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Lecture 8
Macroeconomics
Opening
Prayer
Quiz Master
Accounting Pro
fi
t
Explicit Costs
Explicit + Implicit Costs
Economic Pro
fi
t
Finance
Time
Risk
Finance
Time - t or n
Risk - r or i
Foundation Finance
Formula
(1 + r )
n
r = risk rate
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 11
Unemployment
Culture
Human Beings
Ideas
Physical Human Intellectual Financial
Inventions
Entrepreneurs Free Markets
Innovations
The Capitals of Innovation
trust
health
skills
knowledge
personality
relationships
Human Capital
Unemployment
Inactive Human
Capital
Three Types of
Unemployment
Frictional
Seasonal
Structural
Frictional
Unemployment
Time to find a new
job
Seasonal
Unemployment
Demand changes
with the season
Structural
Unemployment
Too many workers
Change in Demand
What kind of
unemployment
is caused by
smartphones?
99% Reduction in Energy
449 watts to 5 watts
Unemployment Rate
Labor Force
Participation Rate
Rate are Ratios
Labor Force
Adults 16+ who have jobs
or are looking for jobs.
Employed + Unemployed
Employed
paid employees
work in own business
unpaid workers in family business
full-time and part-time
jobs but temporary absence
Unemployed
not employed
available
tried to find a job in the last four weeks
waiting to be recalled from layoff
Not in Labor Force
not employed
full-time student
homemaker
military
retiree
discouraged workers
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 Labor
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?
Calculating Unemployment Rates
Employed
+ Unemployed
= Labor Force
# %
100%
The unemployment rate is 10% and there
are 4,500 people employed. What is the
number unemployed?
10%
90%
4,500
5,000
500
4,500 ÷ .90 = 5,000
Calculating Unemployment Rates
Employed
+ Unemployed
= Labor Force
# %
100%
The unemployment rate is 5% and there are
2,500 people unemployed. What is the
number employed?
5%
95%
47,500
50,000
2,500
2,500 ÷ .05 = 50,000
Calculating Unemployment Rates
Employed
+ Unemployed
= Labor Force
# %
100%
The unemployment rate is 3% and there are 19,400
people employed. There are 30,000 adults. What is
labor force participation rate?
3%
97%
19,400
20,000
600
19,400 ÷ .97 = 20,000
20,000 ÷ 30,000 = .67 or 67%
Unemployment
Who measures it?
How is it measured?
Men
Women
Problems
Overstate - Above actual
Cash workers
Understate - Below actual
Discouraged workers

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