Business writers, economists, and politicians eagerly await the news from the government about the latest economic developments as the economy recovered from the last recession.

Their most radical suggestion was to switch our focus away from economic production to measuring people's economic well-being. This might involve analyzing surveys of people's reported happiness with their own lives.

The page explains the circular flow.

The phases of the business cycle are listed.

You can describe the steps from GDP to income with MyLab Economics.

The study of the nation's economy as a economic issues--unemployment, inf lation, growth, trade, and the gross whole; focuses on the issues of inflation, domestic product--that are most often discussed in newspapers, on the radio.

There are macro economic issues at the center of political debates. All presiden tial candidates are taught a quick lesson in macroeconomics. If the economy performs well during their term in office, they will have a good chance of reelection.

The president will be reelected if voters think the economy has done well.

Jimmy Carter and George H. W. Bush both failed in their bids for reelection because of macroeconomic concerns. Ronald Reagan and Bill Clinton were reelected easily because voters believed the economy was doing well in their first terms. When Barack Obama was reelected in 2012 the economic recovery was well underway. Presidential popularity goes up and down with the economy.

Our everyday lives are affected by macroeconomic events. Millions of lives will be disrupted if the economy fails to create enough jobs. Living standards will not increase rapidly because of slow economic growth. Some people will find it hard to maintain their lifestyles if the price of goods increases rapidly.

The next chapter introduces you to the concepts you need to understand macroeconomics. We look at a nation's production and income in this chapter. We learn how economists measure the income and production of a country. We look at unemployment and inflation in the next chapter. The media often uses terms when reporting economic information.

We need to understand the factors behind the rise in living standards in modern economies. Living standards in the United States are higher today than they were in the past. Living standards are higher than those of millions of people. The economy has not always grown well. Over time, the economic performance has fluctuated. Not enough jobs are created and large numbers of workers become unemployed during periods of slow economic growth. The public and policymakers are concerned about the lack of jobs.

Inflation is explored in the next chapter.

Explain the flow.

We need a basic vocabulary and understanding of some key concepts before we can study growth and fluctuations. Men and women go to work every day, where they sell or provide services. Some of that money is spent on other products and services produced by other people.

This chapter is not about production and income of individuals. That is what a microeconomist studies. From a "big picture" perspective, M05_OSUL5592_09_GE_C05.indd 121 3/15/17 8:40 PM we look at certain measures that will tell us how much the economy is producing and how well it is growing. We will be able to measure the total income generated in the economy and how it flows back to workers and investors. The production and income measures are critical to a nation's economic health. Macroeconomists collect and analyze production and income data to determine how many people will find jobs and whether their living standards are rising or falling. The data and analysis is used by government officials.

We start with a simple economy that doesn't have a government or foreign sector.

Households supply labor to firms. We can think of households as giving capital to firms to produce output. Firms sell goods and services to consumers in output markets.

The circular flow shows how income is generated for households and how households purchase goods and services from firms.

Production generating income is the point of the circular flow diagram. When households supply labor and capital to firms, they are compensated by the firms. They earn wages for their work, and they earn interest, dividends, and rents on the capital they supply to the firms. The households use their income to purchase goods and services. The firm uses revenues from the sale of its products to pay for factors of production.

Income flows throughout the economy when goods and services are produced. Consider a manufacturer of computers. The computer manu facturer makes and sells new computers and also makes income from them. Wages, rent, and interest are paid to workers by the computer manufacturer. After paying for the cost of production, the firm's profit is what is left over for the owners. There are different forms of income.

Your taxes pay for a school district to hire principals, teachers, and other staff to provide educational services to the students in your community. The educational services are an important part of production in the modern economy. The principals, teachers, and staff all make money through their employment with the school district. The school district can rent buildings where classes are held.

Walmart's cost of sales was $358 billion, leaving approximately $115 billion in value added. It's a large number, but it's much smaller than the total sales of the world's largest retailer. Taiwan is ranked 29th in the world and has a GDP similar to that of Walmart. Walmart's size is closer to Angola, which is ranked 60th in the world, using the more appropriate measure of value added. Exercise 3.9 is related to it.

