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    Eco 104: Introduction To Macroeconomics: Lecture 2 Parisa Shakur

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    Numayer Ahmed Chaudhuri
    This document provides an overview of an introductory macroeconomics lecture given by Parisa Shakur. The key points covered include: - The goals of economics include understanding human behavior and improving lives through tools like economic and social justice. - Macroeconomics deals with analyzing the overall behavior of the entire economy. - Price indexes and the consumer price index (CPI) are used to track inflation and measure changes in cost of living. - Unemployment rates are calculated based on definitions of employed, unemployed, and those in the labor force. Different types of unemployment include frictional, structural, and cyclical. - Examples from Bangladesh include a natural unemployment rate of 4.

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    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd

    Eco 104: Introduction To Macroeconomics: Lecture 2 Parisa Shakur

    Uploaded by

    Numayer Ahmed Chaudhuri
    107 views13 pages
    This document provides an overview of an introductory macroeconomics lecture given by Parisa Shakur. The key points covered include: - The goals of economics include understanding human behavior and improving lives through tools like economic and social justice. - Macroeconomics deals with analyzing the overall behavior of the entire economy. - Price indexes and the consumer price index (CPI) are used to track inflation and measure changes in cost of living. - Unemployment rates are calculated based on definitions of employed, unemployed, and those in the labor force. Different types of unemployment include frictional, structural, and cyclical. - Examples from Bangladesh include a natural unemployment rate of 4.

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    Eco104,L2,3

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    This document provides an overview of an introductory macroeconomics lecture given by Parisa Shakur. The key points covered include: - The goals of economics include understanding human behavior and improving lives through tools like economic and social justice. - Macroeconomics deals with analyzing the overall behavior of the entire economy. - Price indexes and the consumer price index (CPI) are used to track inflation and measure changes in cost of living. - Unemployment rates are calculated based on definitions of employed, unemployed, and those in the labor force. Different types of unemployment include frictional, structural, and cyclical. - Examples from Bangladesh include a natural unemployment rate of 4.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    107 views13 pages

    Eco 104: Introduction To Macroeconomics: Lecture 2 Parisa Shakur

    Uploaded by

    Numayer Ahmed Chaudhuri
    This document provides an overview of an introductory macroeconomics lecture given by Parisa Shakur. The key points covered include: - The goals of economics include understanding human behavior and improving lives through tools like economic and social justice. - Macroeconomics deals with analyzing the overall behavior of the entire economy. - Price indexes and the consumer price index (CPI) are used to track inflation and measure changes in cost of living. - Unemployment rates are calculated based on definitions of employed, unemployed, and those in the labor force. Different types of unemployment include frictional, structural, and cyclical. - Examples from Bangladesh include a natural unemployment rate of 4.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 13

    Eco104: Introductionto Macroeconomics

    Lecture2 ParisaShakur

    Nowletsgetstarted
    Broadambi5onofeconomicsistounderstandpeoplebe:er. Economistsarelikeengineers NoblePrizesince1990sformakinghumanlivesbe:er Ul5matemo:otobringeconomicandsocialjus5ce. Butrstweneedtofamiliarizewiththetoolsandproblems etc. Toolsdonotnecessarilyalwaysmeanmodelsandnumbers;ie: developmentprobleminNairobi,India.

    Macroeconomicsisabranchofeconomicsthatdealswith
    theen5reeconomy.Itisinterestedintheoverallbehaviorof theeconomy Thewholeisgreaterthanthesumofallparts.Example: Reducedspendingbyonefamilyleadstoeconomicslump

    createdbyParisaShakur

    Pricelevelandindexes
    Pricelevelisaweightedaverageofthepricesofallgoodsandservicemeasuredusingan index,oQentheCPI PricelevelPrice Theindicescoveredeightcommoditygroupswhichare: 1.Food,beverageandtobacco 2.Clothingandfootwear 3.Grossrent,fuelandligh5ng 4.Furniture,furnishings,householdequipment&opera5on 5.Medicalcareandhealthexpenses 6.Transportandcommunica5ons 7.Recrea5on,entertainment,educa5onandculturalservices 8.Miscellaneousgoodsandservices WorkedExample: Q.Duetodrought,citrusharvestwasdestroyedandpricesoforanges,grapefruit&lemons increasedfromTk.0.2toTk.0.4, Tk.0.6toTk.1.00&Tk.0.25toTk.0.45respec5vely.Howmuchhasthepriceofcitrusfruit increased? Solu%on: InsteadofndingoutforeachwecandoAverage. Forallgoodsandservices,economiststrackchangesforatypicalbasketofgoodsthe marketbasket.Weneedweightedaverageforbe:ermeasures.Theyearchosenasapointof referenceofbenchmarkiscalledthebaseyear.

