6. A teacher makes $60,000 dollars per year; paid
once per month.
Fixed Income
7. Prices go up and a person on a fixed income loses
the ability to consume at the same rate.
Inflation Chart
Scenario
Term
1. Prices for meat, poultry and pork increase as a
result of an increase in the price for corn.
Cost-Push Theory
2. Prices rise in the United States as a result of
successive stimulus packages
Quantity Theory
3. Real Estate prices in the mid-2000’s increased
exponentially as a result of significant increases in
demand.
Demand-Pull Theory
4. Zimbabwe experienced out of control price
increases in their economy.
Hyperinflation
5. In 2009 the general price level decreased.
Deflation
6. A teacher makes $60,000 dollars per year; paid
once per month.
Fixed Income
7. Prices go up and a person on a fixed income loses Purchasing Power
the ability to consume at the same rate.
Consumer Price Index
Consumer Price Index – a measure of the
overall cost of goods and services bought by
the typical urban consumer
 Computed each month by the Bureau of Labor
Statistics (BLS), part of the Department of Labor
 Market Basket – a metaphorical object to
represent a collection of goods and services
 Derived of more than 200 sub-categories,
arranged into eight major groups
 Weighted based on the importance of an
item to the consumer

Index – shows how
the average price of a
standard group of goods
changes over time
 Cost of living - The
average cost of the basic
necessities of life, such as
food, shelter, and
clothing.
 Price
Consumer Price Index
1. FOOD AND BEVERAGES (breakfast cereal, milk,
coffee, chicken, wine, full service meals, snacks)
2. HOUSING (rent of primary residence, owners'
equivalent rent, fuel oil, bedroom furniture)
3. APPAREL (men's shirts and sweaters, women's
dresses, jewelry)
4. TRANSPORTATION (new vehicles, airline fares,
gasoline, motor vehicle insurance)
5. MEDICAL CARE (prescription drugs and medical
supplies, physicians' services, eyeglasses and eye
care, hospital services)
6. RECREATION (televisions, toys, pets and pet
products, sports equipment, admissions);
7. EDUCATION AND COMMUNICATION (college
tuition, postage, telephone services, computer
software and accessories);
8. OTHER GOODS AND SERVICES (tobacco and
smoking products, haircuts and other personal
services, funeral expenses).
•
Market Basket for Products 2008 – $3858.18
The typical basket of goods and services
This figure shows
how the typical
urban consumer
divides spending
among various
categories of
goods and
services. The
Bureau of Labor
Statistics calls
each percentage
the “relative
importance” of the
category.
•
CPI =
Price of basket of goods and services in current year X 100
Price of basket in base year period
Base Period is between 1982 – 1984
•1982-1984 – $1792.00
•
•Market
Basket for Products
• 2008 – $3858.18
•
3858.18/1792 = 2.1530
•
2.15 X100 = 215.3
•
2008 CPI = 215.3
•
Prices have inflated by 115.3% from base period
(1982-1984) to 2008
Inflation = CPI in year 2 – CPI in year 1
CPI in year 1
•2008 – 215.30
•2007 – 207.34
•215.30 – 207.34 = 7.96
•
•7.96/207.34
•.0384
•
X 100
= .0384
X 100 = 3.84%
Prices have inflated by 3.84% from 2007 to 2008
Determining the Inflation Rate
Year
Inflation Rate
1999-2000
172.2 - 166.6 = 5.6/166.6 = .0336 x 100 = 3.4%
1998-1999
166.6 - 163.0 = 3.6/163 = .022 x 100 = 2.2%
1997-1998
163.0 – 160.5 = 2.5/160.5 = .0015 x 100 = 1.6%
1996-1997
160.5 – 156.9 = 3.6/156.9 = .0229 x 100 = 2.3%
1995-1996
156.9 – 152.4 = 4.5/152.4 = .029 x 100 = 2.9%
1994-1995
152.4 – 148.2 = 4.2/148.2 = .028 x 100 = 2.8
1993-1994
148.2 – 144.5 = 3.7/144.5 = .026 x 100 = 2.6%
1992-1993
144.5 – 140.3 = 4.2/140.3 = .029 x 100 = 2.9%
1991-1992
140.3 – 136.2 = 4.1/136.2 = .03 x 100 = 3.0%
1990-1991
136.2 – 130.7 = 5.5/130.7 = .04 x 100 = 4.2%
Market Basket to CPI
Step 1: Survey consumers to determine a fixed basket of goods
Basket = 6 Guns, 3 Butter
Step 2: Find the price of each good in each year
Year
Price of guns
Price of butter
2005
2006
2007
$2
4
6
$4
5
7