Walmart's sales were almost 3% of the U.S. GDP. The impact of Walmart might be measured through its SOURCE: Based on Walmart Annual Report, 2014, http://stock.walmart.com/ sales. Walmart had to buy goods to produce those sales.

We want to understand both sides of the coin, the economy and the generation of income in the economy. The national income and product accounts are published by the Department of Commerce in the United States.

The value of output produced in the economy can be measured by looking at either the production or income side of the economy. Let's learn how to measure production for the entire economy.

Take a look at the components of GDP.

To measure the production of the entire economy, we need to combine an enormous array of goods and services. Adding computers to basketball games would allow us to determine the total monetary value of a fruit harvest.

Market value of final goods and economy in a year GDP is the most common measure of an economy's total services produced. The words in the GDP definition are important.

"Total market value" means we take the quantity of goods produced, divide them by their prices, and then add up the totals.

We can't just add together the number of cars and computers because we can't do that with the goods' prices. The value of everything in a common unit of measurement can be expressed using prices.

To add apples and oranges together, we have to find out the value of both apples and oranges and then add them up.

"Final goods and services" in the definition of GDP means the goods and services that are sold to the final purchaser. If the cars were sold to households or businesses, they would be final goods. We don't count the steel that went into the body of the cars as a final good or service in GDP.

Intermediate good used in the production process is not a final good or service.

Double counting is the reason we don't count intermediate goods as final goods. The price of the steel in the car is reflected in the price of the car. We don't want to count the steel twice. The paper used by a commercial printing firm is an intermediate goods because it becomes part of the final product delivered by the printing firm to its clients.

The rate of production is expressed as the amount of dollars per year. GDP in the United States was $17,420 billion. Goods produced in prior years, such as cars or houses, are not included in GDP for a given year, even if one consumer sells a house or car to another in that year.

GDP will increase if the prices for goods and services increase, even if the amount of goods produced remains the same. The economy will produce two cars and three computers next year, but the prices in the economy will double.

It would be misleading to say that GDP has doubled. The real-nominal principle is one of the basic principles of economics.

The real value of money or income is more important than the face value.

In this chapter, we explain how prices change.

GDP is calculated. The idea is simple.

Either the production of goods and services has gone up or the prices have gone down.

We need to look at a simple example to understand the concept of real GDP.

Suppose the economy produces computers. 10 computers were produced in the first year and each sold for $2,000. 12 computers were sold for $2,100 in year 2. Nominal GDP is $20,000 in the first year and $25,200 in the second; it has increased by a factor of 1.26 or 26 percent.

By a factor of 1.2, the second year's real GDP is 20 percent greater than the first year's. The idea is to use the same prices for both years and take price changes into account.

The graph shows that GDP has grown. Economic growth is studied in detail in Chapter 8.

Over a long period of time, we look at the behavior of real GDP over a shorter period of time.

Unemployment is caused by decreases in real GDP.

The U.S. economy has shown sustained economic growth since World War II.

To get a sense of the size of each component, we need to look at some data for the U.S. economy. The figures for GDP are in Table 5.1. In the third quarter of the year, GDP was $17,560 billion. To get a sense of the magnitude, consider that the US has over 300 million people.

Purchases of newly produced goods and consumers of currently produced goods and services, either domestic or foreign.

durable goods, nondurable goods, and services can be broken down.

Health care is the fastest-growing component of consumption in the United States. The most important component of GDP is consumption spending.

During the year, there is spending on new plants and equipment. If a firm builds a new factory or buys a new machine, it is included in the year's GDP. Purchasing an existing building or buying a used machine doesn't count in GDP because the goods weren't produced during the current year.

Investment spending includes newly produced housing. The sale of an existing home to a new owner is not counted because the house was not built in the current year.

The increase in inventories is included in GDP if firms add them.

During the reduction in the value of capital goods year, some of the existing plant, equipment, and housing will need to be replaced.

The third Gross investment minus depreciation is $2,905 billion.

73 percent of gross investment went to make up for depreciation of existing capital, meaning there was only $797 billion in net investment by firms in that year.

Firms make purchases of new goods and services when they invest in the GDP accounts. We may talk about investing in the stock market or gold. Buying stock for $1,800 on the stock market is not the purchase of new goods and services by firms. That doesn't appear in GDP. Purchasing a gold bar is the same.

