MEASURING MACROECONOMIC OUTCOMES MEASURING MACROECONOMIC OUTCOMES Original slides

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MEASURING MACROECONOMIC OUTCOMES

MEASURING MACROECONOMIC OUTCOMES

MEASURING MACROECONOMIC OUTCOMES Original slides created by Daniel Forsberg MEASURING MACROECONOMIC OUTCOMES Chapters #7

MEASURING MACROECONOMIC OUTCOMES Original slides created by Daniel Forsberg MEASURING MACROECONOMIC OUTCOMES Chapters #7 and #9 KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES CHAPTERS 7 & 9 GOALS 1. Define the commonly used macroeconomic

MEASURING MACROECONOMIC OUTCOMES CHAPTERS 7 & 9 GOALS 1. Define the commonly used macroeconomic measures of Gross Domestic Product, Inflation Rate, and Unemployment Rate 2. Understand how the recent values of these measures compare across countries and how the values of these measures have changed over time in the United States. KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES RECALL: MACROECONOMICS The branch of economics which studies the functioning and

MEASURING MACROECONOMIC OUTCOMES RECALL: MACROECONOMICS The branch of economics which studies the functioning and performance of a society’s _____________. “economy as a whole” KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Gross Domestic Product (GDP) The total market value of all ______

MEASURING MACROECONOMIC OUTCOMES Gross Domestic Product (GDP) The total market value of all ______ final goods and services produced within a society over a certain period of time. KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES “total market value” Weight different items according to market price. “of

MEASURING MACROECONOMIC OUTCOMES “total market value” Weight different items according to market price. “of all final” To avoid “double counting”, only consider the value of items at their “final stage” of production. § intermediate good – a good used in the production process that is not a final good or service (do not include these in GDP) “goods and services” KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS Includes both ‘tangible items’ (e. g. , food, cars, etc. ) and ‘intangible items’ (e. g. , haircuts, cleaning services, etc. )

MEASURING MACROECONOMIC OUTCOMES “produced” Do not include all items sold this period, but rather

MEASURING MACROECONOMIC OUTCOMES “produced” Do not include all items sold this period, but rather all items produced this year. “within a society” Includes all economic activity which taking places within (and only within) the geographic confines of the society. “over a period of time” Includes all production during a particular time period (usually a year). KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Recognize that essentially all of the goods and services which are

MEASURING MACROECONOMIC OUTCOMES Recognize that essentially all of the goods and services which are produced are also purchased (think of the Circular Flow Diagram)… Consequently, we can decompose these purchases into: • Consumption Expenditures (C) • Private Investment Expenditures (I) • Government Purchases (G) • Net Exports (NX) KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Calculating GDP Consumption (C): Purchases of newly produced goods and services

MEASURING MACROECONOMIC OUTCOMES Calculating GDP Consumption (C): Purchases of newly produced goods and services by households Private Investment Expenditures (I): Purchases of newly produced goods and services by firms (e. g. , factories) Government Purchases (G): Purchases of newly produced goods and services by local, state, or federal government KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Calculating GDP Net Exports (NX): • • Exports minus imports Export

MEASURING MACROECONOMIC OUTCOMES Calculating GDP Net Exports (NX): • • Exports minus imports Export – a good or service produced in the home country and sold to someone in a foreign country Import – a good or service produced in a foreign country and purchased by someone in the home country Trade deficit – an excess of imports over exports (NX negative) Trade surplus – an excess of exports over imports (NX positive) KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Recognize that GDP can be expressed as… Y = C +

MEASURING MACROECONOMIC OUTCOMES Recognize that GDP can be expressed as… Y = C + I + G + NX GDP • • Consumption Investment Government Purchases Net Exports “left side” is essentially production, while “right side” is essentially how the output is used/consumed… Values for U. S. in 2017 (trillions of dollars): GDP C I $19. 391 $13. 396 $3. 213 KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS G NX $3. 354 –$0. 572

MEASURING MACROECONOMIC OUTCOMES An Expanded Circular Flow Diagram Taxes factors of production hired Government

