2. CHAPTER 3 National Income
CHAPTER 1 The Science of Macroeconomics
CHAPTER 2 The Data of Macroeconomics
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
3. 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.
5. Value added
Value added is the value of output minus the value of the
intermediate goods used to produce that output
6. 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 the value added at each stage
of production and GDP.
7. 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.
8. The expenditure components of GDP
• consumption, C
• investment, I
• government spending, G
• net exports, NX
An important identity:
9. Consumption (C)
Definition: The value of all goods and services bought by
households, including:
• Durable goods
last a long time.
Examples: cars, home appliances
• Nondurable goods
last a short time.
Examples: food, clothing
• Services
are intangible/non-physical items or activities,
purchased by consumers.
Examples: dry cleaning, air travel, concerts
10. U.S. consumption, 2019
Total (billions of dollars) Per Person (dollars)
Gross Domestic Product 21,729 66,199
Consumption 14,795 45,074
Nondurable goods 3,011 9,173
Durable goods 1,548 4,715
Services 10,237 31,186
11. 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
12. U.S. investment, 2019
Total (billions of dollars) Per Person (dollars)
Gross Domestic Product 21,729 66,199
Investment 3,698 11,267
Nonresidential fixed investment 2,869 8,721
Residential fixed investment 818 2,491
Inventory investment 18 55
13. Government Spending (G)
• G includes all government spending on goods and
services.
• Purchases of trains and installation of subway rail.
• Services provided by a Park Ranger to visitors of
national parks.
• G excludes transfer payments
(e.g., unemployment insurance payments) because they
do not represent spending on goods and services.
14. U.S. government spending, 2019
Total (billions of dollars) Per Person (dollars)
Gross Domestic Product 21,729 66,199
Government Purchases 3,814 11,619
Federal 1,450 4,417
Defense 862 2,626
Nondefense 588 1,790
State and local 2,364 1,790
15. Net Exports (NX)
• NX = exports – imports
• Exports: the value of g&s (goods and services) 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.
• Notice: The trade deficit (NX < 0) does not reduce GDP.
Instead, imports are subtracted to removed them from
domestic spending.
16. U.S. net exports, 2019
Total (billions of dollars) Per Person (dollars)
Gross Domestic Product 21,729 66,199
Net Exports –578 –1,761
Exports 2,498 7,609
Imports 3,076 9,370
17. Stocks versus flows
A stock is a quantity measured at a point in time.
Example:
“The U.S. capital stock was $69 trillion on January 1, 2019.”
A flow is a quantity measured per unit of time.
Example: “U.S. investment was $3.6 trillion during 2019.”
18. Stocks versus flows: examples
Stock Flow
A person’s wealth A person’s annual savings
Number of people with
college degrees
Number of new college
graduates this year
The government debt The government budget
deficit
19. Investment versus capital
Note: Investment is spending on new capital.
Example (assuming no depreciation):
• 1/1/2020:
Economy has $10 trillion worth of capital
• During 2020:
investment = $2 trillion
• 1/1/2021:
Economy will have $12 trillion worth of capital
20. 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
21. GNP versus 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 and dividends on assets
22. Real versus 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.
23. NOW YOU TRY
Real and nominal GDP
2019: P
2019:
Q
2020:
P
2020:
Q
2021:
P
2021:
Q
Good A $30 900 $31 1,000 $36 1,050
Good B $100 192 $102 200 $100 205
• Compute nominal GDP in each year.
• Compute real GDP in each year, using 2019 as the
base year.
24. NOW YOU TRY
Real and nominal GDP, answers
Nominal GDP multiply Ps and Qs from the same year
2019: $46,200 = $30 × 900 + $100 × 192
2020: $51,400
2021: $58,300
Real GDP multiply each year’s Qs by 2010 Ps
2019: $46,200
2020: $50,000
2021: $52,000 = $30 × 1050 + $100 × 205
25. 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.
27. GDP deflator
• Inflation rate: the percentage increase in the overall level
of prices.
• One measure of the price level: GDP deflator
Definition:
Nominal GDP
GDP deflator = 100
Real GDP
28. NOW YOU TRY
GDP deflator and the inflation rate
Nominal GDP Real GDP
GDP
Deflator
Inflation
Rate
2019 $46,200 $46,200 n.a.
2020 51,400 50,000
2021 58,300 52,000
• Use your previous answers to compute the GDP deflator
in each year.