Step 3: Compute the cost of the basket of goods in each year
2005
2006
2007
$________ per Gun ×________ total Guns = ________
$________ per Gun ×________ total Guns = _______
$________ per Gun ×________ total Guns = _______
2005
2006
2007
Total Market Value for Guns _____________ +Total Market Value for Butter_____________ = ______________
Total Market Value for Guns _____________ +Total Market Value for Butter_____________ = ______________
Total Market Value for Guns _____________ +Total Market Value for Butter_____________ = ______________
$_____ per Butter ×________ total Butter =________
$______ per Butter ×_______ total Butter =_______
$______ per Butter ×________ total Butter =________
Step 4: Choose one year as a base year (2005) and compute the CPI in each year
2005
2006
2007
CPI = $___________ (2005)/___________(2005) = __________ X 100 = __________
CPI = $____________ (2006)/___________(2005) = ___________ X 100 = ________
CPI = $___________ (2007)/___________(2005) = ___________ X 100 = _________
Step 5: Use the consumer price index to compute the inflation rate from previous year
2006
2007
Market Basket to CPI
Step 1: Survey consumers to determine a fixed basket of goods
Basket = 6 Guns, 3 Butter
Step 2: Find the price of each good in each year
Year
Price of guns
Price of butter
2005
2006
2007
$2
4
6
$4
5
7
Step 3: Compute the cost of the basket of goods in each year
2005
2006
2007
$___2_____ per Gun ×___6_____ total Guns = __12______
$________ per Gun ×________ total Guns = _______
$________ per Gun ×________ total Guns = _______
2005
2006
2007
Total Market Value for Guns _____________ +Total Market Value for Butter_____________ = ______________
Total Market Value for Guns _____________ +Total Market Value for Butter_____________ = ______________
Total Market Value for Guns _____________ +Total Market Value for Butter_____________ = ______________
$__4____ per Butter ×___3_____ total Butter =___12_____
$______ per Butter ×_______ total Butter =_______
$______ per Butter ×________ total Butter =________
Step 4: Choose one year as a base year (2005) and compute the CPI in each year
2005
2006
2007
CPI = $___________ (2005)/___________(2005) = __________ X 100 = __________
CPI = $____________ (2006)/___________(2005) = ___________ X 100 = ________
CPI = $___________ (2007)/___________(2005) = ___________ X 100 = _________
Step 5: Use the consumer price index to compute the inflation rate from previous year
2006
2007
Market Basket to CPI
Step 1: Survey consumers to determine a fixed basket of goods
Basket = 6 Guns, 3 Butter
Step 2: Find the price of each good in each year
Year
Price of guns
Price of butter
2005
2006
2007
$2
4
6
$4
5
7
Step 3: Compute the cost of the basket of goods in each year
2005
2006
2007
$___2_____ per Gun ×___6_____ total Guns = __12______
$________ per Gun ×________ total Guns = _______
$________ per Gun ×________ total Guns = _______
2005
2006
2007
Total Market Value for Guns _____12________ +Total Market Value for Butter_____12________ = _____24_________
Total Market Value for Guns _____________ +Total Market Value for Butter_____________ = ______________
Total Market Value for Guns _____________ +Total Market Value for Butter_____________ = ______________
$__4____ per Butter ×___3_____ total Butter =___12_____
$______ per Butter ×_______ total Butter =_______
$______ per Butter ×________ total Butter =________
Step 4: Choose one year as a base year (2005) and compute the CPI in each year
2005
2006
2007
CPI = $___________ (2005)/___________(2005) = __________ X 100 = __________
CPI = $____________ (2006)/___________(2005) = ___________ X 100 = ________
CPI = $___________ (2007)/___________(2005) = ___________ X 100 = _________
Step 5: Use the consumer price index to compute the inflation rate from previous year
2006
2007
Market Basket to CPI
Step 1: Survey consumers to determine a fixed basket of goods
Basket = 6 Guns, 3 Butter
Step 2: Find the price of each good in each year
Year
Price of guns
Price of butter
2005
2006
2007
$2
4
6