The wages and benefits of local, state, and federal workers are paid when the government purchases their services as employees.

State and local governments spent $1,986 billion of the total $3,206 billion in the category. Our lives are affected by government purchases. All salaries of postal employees and federal airport security personnel are counted.

All spending by governments is not included in this category.

Transfer payments for Social Security, welfare, and interest on gov individuals that do not correspond to the debt are not included in the production of goods and services.

Nothing is being produced by the recipients in return for money being paid to them. Wage payments to the police, postal workers, and the staff of the Internal Revenue Service are included because they correspond to the services these workers are currently producing.

A large portion of the federal government's budget is not included in GDP because transfer payments are excluded. About 35 percent of the $3,506 billion spent by the federal government was counted as federal government purchases. Transfer payments affect both the income of individuals and their savings behavior. The federal budget deficit is affected by transfer payments in a later chapter.

To understand the role of the foreign sector, we need to define three terms.

A good or service produced in a foreign country. In Table 5.1, we can see that in the third quarter of the year, residents of the country purchased $516 billion in net exports. Net exports were negative because our imports exceeded our home country.

A good or service produced in the home consumers, firms, and the government, whether or not the goods were produced in country and sold in the United States. GDP is supposed to measure the goods produced in another country.

Airplanes made in the United States and sold in Europe are examples of goods that are added to GDP.

Adding exports and subtracting imports is how we measure U.S. produc tion.

Someone in the US buys a car made in Japan. The M05_OSUL5592_09_GE_C05.indd 127 shows that consumption spending rose by $25,000 when a consumer made a purchase. The value of the car subtracted from total exports caused net exports to fall by $25,000. The purchase of a car did not change the GDP. This is what we want because the car wasn't produced in the United States.

If the United States sold a car for $22,000 to a resident of Spain, what would happen? The car was a U.S. export and net exports increased by $22,000. GDP will be $22,000 higher because of this sale.

In the third quarter of the year, the United States' net exports were $516 billion. The United States bought $516 billion more goods from abroad than it sold.

We study how trade deficits can affect a country's GDP.

The united States ran a trade surplus in the early 1980s, when the line on the graph is above zero. The trade deficit was more than 5 percent of GDP in 2004 through 2006

After the recession in the early 2000s, it was 15.8 percent.

The recession in the early 1980s was just as bad as the one in 2007. Our last recession was caused by a financial crisis, according to economists Carmen and Kenneth. Households and firms take time to adjust to them. Real GDP has not grown fast in recent years as compared to other periods in U.S. history. There are exercises 5.6 and 5.7.

The most recent recession was both deep and severe. The growth of the economy after the recession has been slower than in previous recessions.

Real GDP grew only 10.8 percent over the 5-year period.

GDP is the sum of its four components.

One person's production ends up being another person's income according to the circular flow. In addition to measuring a nation's activity by measuring production, we can also measure a nation's income.

National Income residents are measured in the production of goods and services.

Calculating national income requires two primary adjustments to GDP.

The net income earned by U.S. firms and residents abroad is added to GDP.

We add any income earned abroad by U.S. firms or residents to GDP and subtract any income earned in the United States by foreign firms. We add the profits earned by U.S. multinational corporations that are sent back to the United States but not the profits from multinational corpora tions that are sent back to their home countries. The profits Walmart sends back to the US are added to the GDP.

M05_OSUL5592_09_GE_C05.indd is subtracted from GDP.

GDP and net income earned abroad.

Most countries don't pay much attention to the distinction between GDP and GNP. In the United States, the difference between GDP and GNP is usually 1 percent. The differences are larger in some countries. The country of Kuwait earned a lot of income from its oil wealth, which it invested abroad in stocks, bonds, and other types of investments. 9 percent of Kuwait's 2006 GNP was earned by these earnings. Foreigners have made a lot of investments in Australia.

Australia's net income from abroad was negative in 2006 as they sent their profits back to their home countries.

Subtracting depreciation from GNP is the second adjustment we make when calculating national income. Depreciation is the wear and tear on plant and equipment during the year. Our income is reduced because of the wear and tear on our buildings. The table shows the effects of the adjustments.