• Use the GDP deflator to compute the inflation rate from
2019 to 2020 and from 2020 to 2020.
29. NOW YOU TRY
GDP deflator and the inflation rate, answers
Nominal GDP Real GDP
GDP
Deflator
Inflation
Rate
2019 $46,200 $46,200 100 n.a.
2020 51,400 50,000 102.8 2.8%
2021 58,300 52,000 112.1 9.0%
2020 2019
2020 Inflation Rate = × 100
2019
GDP delfator GDP deflator
GDP deflator
30. Two helpful facts for working with percentage
changes, part 1
1. For any variables X and Y,
percentage change in (X ×Y)
≈ percentage change in X
+ percentage change in Y
Example: If your hourly wage rises 5 percent and you
work 7 percent more hours, then your wage income
rises approximately 12 percent.
31. Two helpful facts for working with percentage
changes, part 2
2. Percentage change in (X/Y)
≈ percentage change in X
− percentage change in Y
Example: GDP deflator = 100 × NGDP / RGDP
If NGDP rises 9 percent and RGDP rises 4 percent,
then the inflation rate is approximately 5 percent.
32. Consumer price index (CPI)
• A measure of the overall level of prices
• Published by the Bureau of Labor Statistics (BLS)
• Uses:
• tracking changes in the typical household’s cost of
living
• adjusting many contracts for inflation (“COLAs”)
• allowing comparisons of dollar amounts over time
33. How the BLS constructs the CPI
1. It surveys consumers to determine the composition of
the typical consumer’s “basket” of goods
2. Every month, it collects data on the prices of all items in
the basket and computes the cost of the basket
3. CPI in any month equals
Cost of basket in that month
Cost of basket in base period
100
34. NOW YOU TRY
Compute the CPI
Basket: 20 pizzas, 10
records
Prices:
Pizza Records
2018 10 15
2019 11 15
2020 12 16
2021 13 15
For each year, compute:
• the cost of the basket
• the CPI (using 2018 as the
base year)
• the inflation rate from the
preceding year
35. NOW YOU TRY
Compute the CPI, answers
Cost of
Basket
CPI Inflation
Rate
2018 $350 100 n.a.
2019 370 105.7 5.7%
2020 400 114.3 8.1%
2021 410 117.1 2.5%
37. 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.
38. 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.
• The BLS therefore made adjustments to reduce the bias.
• Now, the CPI’s bias is probably under 1% per year.
39. CPI versus 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
40. 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
41. Two important labor-force concepts
• Unemployment rate
percentage of the labor force that is unemployed
• Labor-force participation rate
fraction of the adult population that “participates” in the
labor force—that is, is working or looking for work
42. NOW YOU TRY
Computing labor statistics
U.S. adult population by group, February 2021
Number employed = 150.24 million
Number unemployed = 9.72 million
Adult population = 260.66 million
Calculate
• the labor force
• the unemployment rate
• the labor force participation rate
43. NOW YOU TRY
Computing labor statistics, answers
Data: E = 150.24, U = 9.72, POP = 260.66
Labor force
L = E + U = 150.24 + 9.72 = 159.96
Unemployment rate
U/L × 100% = (9.72/159.96) × 100% = 6.1%
Labor-force participation rate
L/POP × 100% = (159.96/260.66) × 100% = 61.37%
44. NOW YOU TRY
Computing percentage changes
Suppose
• population increases by 1 percent
• labor force increases by 3 percent
• The number of unemployed persons increases by 2
percent
Compute the percentage changes in the labor-force
participation and unemployment rates.
45. NOW YOU TRY
Computing percentage changes, 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
percentage of their initial values, not in percentage points!
Example: If the initial value of LFPR is 60.0 percent, a 2
percent increase would bring it to 61.2 percent because 2
percent of 60 equals 1.2.
46. 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
48. CHAPTER 3 National Income
CHAPTER 1 The Science of Macroeconomics
CHAPTER 2 The Data of Macroeconomics
C H A P T E R S U M M A R Y , P A R T 1
• Gross domestic product (GDP) measures both total
income and total expenditure on the economy’s
output of goods and 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
affect only nominal GDP.
• GDP is the sum of consumption, investment,
government purchases, and net exports.
49. CHAPTER 3 National Income
CHAPTER 1 The Science of Macroeconomics
CHAPTER 2 The Data of Macroeconomics
C H A P T E R S U M M A R Y
• 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 PCE deflator
• The unemployment rate is the fraction of the labor
force that is not employed.
