Macro 11

2. Lecture 11
Macroeconomics

3. Quiz
Name two companies in
the DJIA.

4. Dow Jones Industrial Average
DJIA
30 leading companies

5. Finance
Time
Risk

6. Finance
Time - t or n
Risk - r or i

7. Foundation Finance
Formula
(1 + r )
n
r = risk rate
n = time periods

8. FutureValue?
Future Value = Amount Today x Factor
Factor is the Growth Formula
(1 + r )
n
r = rate
n = time periods

9. FutureValue?
(1 + r )
n
r = 10% or 0.10
n = 5 years
(1 + 0.10)5
(1.10)5
1.61

10. FutureValue?
Future Value = Amount Today x Factor
$161 = $100 x 1.61
Future Value is compounding
Future Value is multiplying

11. PresentValue?
Present Value = Future Amount ÷ Factor
Present Value = $100 ÷ 1.61
$62.11 = $100 ÷ 1.61
Present Value is discounting
Present Value is dividing

12. Finance
Unknown - Present Value or Future Value?
Must know rate and number of periods
Compute Factor with formula
(1+r)n
If FV multiply
If PV divide

13. Present Future
x Factor ?
÷ Factor ?
Factor Formula = (1 + r )
n

14. Chapter 11
Unemployment

15. Unemployment
Who measures it?
How is it measured?

16. Who Measures?
Department of Labor
Bureau of Labor Statistics

17. Two Surveys
The Current Population Survey (CPS) "household
survey" Sample of 60,000 households.
The Current Employment Statistics Survey (CES):
"payroll survey" sample of 160,000 businesses and
government agencies that represent 400,000 individual
employees.

18. Adults 16+
Everybody 320 100%
16+ 254 80%
Under 16 66 20%

19. Adult Category
16+ 254 100%
Not in
Labor Force
94 37%
In
Labor Force
160 63%

20. Not in Labor Force
not employed
discouraged workers
full-time student
homemaker
military
retiree

21. Discouraged Worker

22. Discouraged Worker
People who would like
to work but have given
up looking for a job

23. Labor Force
Adults 16+ who have jobs
or are looking for jobs.
Employed + Unemployed

24. Labor Force
Participation Rate
The percent of the Adult
Population that is in the
Labor Force

26. 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Year
0N
1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Year
0
20
40
60
Shareofthecivilianlaborforce(%)
Men
Women

27. Labor Force
Total 160 100%
Employed 152.3 95.2%
Unemployed 7.7 4.8%

28. Employed
paid employees
work in own business
unpaid workers in family business
full-time and part-time
jobs but temporary absence

29. Unemployed
not employed
available
tried to find a job in the last
four weeks
waiting to be recalled from
layoff

30. Unemployment Rate
Unemployed
÷
Labor Force

31. 16+
79%
Under 16
21%
U.S Population
millions %
Under 16 66 21%
16+ 254 79%
Total 320 100%

32. Unemployed 7.7 million
3%
Employed 152.3 million
60%
Not in Labor Force 94 million
37%
Adult Population

33. Unemployed 7.7 million
5%
Employed 152.3 million
95%
Labor Force

34. millions
%
Population
%
Adults
% Labor
Force
Population 320 100%
Age under 16 66 20%
Age 16+ 254 80% 100%
Not in Labor Force 94 30% 37%
In Labor Force 160 50% 63% 100%
Employed 152.3 47.6% 60% 95.2%
Unemployed 7.7 2.4% 3% 4.8%

35. U1: the percentage of labor force unemployed for 15 weeks or longer.
U2: the percentage of labor force who lost jobs or completed temporary work.
U3: the official unemployment rate that occurs when people are without jobs and they
have actively looked for work within the past four weeks.
U4: the individuals described in U3 plus "discouraged workers," those who have stopped
looking for work because current economic conditions make them think that no work is
available for them.
U5: the individuals described in U4 plus other "marginally attached workers," "loosely
attached workers," or those who "would like" and are able to work, but have not looked
for work recently.
U6: the individuals described in U5 plus part-time workers who want to work full-time,
but cannot due to economic reasons, primarily underemployment.
Six Measures of Unemployment

36. Problems
Overstate - Above actual
Cash workers
Understate - Below actual
Discouraged workers

37. Natural Rate of
Unemployment
The normal rate of
unemployment around
which the unemployment
rate fluctuates