$4
5
7
Step 3: Compute the cost of the basket of goods in each year
2005
2006
2007
$___2_____ per Gun ×___6_____ total Guns = __12______
$________ per Gun ×________ total Guns = _______
$________ per Gun ×________ total Guns = _______
2005
2006
2007
Total Market Value for Guns _____12________ +Total Market Value for Butter_____12________ = _____24_________
Total Market Value for Guns _____________ +Total Market Value for Butter_____________ = ______________
Total Market Value for Guns _____________ +Total Market Value for Butter_____________ = ______________
$__4____ per Butter ×___3_____ total Butter =___12_____
$______ per Butter ×_______ total Butter =_______
$______ per Butter ×________ total Butter =________
Step 4: Choose one year as a base year (2005) and compute the CPI in each year
2005
2006
2007
CPI = $_____24_______ (2005)/_____24______(2005) = _____1______ X 100 = ____100_____
CPI = $____________ (2006)/___________(2005) = ___________ X 100 = ________
CPI = $___________ (2007)/___________(2005) = ___________ X 100 = _________
Step 5: Use the consumer price index to compute the inflation rate from previous year
2006
2007
Market Basket to CPI
Step 1: Survey consumers to determine a fixed basket of goods
Basket = 6 Guns, 3 Butter
Step 2: Find the price of each good in each year
Year
Price of guns
Price of butter
2005
2006
2007
$2
4
6
$4
5
7
Step 3: Compute the cost of the basket of goods in each year
2005
2006
2007
$___2_____ per Gun ×___6_____ total Guns = __12______
$___4_____ per Gun ×___6_____ total Guns = __24_____
$________ per Gun ×________ total Guns = _______
2005
2006
2007
Total Market Value for Guns _____12________ +Total Market Value for Butter_____12________ = _____24_________
Total Market Value for Guns _____________ +Total Market Value for Butter_____________ = ______________
Total Market Value for Guns _____________ +Total Market Value for Butter____________ = ______________
$__4____ per Butter ×___3_____ total Butter =___12_____
$__5____ per Butter ×___3_____ total Butter =___15____
$______ per Butter ×________ total Butter =________
Step 4: Choose one year as a base year (2005) and compute the CPI in each year
2005
2006
2007
CPI = $_____24_______ (2005)/_____24______(2005) = _____1______ X 100 = ____100_______
CPI = $____________ (2006)/___________(2005) = ___________ X 100 = ________
CPI = $___________ (2007)/___________(2005) = ___________ X 100 = _________
Step 5: Use the consumer price index to compute the inflation rate from previous year
2006
2007
Market Basket to CPI
Step 1: Survey consumers to determine a fixed basket of goods
Basket = 6 Guns, 3 Butter
Step 2: Find the price of each good in each year
Year
Price of guns
Price of butter
2005
2006
2007
$2
4
6
$4
5
7
Step 3: Compute the cost of the basket of goods in each year
2005
2006
2007
$___2_____ per Gun ×___6_____ total Guns = __12______
$___4_____ per Gun ×___6_____ total Guns = __24_____
$________ per Gun ×________ total Guns = _______
2005
2006
2007
Total Market Value for Guns _____12________ +Total Market Value for Butter_____12________ = _____24_________
Total Market Value for Guns _____24________ +Total Market Value for Butter_____15________ = _____39_________
Total Market Value for Guns _____________ +Total Market Value for Butter____________ = ______________
$__4____ per Butter ×___3_____ total Butter =___12_____
$__5____ per Butter ×___3_____ total Butter =___15____
$______ per Butter ×________ total Butter =________
Step 4: Choose one year as a base year (2005) and compute the CPI in each year
2005
2006
2007
CPI = $_____24_______ (2005)/_____24______(2005) = _____1______ X 100 = ____100_______
CPI = $____________ (2006)/___________(2005) = ___________ X 100 = ________
CPI = $___________ (2007)/___________(2005) = ___________ X 100 = _________
Step 5: Use the consumer price index to compute the inflation rate from previous year
2006
2007
Market Basket to CPI
Step 1: Survey consumers to determine a fixed basket of goods
Basket = 6 Guns, 3 Butter