MEASURING MACROECONOMIC OUTCOMES An Expanded Circular Flow Diagram Taxes factors of production hired Government Finished goods and services supplied exports imports Taxes KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS Rest of World Start with the previous Basic Circular Flow diagram and add an illustration of the role of… • Government • International trade

MEASURING MACROECONOMIC OUTCOMES Expanded Circular Flow… Government: • households and firms pay taxes to

MEASURING MACROECONOMIC OUTCOMES Expanded Circular Flow… Government: • households and firms pay taxes to the government • government hires some inputs from the market for factors of production (e. g. , government International Trade: workers) • some goods consumed by domestic • government provides some households are produced elsewhere (imports) finished goods and services to • some goods produced by domestic firms are households (e. g. , education consumed elsewhere (exports) and healthcare) KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES GDP as a measure of well-being GDP can be used as

MEASURING MACROECONOMIC OUTCOMES GDP as a measure of well-being GDP can be used as a “proxy measure” of well-being… • A “higher value of GDP” is preferable, insomuch as it indicates that people are able to “consume more stuff”… How has GDP changed in the U. S. over time? KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Historical values of GDP in U. S. : ● 1915: $39.

MEASURING MACROECONOMIC OUTCOMES Historical values of GDP in U. S. : ● 1915: $39. 0 billion ● 1942: $166. 0 billion => 4. 3 times larger than 1915 ● 1970: $1, 075. 9 billion => 27. 6 times larger than 1915 ● 1998: $9, 089. 2 billion => 233. 1 times larger than 1915 ● 2015: $17, 947. 0 billion => 460. 2 times larger than 1915 So, were people consuming 460. 2 times more stuff in 2015 than in 1915? KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Real GDP vs Nominal GDP – the value of GDP computed

MEASURING MACROECONOMIC OUTCOMES Real GDP vs Nominal GDP – the value of GDP computed using current prices • • • GDP can increase due to: (i) a greater amount of stuff being produced or (ii) a general increase in the price at which stuff is traded… When examining the value of GDP over time, it is often desirable to “take out changes which result from changes in price” Real GDP answers the hypothetical question: “What would be the value of goods/service produced in a particular year, if we valued them at the prices which prevailed in some other base year? ” Real GDP – the value of GDP computed using prices from an arbitrary base year (i. e. , a measure of GDP that controls for changes in prices, since across different periods goods/services are valued at common, constant prices) KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Previously reported values were nominal, not real… Historical values of Real

MEASURING MACROECONOMIC OUTCOMES Previously reported values were nominal, not real… Historical values of Real GDP in U. S. : Figures use 2009 as a base year (2009 dollars) ● 1915: $614. 6 billion ● 1942: $1, 771. 8 billion => 2. 9 times larger than 1915 ● 1970: $4, 722. 0 billion => 7. 7 times larger than 1915 ● 1998: $11, 252. 9 billion => 18. 8 times larger than 1915 ● 2015: $16, 348. 9 billion => 26. 6 times larger than 1915 So, were people consuming 26. 6 times more stuff in 2015 than in 1915? KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Total real output was 26. 6 times larger, but it had

MEASURING MACROECONOMIC OUTCOMES Total real output was 26. 6 times larger, but it had to be divided by more people… Historic U. S. Population: ● ● ● 100. 5 million in 1915 134. 9 million in 1942 205. 1 million in 1970 276. 2 million in 1998 321. 7 million in 2015 (3. 20 times as many people in 2015 than in 1915) * Data: Census Bureau KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Real GDP Per Capita – the value of Real GDP divided

MEASURING MACROECONOMIC OUTCOMES Real GDP Per Capita – the value of Real GDP divided by total population The value of Real GDP Per Capita is a good proxy measure of economic well-being, since it reveals average real consumption person… KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Real GDP per Capita: Historical values: ● 1915: $6, 113 ●