National income is divided into six basic categories: compensation of employees, corporate profits, rental income, proprietors' income, and net interest. Wages and benefits make up 61 percent of national income. Wages and benefits make up the majority of national income in most countries.

National income and corporate received by households are used to calculate personal income.

Social Security and Medicare are paid for by taxes on production and imports. All transfer payments and personal interest income from the government and consumers are included. Personal income is the total income available to households.

The dollar value of the interest, profits, and rent-generated firm's sales minus the dollar value of the goods and services purchased from other firms can be used to measure the firm's value.

The value added by the dollar value of the firm is what remains. We can calculate national income by adding up the value added for all the firms in the economy, plus the dollar value of the goods and services purchased from nonprofit and governmental organizations. Let's work with other firms.

An economy consists of two firms: an automobile firm that sells its cars to consumers and a steel firm that only sells to the automobile firm.

If the steel firm sells $6,000 worth of steel but does not purchase any inputs from other firms, its value is $6,000, which it pays out in the form of wages, rents, interest, and profits. The total value added in the economy from both firms is $16,000, which is the sum of wages, rents, interest, and profits for the entire economy.

This example shows how we measure the value added for a firm by starting with the total sales and subtracting the inputs it buys from other firms. The firm's value added is the amount of income that remains and is distributed as wages, rents, interest, and profits. The firms that produce intermediate goods need to be included in the calculation of national income.

Now that we have looked at both production and income, let's look at a slightly more realistic circular flow.

The roles that the government and the foreign sector play in the circular flow are shown in the new linkages.

Money seems to buy happiness at any point in time. Individuals with higher incomes report higher levels of personal satisfaction.

These "other factors" are important. A stable marriage is worth $100,000 per year in terms of reported satisfaction, according to Blanchflower and Oswald.

Trends in the relative happiness of different groups in our society are interesting. The happiness of African Americans has risen faster than that of whites over the last 30 years. Over the last 30 years, men's happiness has increased relative to women's.

Blanchflower and Oswald looked at how happiness varies over time. They found that in the two economists, David Blanchflower of the United States and Andrew Oswald of the United Kingdom, the happiness of men and women depends on income, education, and other personal factors. The years in which earnings are the highest are also the years in which people are asked to describe themselves as happy. The results of their work are 6.9 and 6.2.

In the last 30 years, reported levels of happiness have declined slightly in the United States and remained relatively flat in the United Kingdom. The increased Britain and the USA could be the reason.

Firms and households pay taxes. The govern ment supplies goods and services in the product market and purchases inputs in the factor markets, just like private-sector firms do.

Net exports can be positive or negative.

We can ask who buys the output that is produced, or we can ask how the income that is created through the production process is divided between workers and investors. Consumer expenditures make up nearly 70% of GDP. 61 percent of national income is paid in wages and benefits. Depending on whether they are more focused on current production or on current income, mac roeconomists may use data based on production that occurs in the economy or on its flip side.

Learning objective is to calculate real and nominal GDP.

We have discussed different ways to measure the production of an economy, looking at both who purchases goods and services and the income they generate. GDP is the most used measure by both the public and economists. Let's take a closer look at it.

The economy can grow from one year to the next. The price can go up from one year to the next. We defined nominal GDP as GDP adjusted for price changes, and real GDP as GDP adjusted for price changes.

We are looking at how GDP is measured in modern economies.

A simple economy in which there are only two goods--cars and computers--produced in the last two years. The prices and quantities produced for each year are shown in Table 5.4. The production of computers increased more rapidly than the production of cars. The price of cars went up while the price of computers remained the same.

In each year, let's calculate nominal GDP. The total market value of goods and services is calledNominal GDP. We can see that the nominal GDP for the year of 2011 is four cars and one computer, and the nominal GDP for the year of 2012 is five cars and three computers. Constant prices are used to calculate GDP.

The nominal GDP for the year is equal to $45,000. Nominal GDP for 2012 is $75,000, but real GDP is less than that at $65,000. The reason real GDP is less than nominal GDP is that prices of cars rose by $2,000 between 2011 and 2012 and we are measuring GDP using 2011 prices. Constant prices can be used to calculate GDP for any other year.