    createdbyParisaShakur

    CPIcontd.
    Supposethemarketbaskethas200oranges,50grapefruitand100 lemonsforOneyear,then
    PreDrought PriceofOrange PriceofGrapefruit PriceofLemon Costofmarket basket 0.2 0.6 0.25 (200x0.2)+(50x0.6)+( 100x0.25)=Tk.95 PostDrought 1.00 0.45 (200x0.4)+(50x1.00) +(100x0.45)= Tk.175
    createdbyParisaShakur

    0.4

    Priceindexinagivenyear=Costofmarketbasketinagivenyear Costofmarketbasketinbaseyearx100 =175X100=184.2 95

    CPIcontd.
    CPIisthemostcommonpriceindex. Now,tryndingoutpriceindexvalueforthebaseyear. TheCPIforthebaseyearis100whichmakesiteasierto compare. Thusfromthepriceindexvalueabove,itisclearthatprices haveincreasedby84.2%fordroughtfrombaseyear.

    createdbyParisaShakur

    In?lation
    Itistheincreaseinpricelevel Priceindexesareveryusefultocalculateina5on. Ina5onrate=Priceindexinyear2Priceindexinyear1x100 Priceindiceshelpustrackpricechangesovertheyearsfora par5cularmarketbasket. Areourincomesactuallyincreasing? Nominalincome:thecurrencyvalueofapersonsincome Realincome:nominalincomeadjustedforpricechanges
    createdbyParisaShakur

    Priceindexinyear1

    RealIncome=Nominalincomex100
    CPI

    CPI
    CPItrendforBangladeshshows,headlineina5onis rising,drivenmainlybyfoodpriceina5on.

    createdbyParisaShakur

    CalculatingRealIncome
    Ifyournominalincomeis$50,000andyourrealincome inbaseyearpricesis$62,500,whatistheCPI?
    createdbyParisaShakur

    DisadvantagesofusingCPI:Itovervaluesthetruecostof livingbecause: 1Subs5tu5onbias 2Innova5onmayleadtofallinconsumerprices

    Unemployment
    Easiertodeneemploymentbutnotsoeasytodene unemployment Peopleover16,notinins5tu5ons,havingtheability(both physicalandmental)andwillingness(ac5velylookingfor work)toworkbutcurrentlyoutofwork,arecountedas unemployed Labourforce=Employed+unemployed 1.Unemploymentrate(U)=(No.ofunemployed/labour force)*100 2.Employmentrate(E)=(No.ofemployed/peoplenotin ins5tu5ons)*100 3.Labourforcepar8cipa8onrate(LFPR)=(Labourforce/people notinins5tu5ons)*100

    createdbyParisaShakur

    Problemswithunemployment rates
    Ucanbeoverstatedbecausealotpeoplemaybeunemployed dueto5melagbetweenlosingandgeqngajobbutare condentthattheywillgetone.However,theyarealso countedasunemployed Umaybeunderstatedbecause 1. Alotofpeoplemaygiveuplookingforworkgiventhe prevailingjobmarketbuttheywillnotbecountedas unemployed.Theyarecalleddiscouragedworkers 2. Therearetheunderemployedwhoareworkingpart5me duetolackofdecentfull5mejobs.Eg.women
    createdbyParisaShakur

    10

    Typesofunemployment
    1. Fric8onalunemployment(UF)involuntarilyunemployedand taking5meforjobsearching.Inadynamicsocietythistypeof unemploymentisinevitable,harmlessandevenhealthy. 2. StructuralUnemployment(US)Unemployedbecausethereare lessjobsavailablethanthethenumberofunemployedorthereis alackofmatchingskills.Retrainingmightbeasolu5on. 3. NaturalrateofUnemployment(UN)UF+US 4. FullemploymentiswhenU=UN 5. CyclicalUnemploymentisthedierencebetweenUandUN
    11

    createdbyParisaShakur

    Bangladeshataglance,sourceCIAfact
    book

    createdbyParisaShakur

    12

    MoreonBangladesh
    IncaseofBangladesh: NaturalrateofUnemployment=4.3% Actualunemploymentrate(MES,2009)=5.1% Cyclicalunemployment=(5.14.3)%=0.8%point UnemploymentratesinBangladesh,es5matedat5.1percent, arecompara5velylowduetopervasiveunderemployment andthelargenumberofpeopleconsideredtobeoutofthe labourforce.Unemploymentratesarehighamongtheyouth, especiallyamongyoungmenundertheageof30.

    createdbyParisaShakur

    13

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