MEASURING MACROECONOMIC OUTCOMES Real GDP per Capita: Historical values: ● 1915: $6, 113 ● 1942: $13, 138 => 2. 1 times larger than 1915 ● 1970: $23, 024 => 3. 8 times larger than 1915 ● 1998: $41, 737 => 6. 8 times larger than 1915 ● 2015: $50, 820 => 8. 3 times larger than 1915 So, in fact, the typical person was able to consume about “ 8. 3 times more stuff” in 2015 than in 1915, which still seems like a very big increase. Now let’s compare Real GDP Per Capita across countries… KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES IACs vs. LDCs Industrially Advanced Countries (IACs) – high income countries

MEASURING MACROECONOMIC OUTCOMES IACs vs. LDCs Industrially Advanced Countries (IACs) – high income countries with primarily market based economies, large stocks of technologically advanced industrial capital, and a highly educated and skilled workforce (e. g. , U. S. , Norway, Australia, Germany, Japan) Less Developed Countries (LDCs) – lower income countries which are held back by some combination of poor economic institutions, undeveloped industrial capital, and/or an uneducated and unskilled workforce (e. g. , India, Ghana, Bangladesh, and the Democratic Republic of the Congo) KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES IACs – high income countries with primarily market based economies, large

MEASURING MACROECONOMIC OUTCOMES IACs – high income countries with primarily market based economies, large stocks of technologically advanced industrial capital, and a highly educated and skilled workforce LDCs – lower income countries which are held back by some combination of poor economic institutions, undeveloped industrial capital, and/or an uneducated and unskilled workforce But, there are tremendous differences in GDP between the most prosperous and least prosperous IACs and between the most prosperous and least prosperous LDCs • That is, it is NOT the case that there are simply extremes of haves and have nots • Rather, actual GDP Per Capita varies almost continually across countries When comparing values of GDP across different countries, it is necessary to account for differences in costs of living between countries when calculating GDP • Purchasing Power Parity (PPP) => takes the effects of differences in costs of living out of GDP figures across countries => compare “Per Capita GDP (PPP)” KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Country Per Capita GDP, 2017 Qatar $124, 900 (2 nd) Russia

MEASURING MACROECONOMIC OUTCOMES Country Per Capita GDP, 2017 Qatar $124, 900 (2 nd) Russia $27, 900 (70 th) India $7, 200 (155 th) Singapore $90, 500 (7 th) Chile $24, 600 (79 th) Angola $6, 800 (159 th) Norway $70, 600 (12 th) Mexico $19, 500 (89 th) Honduras $5, 500 (168 th) Hong Kong $61, 000 (18 th) WORLD $17, 300 Sudan $4, 600 (172 nd) United States $59, 500 (20 th) China $16, 600 (105 th) Kenya $3, 500 (185 th) Germany $50, 200 (27 th) South Africa $13, 400 (114 th) Nepal $2, 700 (194 th) Japan $42, 700 (41 st) Indonesia $12, 400 (123 rd) Italy $38, 000 (48 th) $800 (225 th) Jamaica $9, 200 (141 st) Congo, Dem. Rep. of Portugal $30, 300 (64 th) Morocco $8, 600 (146 th) In terms of Real GDP per capita, are people in the U. S. “$9, 300 better off” than people in Germany and “$11, 100 worse off” than people in Norway? KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES At what level should we examine the data? U. S. /Norway?

MEASURING MACROECONOMIC OUTCOMES At what level should we examine the data? U. S. /Norway? U. S. /E. U. ? North Carolina/Norway? => this “choice” can greatly influence our answers/insights Country/State Per Capita GDP District of Columbia $176, 127 Netherlands $53, 900 Florida $42, 085 Luxembourg $105, 100 South Dakota $52, 240 EUROPEAN UNION $39, 200 Ireland $73, 200 Ohio $50, 666 West Virginia $38, 860 Massachusetts $71, 456 Germany $50, 200 Italy $38, 000 Alaska $70, 683 Georgia $48, 979 Mississippi $33, 558 North Dakota $67, 244 Tennessee $46, 925 Portugal $30, 300 UNITED STATES $59, 500 Finland $44, 500 Poland $29, 600 Texas $57, 077 United Kingdom $44, 300 Greece $27, 800 Pennsylvania $54, 725 France $44, 100 Bulgaria $21, 800 KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES GDP comparison – USA to EU Of the 28 E. U.