Step 2: Find the price of each good in each year
Year
Price of guns
Price of butter
2005
2006
2007
$2
4
6
$4
5
7
Step 3: Compute the cost of the basket of goods in each year
2005
2006
2007
$___2_____ per Gun ×___6_____ total Guns = __12______
$___4_____ per Gun ×___6_____ total Guns = __24_____
$________ per Gun ×________ total Guns = _______
2005
2006
2007
Total Market Value for Guns _____12________ +Total Market Value for Butter_____12________ = _____24_________
Total Market Value for Guns _____24________ +Total Market Value for Butter_____15________ = _____39_________
Total Market Value for Guns _____________ +Total Market Value for Butter____________ = ______________
$__4____ per Butter ×___3_____ total Butter =___12_____
$__5____ per Butter ×___3_____ total Butter =___15____
$______ per Butter ×________ total Butter =________
Step 4: Choose one year as a base year (2005) and compute the CPI in each year
2005
2006
2007
CPI = $_____24_______ (2005)/_____24______(2005) = _____1______ X 100 = ____100_______
CPI = $_____39_______ (2006)/____24_______(2005) = ___1.625________ X 100 = __162.5______
CPI = $___________ (2007)/___________(2005) = ___________ X 100 = _________
Step 5: Use the consumer price index to compute the inflation rate from previous year
2006
2007
Market Basket to CPI
Step 1: Survey consumers to determine a fixed basket of goods
Basket = 6 Guns, 3 Butter
Step 2: Find the price of each good in each year
Year
Price of guns
Price of butter
2005
2006
2007
$2
4
6
$4
5
7
Step 3: Compute the cost of the basket of goods in each year
2005
2006
2007
$___2_____ per Gun ×___6_____ total Guns = __12______
$___4_____ per Gun ×___6_____ total Guns = __24_____
$___6_____ per Gun ×___6_____ total Guns = __36_____
2005
2006
2007
Total Market Value for Guns _____12________ +Total Market Value for Butter_____12________ = _____24_________
Total Market Value for Guns _____24________ +Total Market Value for Butter_____15________ = _____39_________
Total Market Value for Guns _____36________ +Total Market Value for Butter_____21________ = _____57_________
$__4____ per Butter ×___3_____ total Butter =___12_____
$__5____ per Butter ×___3_____ total Butter =___15____
$__7____ per Butter ×___3_____ total Butter =___21_____
Step 4: Choose one year as a base year (2005) and compute the CPI in each year
2005
2006
2007
CPI = $_____24_______ (2005)/_____24______(2005) = _____1______ X 100 = ____100_______
CPI = $_____39_______ (2006)/____24_______(2005) = ___1.625________ X 100 = __162.5______
CPI = $_____57______ (2007)/____24_______(2005) = ___2.375________ X 100 = ____237.5_____
Step 5: Use the consumer price index to compute the inflation rate from previous year
2006
2007
Market Basket to CPI
Step 1: Survey consumers to determine a fixed basket of goods
Basket = 6 Guns, 3 Butter
Step 2: Find the price of each good in each year
Year
Price of guns
Price of butter
2005
2006
2007
$2
4
6
$4
5
7
Step 3: Compute the cost of the basket of goods in each year
2005
2006
2007
$___2_____ per Gun ×___6_____ total Guns = __12______
$___4_____ per Gun ×___6_____ total Guns = __24_____
$___6_____ per Gun ×___6_____ total Guns = __36_____
2005
2006
2007
Total Market Value for Guns _____12________ +Total Market Value for Butter_____12________ = _____24_________
Total Market Value for Guns _____24________ +Total Market Value for Butter_____15________ = _____39_________
Total Market Value for Guns _____36________ +Total Market Value for Butter_____24________ = _____57_________
$__4____ per Butter ×___3_____ total Butter =___12_____
$__5____ per Butter ×___3_____ total Butter =___15____
$__7____ per Butter ×___3_____ total Butter =___21_____
Step 4: Choose one year as a base year (2005) and compute the CPI in each year
2005
2006
2007
CPI = $_____24_______ (2005)/_____24______(2005) = _____1______ X 100 = ____100_______
CPI = $_____39_______ (2006)/____24_______(2005) = ___1.625________ X 100 = __162.5______
CPI = $_____57______ (2007)/____24_______(2005) = ___2.375________ X 100 = ____237.5_____
