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Lecture 8
Macroeconomics
Opening
Prayer
Quiz Master
Valuation
Share Price: $17
5

Share Outstanding: 16.5 billio
n

Value
?

$2.85 trillion
wolframalpha.com
Accounting Pro
fi
t
Explicit Costs
Explicit + Implicit Costs
Economic Pro
fi
t
Finance
Tim
e

Risk
Finance
Time - t or n
Risk - r or i
Foundation Finance
Formula
(1 + r )
n
r = risk rat
e

n = time periods
number of periods
Value r = 5%
r = 10%
r = 15%
Value = (1 + r)n r = rate
n = number of periods
number of periods
Value
r = 15%
Value = (1 + r)n r = rate
n = number of periods
Future


Value
Present


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


n = time periods
FutureValue?
(1 + r )
n
r = 10% or 0.10


n = 5 years
(1 + 0.10)5
(1.10)5
1.61
FutureValue?
Future Value = Amount Today x Factor
$161 = $100 x 1.61
Future Value is compounding


Future Value is multiplying
PresentValue?
Present Value = Future Amount ÷ Factor
Present Value = $500 ÷ 1.61


$310.56 = $500 ÷ 1.61
Present Value is discounting


Present Value is dividing
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
Present Future
x Factor ?
÷ Factor ?
Factor Formula = (1 + r )
n
Chapter 1
1

Unemployment
Three Types o
f

Unemployment
Frictiona
l

Seasona
l

Structura
l
Frictiona
l

Unemployment
Time to find a new
job
Seasona
l

Unemployment
Demand changes
with the season
Structura
l

Unemployment
Too many worker
s

Change in Demand
What kind of
unemployment
is caused by
smartphones?
99% Reduction in Energy
449 watts to 5 watts
Unemployment Rat
e

Labor Force
Participation Rat
e

Rate are Ratios
Labor Force
Adults 16+ who have jobs
or are looking for jobs.
Employed + Unemployed
Employed
paid employee
s

work in own busines
s

unpaid workers in family busines
s

full-time and part-tim
e

jobs but temporary absence
Unemployed
not employe
d

availabl
e

tried to find a job in the last four week
s

waiting to be recalled from layoff
Not in Labor Force
not employe
d

full-time studen
t

homemake
r

militar
y

retire
e

discouraged worker
s
Discouraged Worker
Discouraged Worker
People who would like
to work but have given
up looking for a job in
the last four weeks
Who Measures?
Department of Labo
r

Bureau of Labor Statistics
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.
Labor Force
Participation Rate
The percent of the Adult
Population that is in the
Labor Force
Population 330
Adults 254
Labor Force 160
Employed 152
Under 16 76
Not in Labor Force 94
8 Unemployed
Employed 152 8
Unemployed
Not in Labor Force 94 Under 16 76
Labor Force


Participation Rate
=
Labor Force


÷


Adults
Unemployment Rate =
Unemployed


÷


Labor Force
Rates
3,000 people live in Pooleynesia. There are
250 people under 16. 450 people are not
in the labor force. 230 people are
unemployed.


1. What is the Labor Force Participation
Rate?


2. What is the Unemployment Rate?

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Macro 9