The growth in real GDP for this economy is now calculated. In 2012 real GDP grew by $20,000.

44.4% is the percentage growth in real GDP. Cars and computers have an average growth rate of this percentage.

The curves cross in 2009, when real GDP is measured in dollars. Prices in earlier years were lower than in 2009, so nominal GDP was less than real GDP. Prices in later years were higher than they were in 2009.

The data in Table 5.4 can be used to measure the changes in prices for cars and computers. The idea is that the differences between nominal GDP and real GDP are caused by changes in prices. We can measure the changes in prices for the economy by comparing real GDP and nominal GDP.

How prices of goods and services change over time is measured by an index. The value of this index will be equal to 100 in the year change because we are calculating real of goods and services included in GDP.

The base year is 2011.

The figure plots both real and nominal GDP for the united States in billions of dollars.

The weighted average of the price changes for cars and computers is 15 percent.

The Commerce Department used these formulas to calculate GDP until 1996. The prices in that M05_OSUL5592_09_GE_C05.indd 134 were used by the economists to measure real GDP. The GDP deflator was calculated by taking the ratio of nominal GDP to real GDP. The Commerce Department uses a more complicated method to calculate real GDP. Real GDP was measured using prices from 2011. We could have measured real GDP using 2012 prices. We would come up with different numbers for the increase in prices and the increase in GDP if we did. If you look at the data produced by the Commerce that uses an average of base years from the Department, you will see that GDP is measured in chained dollars and a chain-type price.

List the phases of the business cycle because real GDP does not always grow smoothly.

An example of a business cycle from the late 1980s and early 1990s can be found here. In the mid 1990s, real GDP begins to fall.

Referred to as 6 consecutive consecutive 3-month periods, economists talk more in quarters of the year than in months. They would say that there was a decline in real GDP.

The start of a recession.

When output stops falling in a recession.

The peaks, troughs, and expansion phases of the recession can be seen.

The United States has experienced 11 recessions.

The table has the dates of the peaks and troughs of each recession, the percent decline in real GDP from each peak to each trough, and the length of the recessions in months. The recession from 1973 to 1975 was caused by a rise in world oil prices. It was the worst downturn since World War II.

There have been four recessions in the last three decades, three of them starting at the beginning of the decade. Employment fell before the terrorist attack on the United States on September 11, 2001. The economy fell into a recession after the attack disrupted economic activity. The financial difficulties associated with the decline in the housing sector led to the start of the recession. The financial crisis hit in September and October of 2008.

The U.S. has had downturns from 1860 to World War II. Unemployment did not change in some cases. The economic downturns of 1893 and 1929 were severe.

Although we used the common definition of a recession as a period when real GDP falls for 6 months, a committee at the National Bureau of Economics Research officially proclaims the beginning and end of the recession. It uses a wide variety of indicators to determine whether a recession has occurred or not.

The years 1929 through 1933 were referred to as the Great Depression. The most severe disruptions to economic life in the United States were caused by the drop in GDP.

They lost their jobs and their life savings. The unemployment went up sharply. In 1933, 25 percent of people who were looking for work failed to find a job.

The United States has not experienced a depression since that time. In the last 20 years, several Asian countries and Latin American countries have suffered severe economic disruptions.

GDP is the best measure of the value of output produced by an economy.

We can use GDP and related indicators to measure economic growth within a welfare.

GDP can be used to compare the value of output in different countries.

GDP and related measures are used by economists to determine if an economy has fallen into a recession. GDP is a very useful measure of the health of an economy, but it is not a perfect measure.

There are flaws in the construction of GDP. We should be cautious in interpreting GDP as a measure of our economic well-being because it doesn't take into account things like housework, leisure, and pollution.

GDP ignores transactions that don't take place in organized markets. Clean ing, cooking, and providing free child care are some of the services that people do for themselves in their own homes. GDP statisticians can't measure these services because they aren't transferred through markets. Measured GDP would be higher if household production was included.

GDP is a measure of the production that occurs in the economy and leisure time is not included in it. Increased leisure time will lead to higher social welfare, but not higher GDP.