MEASURING MACROECONOMIC OUTCOMES GDP comparison – USA to EU Of the 28 E. U. countries, only 2 have Per Capita GDP above the U. S. ’s value • Luxembourg = $105, 000 (area 2/3 rds of RI [50 th]; population of VT [49 th]) • Ireland = $73, 200 (area of SC [40 th]; population of IN [17 th]) • United States = $59, 500 Of the 50 U. S. states, only 4 have a Per Capita GDP below the E. U. ’s value • European Union = $39, 200 • Idaho = $39, 032 • West Virginia = $38, 860 • Arkansas = $37, 930 • Mississippi = $33, 558 KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Inflation and Unemployment Very loosely… Inflation: measures increases in prices Unemployment:

MEASURING MACROECONOMIC OUTCOMES Inflation and Unemployment Very loosely… Inflation: measures increases in prices Unemployment: measures how may people don’t have jobs KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Inflation Rate – the rate at which the overall price level

MEASURING MACROECONOMIC OUTCOMES Inflation Rate – the rate at which the overall price level increases on an annual basis § In recent years, most stable, developed economies have experienced rates of 0% to 4% § Deflation – a general decrease in the level of overall price (i. e. , a realization of a negative inflation rate) § Hyperinflation – an extremely high rate of inflation, generally above 100% per year (e. g. , inflation rate in Zimbabwe during 2008 was 12, 563%) KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Hyperinflation KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Hyperinflation KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Hyperinflation KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Hyperinflation KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Inflation Rates (2017) Saudi Arabia Ireland Japan Finland – 0. 9%

MEASURING MACROECONOMIC OUTCOMES Inflation Rates (2017) Saudi Arabia Ireland Japan Finland – 0. 9% 0. 3% 0. 5% 0. 8% Brazil Russia Colombia Mexico 3. 4% 3. 7% 4. 3% 6. 0% France Canada Australia Chile 1. 2% 1. 6% 2. 0% 2. 2% Ukraine Argentina South Sudan Venezuela 14. 4% 25. 7% 187. 9% 1, 087. 5% (CIA World Fact Book) KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Unemployment Rate – the percentage of the labor force that is

MEASURING MACROECONOMIC OUTCOMES Unemployment Rate – the percentage of the labor force that is currently unemployed § Most stable, developed, industrialized economies typically have rates of 4% to 8% Singapore Japan Mexico Bolivia 2. 2% 2. 9% 3. 4% 4. 0% United Kingdom 4. 4% New Zealand Russia Canada Chile 4. 7% 5. 2% 6. 3% 6. 7% India France Brazil Greece 8. 5% 9. 4% 12. 8% 21. 5% Lithuania 7. 1% Venezuela 27. 1% (CIA World Fact Book) KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Unemployment Rate – the percentage of the labor force that is

MEASURING MACROECONOMIC OUTCOMES Unemployment Rate – the percentage of the labor force that is currently unemployed What does this definition of Unemployment Rate really mean? Labor Force consists of two types of people: i. those who currently have a job ii. those who do not currently have a job but are actively seeking a job That is, Labor Force consists of all people who can answer “yes” to at least one (if not both) of the following questions: i. “Do you have a job? ” ii. “Are you actively seeking a job? ” KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Labor Force consists of everyone who says “yes” to at least

MEASURING MACROECONOMIC OUTCOMES Labor Force consists of everyone who says “yes” to at least one of the following: i. “Do you have a job? ” ii. “Are you actively seeking a job? ” Example: labor market status of individuals in society… Person A B C D E F G H Do you currently have a job? Yes Yes No No Are you currently seeking a job? No No No Yes No No No § F, G, and H are not part of the labor force => 5 workers in labor force § 4 of these 5 currently have a job => unemployment rate is 20% KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES U. S. Inflation Rate Post WW-II Annual Inflation Rate (observed monthly)…