Editor's Notes
#1:This PowerPoint chapter contains in-class exercises requiring students to have calculators.
To help motivate the students, it may be helpful to remind them 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 since 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, and 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.
#3:Most students, having taken principles of economics, will have seen this definition and will be familiar with it. It’s not worth spending a lot of time on it.
It might be worthwhile, however, to briefly review the factors of production.
#5:It might be useful here to remind students what the term “intermediate goods” means.
#6: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.
#8:This slide lists the expenditure components; the following slides 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.
#9:A consumer’s spending on a new house is counted under investment, not consumption. More on this in a few moments, when we get to investment.
A tenant’s spending on rent is counted 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: even though 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 that 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).
#10:Source: Bureau of Economic Analysis (http://www.bea.gov), U.S. Department of Commerce
#11: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 has been renting? Conceptually, consumption should remain unchanged: even though 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).
#12:Source: Bureau of Economic Analysis (http://www.bea.gov), U.S. Department of Commerce
Third-quarter advance estimate (released 12/23/2014)
#13: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.
#14:Source: Bureau of Economic Analysis (http://www.bea.gov), U.S. Department of Commerce
#15:“g&s” is short for “goods and services”
Example:
Assume the total cost to tile a floor is 1000 dollars; of which 700 is labor, and 300 is imported tile. How much does this activity contribute to GDP?
C = 1000, I = G = 0, NX = -300,
Y=700.
However, if the tile is not imported (NX = 0), the project is not done, so C = 0 and Y = 0.
#16:Source: Bureau of Economic Analysis (http://www.bea.gov), U.S. Department of Commerce
#17:The bathtub example, which appears in Chapter 2, is the classic means of explaining stocks and flows.
#18: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 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.
#19:If you teach the stocks vs. flows concepts, this is a good example of the difference.
Note: These numbers are not for the United States but simply illustrate the example.
#20:This is why economists often use the terms income, output, expenditure, and GDP interchangeably.
#21: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 United States, 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 United States
profits earned by foreign-owned businesses located in the United States
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, such as the wages earned by labor.
#23: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—for example, nominal GDP in 2019 = $30 × 900 + $100 × 192.
#24: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—for example, nominal GDP in 2019 = $30 × 900 + $100 × 192.
#25:Suppose that from 2016 to 2017, 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 that real GDP is the value of output using constant base-year prices. If real GDP grows by 6% from 2016 to 2017, 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 2016 and 2017.
#26: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 like me, you might ask students if they know why the two lines cross in 2012.
Answer: 2012 is the base year for this real GDP data, so real GDP = nominal GDP in 2012 only.
Before 2009, real GDP > nominal GDP, while after 2009, real GDP < nominal GDP. 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 rose. 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.
#27: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 <reveal next bullet point>: 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.
#30:These handy hints will be useful in many different contexts later in this book. For example, in the quantity theory of money in Chapter 4, these hints help understand how the quantity equation, MV = PY, gives a relationship between the rates of inflation, money growth, and GDP growth.
The example on this slide uses
wage income = (hourly wage) × (number of hours worked)
Another example would be
revenue = price × quantity
Students will see many more examples later in the textbook.
Note: You may wish to avoid calling these “tricks” as students may believe that the math is tricky and harder than it needs to be.
#31:Again, we will see uses for this hint 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)
Note: You may wish to avoid calling these “tricks” as students may believe that the math is tricky and harder than it needs to be.
#32: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”—that is, 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.
#34:From 2020 to 2021, 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 records, 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 recordss.
#35:From 2020 to 2021, 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 records falls by $1.
However, since the basket contains twice as many pizzas as records, 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 records.
#36:Each number is the percentage of the “typical” household’s total expenditure.
Ask students for examples of how the breakdown of their own expenditures differs from that of the typical household shown here. Then ask students how the typical elderly person’s expenditures might differ from those 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 website 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 are from Jan 2021.
#42:Source: Bureau of Labor Statistics, U.S. Department of Labor
http://www.bls.gov
https://www.bls.gov/webapps/legacy/cpsatab1.htm
The population measured used here is the adult civilian non-institutional population.
Note: Differences from the official number would be due to rounding
#43:Differences from official rate are due to rounding
#44:Allow 2 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.
#47: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