People don't report their income because they don't want to pay taxes on it. Wait staff may not report all their tips and own ers of flea markets may make under-the-table cash transactions with their customers.

In 2005, the Internal Revenue Service estimated that $310 billion in federal income taxes were not collected from the underground economy. If the federal income tax rate that applies to income evaded from taxes was 20 percent, the underground economy's income would have escaped the GDP accountants at 15 percent of GDP.

Economists use a variety of methods to estimate the size of the economy. The under ground economy is larger in developing countries than it is in developed countries.

In highly developed countries, estimates of the underground economy are between 15 and 20 percent of reported or official GDP. Estimates are closer to 40 percent in developing countries. Estimates of the underground economy are contained in Table 5.6.

GDP doesn't value changes in the environment that occur in the production of output. A factory that produces $1,000 of output but pollutes a river will have its value lowered by $2,000.

Based on estimates by Friedrich Schneider in "The Size of Shadow Economies in 145 Countries from 1999 to 2003".

GDP will increase by $1,000. GDP is a measure of our economic well-being because changes in the environment affect our daily lives. The Commerce Department has tried before to measure the effects of changes in environment by adding positive or negative changes to the national income. They only looked at a small part of the environment. Finding the answer to this question will be a challenge for the next generation of economic statisticians.

Most of us would prefer to live in a country with a high standard of living, and few of us would want to experience poverty up close.

100 real GDP is what these measures are. Developing mean U.S. individuals and firms is a process of subtracting statistics for an entire depreciation.

The department uses methods that take an average.

The National Bureau of economic research uses a broader definition.

Nonmarket transactions, leisure time, the goods and services produced in a given year are not included in GDP.

Consumption, investment, government purchases, and net exports make up GDP.

GDP deflator, p. 134 net investment, p. 126 transfer payments, p. 127 government purchases, p. 123 peak, p. 135 value added, p. 130 gross investment,

Explain the flow.

Take a look at the components of GDP.

Investment is taken as a whole.

Rent was paid on office and factory buildings because of the purchases of police cars.

Understanding the circular flow diagram is important. If a country is experiencing inflation, the flow of goods will go in opposite directions.

Looking at both sides. The government puts workers on the output of an economy by looking at either produc payroll who cannot find jobs for long periods, or income, which is why we can measure Economy A.

Australia gives cash grants to many ployed workers. Natural resources and foreign firms are often involved in paring the GDP statistics between Australia and other countries. The profits of firms in the same economy are sent back to their home countries.

Is it a dollar?

Buying a foreign car. Explain why buying a foreign item decreases your personal income.

$50,000 doesn't increase GDP.

A new car for $23,000 is what you just bought. You decide between health professionals and oil workers after a year. Do you need a bigger car?

Explain what depreciation is.

For any given year, the GDP deflator is calculated by using national income and the steps from GDP to income.

The real cost of living is underestimated by the GDP deflator.

Calculating real GDP, price index, and inflation.

The Nigerian oil industry is managed by 2012 using 2011.

The GDP/GNP exceeded its __________.

The value added for a charity is measured.

Find the GDP as a Measure of Welfare data for nominal GDP, real GDP in chained dollars, and the chain price index for GDP on the Federal Reserve Bank of St. Louis website.

Discuss the relationship between GDP and welfare.

The reported happiness of men has increased.

The date that a recession ends is called __________.

The traditional definition of a recession is a decline in real GDP for at least two quarters.

There is a decline in paid childcare and output.

A severe munity spends $1 million on salaries and equipment.

The crime rate is the same.

There are vanishing trees and national income.

The speed of a recovery is measured. The time it takes for the econ to be injected into the wells in order to produce more natural gas has been suggested.

It caused environmental damage. How would you feel if you tried to measure whether the ban has increased or not?

According to survey data, the residents of the United States are higher in per capita income than the residents of California and Louisiana. What do you think about relative eco happy?

The Bureau of economic analysis of the Department of Commerce began publishing their official statistics data that compares the cost of living in states and metropolitan areas in the United States.

If you moved from Dallas to Oakland you would lose your real earning power.

