Labor Force Participation Rate

Explain the terms Labor Force, Labor Force Participation Rate and Unemployment Rate. What is the relationship between these three measures?

Labor force is any person working or looking for jobs over the age of 16, and is calculated by adding the number of unemployed plus the number of employed. The labor force participation rate is a percentage of non-institutionalized individuals working or looking for work, and can be found by dividing the labor force by all the adult population. On the other hand the unemployment rate is a measure of the active labor force, and can be found by dividing the unemployed by the number of people in the labor force.

The relationship between labor force, labor force participation rate and unemployment rate are

Why does it exclude intermediate goods, second hand goods, and transfer payments?

Gross domestic product is the market value of all finished goods and services produced inside a nation for a year. The reason why the gross domestic product excludes intermediate goods is that intermediate goods are consider unfinished goods for example an orange sale happens is excluded from the GDP when it is sold to an orange juice producer as the producer would use that orange to make orange juice to sell to consumers. However if that same orange is sold to a household that would use it to make orange juice, it is included in the GDP as that orange would not be resold for profit.

The reason why the gross domestic product excludes second hand goods is because the definition of GDP tell us that they must be produced within a year, for instance a sale of a used car say a 2015 Ford truck today is not included In the GDP as the GDP accounted for that sale in the year 2015 and not this year. In essence second hand goods are already accounted for the GDP on the year they were produced. Lastly the reason why the gross domestic product excludes transfer payments is because the relocation of money from one party to another. Examples of transfer payments are government social security payments, Medicare, or welfare programs as they not part of any goods or services so they are excluded from the GDP count (Miller,

First major limitation in using GDP as a measure of well-being is a natural disaster like a tornado, as property damage would trigger work and services to fix the damages thriving on the need and demand for those goods and services however it comes with at a loss of money for the property owners as they have to spend money to replace their loss wealth, where otherwise they would have to give up buying the things they wanted.

Second major limitation in using GDP as a measure of well-being is the changes in working hours as GDP does not measure or accounts for people working less to perhaps spend more time with family rather than work they might want to work four days a week affecting the GDP as the employee labor decreases due to the change on his priorities by working less.

Lastly the third major limitation in using GDP as a measure of well-being is the non-market production as is very difficult to calculate, for instances the sale of illegal drugs, so this people are contributing to the economy and producing but are not being tracked or accounted by the GDP, thus devaluating the living standards (Miller,