MEASURING MACROECONOMIC OUTCOMES U. S. Inflation Rate Post WW-II Annual Inflation Rate (observed monthly)… • January 1948 through April 2018 (844 months) KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES U. S. Inflation Rate Post WW-II • January 1948 through April

MEASURING MACROECONOMIC OUTCOMES U. S. Inflation Rate Post WW-II • January 1948 through April 2018 (844 months) § Mean = 3. 52% § Median = 2. 88% § Maximum = 14. 76% [March 1980] § Minimum = – 2. 87% [July 1949] • 2. 46% in April 2018 => 75 straight months (over 6 years) with value below “median” of 2. 88%. . . • Negative rate in 40 of 844 months (less than 5% of the time) § Jan. 2015 through May 2015 § May 1949 through June 1950 (14 months) (5 months) § Sept. 1954 through Aug. 1955 (12 months) § Sept. 2015 (1 month) § March 2009 through Oct. 2009 (8 months) KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES The “Great Inflation” – period of abnormally high inflation rates from

MEASURING MACROECONOMIC OUTCOMES The “Great Inflation” – period of abnormally high inflation rates from early 1970’s through early 1980’s • Mean value was 9. 18% between August 1973 and July 1982 • Above 6% in 99 of the 108 months (91. 7% of months) between August 1973 and July 1982 • Above 6% in only 11 of the 688 “other months” (1. 6% of months) from Jan. 1952 to April 2018 KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES U. S. Unemployment Rate Post WW-II Unemployment Rate (observed monthly)… •

MEASURING MACROECONOMIC OUTCOMES U. S. Unemployment Rate Post WW-II Unemployment Rate (observed monthly)… • January 1948 through April 2018 (844 months) KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES U. S. Unemployment Rate Post WW-II • January 1948 through April

MEASURING MACROECONOMIC OUTCOMES U. S. Unemployment Rate Post WW-II • January 1948 through April 2018 (844 months) § Mean = 5. 78% § Maximum = 10. 8% [Nov. 1982 and Dec. 1982] § Median = 5. 6% § Minimum = 2. 5% [May 1953 and June 1953] • 3. 9% in April 2018 => lowest level since December 2000 [3. 7% in September 2018 and November 2018 => lowest since December 1969] • 10. 0% or higher: Sept. 1982 through June 1983 (10 months) and again in October 2009 • 8. 0% or higher: Jan. 1975 through Dec. 1975 (12 months); Nov. 1981 through Jan. 1984 (27 months); Feb. 2009 and August 2012 (43 months) KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

Unemployment Rate above 6% Number of Mean 6% or Higher. . . High or

Unemployment Rate above 6% Number of Mean 6% or Higher. . . High or Time Period Months in Unemployment Number of Percent of Low? Time Period Rate Months Jan. 1948 to Sept. 1974 321 Low 4. 79% 47 14. 6% Oct. 1974 to Aug. 1994 239 High 7. 06% 189 79. 1% Sept. 1994 to July 2008 167 Low 5. 03% 8 4. 8% Aug. 2008 to Sept. 2014 74 High 8. 23% 74 100% Oct. 2014 to April 2018 43 Low 4. 82% 0 0% KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Unemployment & Inflation Rate => three distinct periods… 1. Low rate:

MEASURING MACROECONOMIC OUTCOMES Unemployment & Inflation Rate => three distinct periods… 1. Low rate: January 1952 through July 1973 2. High rate: August 1973 through July 1982 3. Low rate: August 1982 through April 2018 Unemployment Rate => five distinct periods… 1. Low rate: Jan. 1948 through Sept. 1974 2. High rate: Oct. 1974 through August 1994 3. Low rate: Sept. 1994 through July 2008 4. High rate: Aug. 2008 through Sept. 2014 5. Low rate: Oct. 2014 through April 2018 KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Unemployment & Inflation Rate => three distinct periods… 1. Low rate:

MEASURING MACROECONOMIC OUTCOMES Unemployment & Inflation Rate => three distinct periods… 1. Low rate: January 1952 through July 1973 2. High rate: August 1973 through July 1982 3. Low rate: August 1982 through April 2018 Unemployment Rate => five distinct periods… 1. Low rate: Jan. 1948 through Sept. 1974 2. High rate: Oct. 1974 through August 1994 3. Low rate: Sept. 1994 through July 2008 4. High rate: Aug. 2008 through Sept. 2014 5. Low rate: Oct. 2014 through April 2018 high unemployment Aug. 1994 Oct. 1974 Aug. 2008 Sept. 2014 time Aug. 1973 July 1982 high inflation Simultaneously high Unemployment Rate & Inflation Rate from October 1974 through July 1982! KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Misery Index – economic indicator created by Arthur Okin, calculated by

MEASURING MACROECONOMIC OUTCOMES Misery Index – economic indicator created by Arthur Okin, calculated by simply adding together the annual inflation rate and the unemployment rate 22, 50 20, 00 17, 50 15, 00 12, 50 10, 00 7, 50 5, 00 2, 50 52 в 5 ян 4 в 5 ян 6 в 5 ян 8 в 6 ян 0 в 6 ян 2 в 6 ян 4 в 6 ян 6 в 6 ян 8 в 7 ян 0 в 7 ян 2 в 7 ян 4 в 7 ян 6 в 7 ян 8 в 8 ян 0 в 8 ян 2 в 8 ян 4 в 8 ян 6 в 8 ян 8 в 9 ян 0 в 9 ян 2 в 9 ян 4 в 9 ян 6 в 9 ян 8 в 0 ян 0 в 0 ян 2 в 0 ян 4 в 0 ян 6 в 0 ян 8 в 1 ян 0 в 1 ян 2 в 1 ян 4 в 1 ян 6 в 18 50 ян в- ян ян в- 48 0, 00 KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES Misery Index Monthly values, from January 1948 to April 2018: •

MEASURING MACROECONOMIC OUTCOMES Misery Index Monthly values, from January 1948 to April 2018: • Low value: 2. 97 in July 1953 • High value: 21. 98 in June 1980 (inflation of 14. 38% and unemployment of 7. 6%) • Average value: mean of 9. 30; median of 8. 47 • 6. 36 in April 2018 22, 50 20, 00 17, 50 15, 00 12, 50 10, 00 7, 50 5, 00 2, 50 17 в- 14 в- ян в- 11 ян 08 в- ян 05 ян 02 в- ян в- в- 99 ян 96 в- ян 93 в- ян 90 в- ян 87 ян 84 вян в- в- 81 ян 78 в- ян в- 75 ян 72 в- ян 69 ян 66 вян в- в- 63 ян 60 в- KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS ян 57 в- ян 54 в- ян 51 ян вян ян в- 48 0, 00

22, 50 15, 00 12, 50 10, 00 7, 50 5, 00 2, 50

22, 50 15, 00 12, 50 10, 00 7, 50 5, 00 2, 50 янв-17 янв-14 янв-11 янв-08 янв-05 янв-02 янв-99 янв-96 янв-93 янв-90 янв-87 янв-84 янв-81 янв-78 янв-75 янв-72 янв-69 янв-66 янв-63 янв-60 янв-57 0, 00 янв-54 Misery Index above 12. 50: not common • 132 of 844 months between Jan. 1948 and April 2018 (only 15. 64% of the time) • Most recently, 5 straight months from May 2011 through Sept. 2011 17, 50 янв-51 The Great Misery 20, 00 янв-48 MEASURING MACROECONOMIC OUTCOMES “The Great Misery” – period of time from November 1973 through June 1983 when the value of the Misery Index was 12. 50 or higher in every single month • 116 consecutive months • above 12. 50 in only 16 of 728 “other months” from Jan. 1948 to April 2018 (i. e. , 2. 20% of the time) KENNESAW STATE UNIVERSITY | COLES COLLEGE OF BUSINESS

MEASURING MACROECONOMIC OUTCOMES

MEASURING MACROECONOMIC OUTCOMES