If you lived somewhere else, you could still afford to move to California. In California, the index was less than in Dallas. If you had to accept a slightly lower salary to move to Merced, your real earning power could be higher. Private firms that specialized in relocating executives provided this information. Anyone can access the data on the Web.

Explain the difference between inflation and the labor force participation rate and the price level.

MyLab Economics can help you study more efficiently.

Losing a job is one of the most difficult experiences a person can have. The fear that the purchasing power of their wealth will evaporate with inflation is a source of deep concern for older adults.

We look at how economists define unemployment and inflation. The costs of unemployment and inflation are explored. We will be able to investigate the causes of unemployment and inflation once we understand what they are.

Costs are imposed on individuals and society when an economy performs poorly. One of the key issues for macroeconomics is understanding the unemployment rate.

Unemployment rises sharply and becomes a cause of public concern during periods of poor economic performance and slow economic growth. Unemployment does not disappear during good economic times. Understanding how economists and government statisticians measure unemployment is our first task.

Let's start with some definitions. People who looked for work in the past but aren't currently looking are not counted as unemployed.

The total number of workers, both employed and unemployed.

There is a percentage of the labor force that is unemployed.

The 16 year old is in the labor force.

200,000 people are 16 years of age and older in the economy. 122,000 people are employed and 8000 are unemployed. 130,000 people are in the labor force.

The labor force participation rate is 65 percent and the unemployment rate is 6 percent.

Figure 6.1 shows how the U.S. economy is viewed.

In January 2015, the total civilian population was more than twenty million people. We divide the population into two groups, those in the labor force and those outside the labor force. The labor force participation rate was 63 percent. Roughly two-thirds of the U.S. is shown as you can see.

There were 148,201,000 employed and 8,979,000 unemployed in the labor force.

63 percent of the civilian population is in the labor force.

Military personnel and prisoners are not included in the measures.

The increase in the participation of women in the labor force is one of the most important trends in the last 50 years. The labor force participation rate for women over the age of 20 was 32% in 1948. By 1970, it was 43 percent, and by 1997 it was 60 percent. Women dramatically increased their presence in the workforce as a result of this trend.

The participation rate for women fell in 2015.

There is international data on unemployment for 2015. The countries with modern, industrial econo mies have different unemployment rates.

Unemployment rates in developed countries vary greatly.

Government support for unemployed workers is one of the factors reflected in the sharp differences. Unemployment will tend to be higher in countries with the most generous support.

The unemployed are people who are looking for work but don't have a job. Let's take a closer look at our unemployment measures.

It is easy to determine who is employed by counting the people who are working. It is difficult to distinguish between those who are unemployed and those who are not in the labor force. The Department of Labor's Bureau of Labor Statistics interviews a large sample of households each month. The employment situation of all household members 16 years of age and older is asked by the BLS. If someone in a household is not working, the interviewer asks if the person is looking for a job. He or she is classified as unemployed if the answer is yes. If the answer is no, that person is classified as not being in the labor force.

The BLS measure of unemployment does not take into account all the employment experiences individuals face. Consider the cases of a steelworker who stopped looking for work because he felt there were no jobs, a young woman who did not seek work because she had no transportation to the workplace, and a computer programmer who only worked part time. The first two are not included in the labor force and the third is counted as employed. Alternative statistics that reflect these circumstances were published by the BLS in 1994.

Statistics are the reason why workers leave the labor force.

There are people who would like to work who have stopped looking for work because of a variety of reasons. There are two groups of Margin ally attached workers: discouraged workers who left the labor force because they couldn't find jobs, and workers who are not looking for jobs for other reasons.

There are workers who would like to be employed full time but hold part time jobs. These people are counted in the BLS statistics because they have a job. They would like to work more hours. We don't include people who prefer part-time work.

In January of 2015, 8.98 million people were classified as unemployed.

There were 0.67 million discouraged workers. There were 2.20 million marginally attached workers. If we add marginally attached individuals to those who were involuntarily working part time, the total is more than 8 million. There were between 8.98 million unemployed and 17 million unemployed, depending on the number of people who did not have a full-time job.

If we include the marginally attached in the labor force, the unemployment rate in 2015 would be more than 10 percent higher than the official rate.