Step 5: Use the consumer price index to compute the inflation rate from previous year
2006
2007
(162.5 – 100) / 100 × 100 =
Market Basket to CPI
Step 1: Survey consumers to determine a fixed basket of goods
Basket = 6 Guns, 3 Butter
Step 2: Find the price of each good in each year
Year
Price of guns
Price of butter
2005
2006
2007
$2
4
6
$4
5
7
Step 3: Compute the cost of the basket of goods in each year
2005
2006
2007
$___2_____ per Gun ×___6_____ total Guns = __12______
$___4_____ per Gun ×___6_____ total Guns = __24_____
$___6_____ per Gun ×___6_____ total Guns = __36_____
2005
2006
2007
Total Market Value for Guns _____12________ +Total Market Value for Butter_____12________ = _____24_________
Total Market Value for Guns _____24________ +Total Market Value for Butter_____15________ = _____39_________
Total Market Value for Guns _____36________ +Total Market Value for Butter_____24________ = _____57_________
$__4____ per Butter ×___3_____ total Butter =___12_____
$__5____ per Butter ×___3_____ total Butter =___15____
$__7____ per Butter ×___3_____ total Butter =___21_____
Step 4: Choose one year as a base year (2005) and compute the CPI in each year
2005
2006
2007
CPI = $_____24_______ (2005)/_____24______(2005) = _____1______ X 100 = ____100_______
CPI = $_____39_______ (2006)/____24_______(2005) = ___1.625________ X 100 = __162.5______
CPI = $_____57______ (2007)/____24_______(2005) = ___2.375________ X 100 = ____237.5_____
Step 5: Use the consumer price index to compute the inflation rate from previous year
2006
2007
(162.5 – 100) / 100 × 100 = 62.5%
Market Basket to CPI
Step 1: Survey consumers to determine a fixed basket of goods
Basket = 6 Guns, 3 Butter
Step 2: Find the price of each good in each year
Year
Price of guns
Price of butter
2005
2006
2007
$2
4
6
$4
5
7
Step 3: Compute the cost of the basket of goods in each year
2005
2006
2007
$___2_____ per Gun ×___6_____ total Guns = __12______
$___4_____ per Gun ×___6_____ total Guns = __24_____
$___6_____ per Gun ×___6_____ total Guns = __36_____
2005
2006
2007
Total Market Value for Guns _____12________ +Total Market Value for Butter_____12________ = _____24_________
Total Market Value for Guns _____24________ +Total Market Value for Butter_____15________ = _____39_________
Total Market Value for Guns _____36________ +Total Market Value for Butter_____24________ = _____57_________
$__4____ per Butter ×___3_____ total Butter =___12_____
$__5____ per Butter ×___3_____ total Butter =___15____
$__7____ per Butter ×___3_____ total Butter =___21_____
Step 4: Choose one year as a base year (2005) and compute the CPI in each year
2005
2006
2007
CPI = $_____24_______ (2005)/_____24______(2005) = _____1______ X 100 = ____100_______
CPI = $_____39_______ (2006)/____24_______(2005) = ___1.625________ X 100 = __162.5______
CPI = $_____57______ (2007)/____24_______(2005) = ___2.375________ X 100 = ____237.5_____
Step 5: Use the consumer price index to compute the inflation rate from previous year
2006
2007
(162.5 – 100) / 100 × 100 = 62.5%
(237.5 – 162.5) / 162.5 × 100 = 46.15%
Poverty
Poverty - lack of basic human needs, such as
clean water, nutrition, health care, education,
clothing and shelter, because of the inability to
afford them
 Poverty threshold - is an income level below that
which is needed to support families or households.
 Poverty rate – percentage of people who live below
the poverty threshold (2010 – 14.3%)
 Poor – low income working poor, unemployed,
homeless, children

Antipoverty Policies





1996 – President Clinton signed
welfare reform
Block Grants – lump sums of
money to the states to assist poor,
5 year limit to receipt of benefits,
show employment within 2 years
Workfare – program requiring work
in exchange for temporary
assistance
Enterprise zones – areas where
companies can gain tax benefits
from local, state and federal
government
 Revitalization projects in
rundown areas
Employment assistance – job
training programs to deal with
unskilled workers; minimum wage
laws