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    CH 13 Measuring The Economy

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    This document provides information about key economic indicators that economists use to measure and understand the economy, such as GDP, unemployment, and inflation. It defines GDP as the total market value of all final goods and services produced within a country in a given year. The document also explains the different components that make up GDP (C, I, G, NX), why GDP is measured, and how to calculate real GDP. It then discusses how unemployment rates are calculated and the different types of unemployment. Finally, it covers what inflation is and how it is measured using the Consumer Price Index, as well as causes and costs of inflation.

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    CH 13 Measuring The Economy

    Uploaded by

    api-261761091
    977 views33 pages
    This document provides information about key economic indicators that economists use to measure and understand the economy, such as GDP, unemployment, and inflation. It defines GDP as the total market value of all final goods and services produced within a country in a given year. The document also explains the different components that make up GDP (C, I, G, NX), why GDP is measured, and how to calculate real GDP. It then discusses how unemployment rates are calculated and the different types of unemployment. Finally, it covers what inflation is and how it is measured using the Consumer Price Index, as well as causes and costs of inflation.

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    ch 13 measuring the economy

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    This document provides information about key economic indicators that economists use to measure and understand the economy, such as GDP, unemployment, and inflation. It defines GDP as the total market value of all final goods and services produced within a country in a given year. The document also explains the different components that make up GDP (C, I, G, NX), why GDP is measured, and how to calculate real GDP. It then discusses how unemployment rates are calculated and the different types of unemployment. Finally, it covers what inflation is and how it is measured using the Consumer Price Index, as well as causes and costs of inflation.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    977 views33 pages

    CH 13 Measuring The Economy

    Uploaded by

    api-261761091
    This document provides information about key economic indicators that economists use to measure and understand the economy, such as GDP, unemployment, and inflation. It defines GDP as the total market value of all final goods and services produced within a country in a given year. The document also explains the different components that make up GDP (C, I, G, NX), why GDP is measured, and how to calculate real GDP. It then discusses how unemployment rates are calculated and the different types of unemployment. Finally, it covers what inflation is and how it is measured using the Consumer Price Index, as well as causes and costs of inflation.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 33
    At a glance
    Powered by AI
    The key takeaways are that GDP, inflation, and unemployment are important economic indicators used to measure the size and health of an economy. GDP measures the total market value of all final goods and services produced in a country in a year. Inflation tracks changes in the cost of living using the consumer price index, and unemployment measures the percentage of the labor force that is unemployed and actively seeking work.

    The main components used to calculate GDP are consumption (C), investment (I), government spending (G), and net exports (X-M). C includes household spending on goods and services. I includes business spending on capital goods, construction, and changes in inventories. G includes government purchases of goods and services. X-M is exports minus imports.

    Some examples of things not included in GDP calculations are intermediate goods and services, goods and services not sold in the marketplace like babysitting or barter, used goods/second-hand sales, illegal goods and services, and purely financial transactions.

    Measuring the Economy

    Ch 13 Econ Alive

    Questions
    1. Why do economists measure things like GDP,
    inflation and unemployment?
    2. Do you want your countrys GDP to increase or
    decrease? Why?
    3. Does GDP measure every good or service (G/S) that
    is produced?
    4. If Sony (a Japanese company) manufacturers
    headphones in Indiana, does that count in U.S. or
    Japans GDP?
    5. If Ford manufactured a Mustang in 2014 and didnt
    sell it until 2015, would the value of the Mustang
    count towards 2014 or 2015 GDP?

    Measuring the Economy

    GDP

    Gross Domestic Product


    (GDP)
    Short: Measure of the total output of the economy
    Longer: A measure of the total market value of all final
    goods and services produced in a country in a year.
    Market value: dollar amount for which something sells.
    - allows us to compare relative values
    (e.g. a car adds more to GDP than an apple) and
    - add these different values together.
    Final goods and services: prices sold to final consumer
    - avoids double counting

    Why measure GDP?


    1. To see how big the economy is
    2. To see whether the economy is
    growing or not

    U.S. GDP 1990-2015

    Q4 2014 U.S. GDP

    GDP = C + I + G + NX (X-M)
    C = household consumption
    I= business investment
    G=government purchases
    NX= net exports (Exports-imports)
    take the quantity of everything produced,
    multiply it by the price at which each
    product sold, and add up the total

    (C):
    Personal Consumption Expenditures

    Spending by households on
    goods and services
    - e.g. cars, food, visits to the
    dentist.

    (I):
    Gross Private Domestic Investment
    Spending by businesses on capital
    goods
    (e.g. machinery, factories,
    equipment, tools)
    New construction
    (residential and non-residential)
    Changes in inventories

    (G): Government
    Consumption and Gross Investment
    Government Purchases of goods and
    services
    Includes defense and
    non-defense spending

    Includes federal, state and local


    spending

    NX (X-M):
    Net Exports of Goods and Services
    Net exports = exports minus imports
    Exports are added into US GDP
    because they are goods and services
    produced in the US and sold abroad.
    Imports are subtracted from US GDP
    because they are goods and services
    produced abroad and sold in the US

    Things not included in GDP:

    -Intermediate goods and services


    - Good and services not sold in the market place
    - babysitting, barter
    - Used goods/second-hand sales
    - Illegal goods and services
    - Purely financial transactions

    Three ways to measure GDP


    Nominal GDP

    Real GDP

    Measures GDP in
    Measures GDP in
    todays prices (current
    constant dollars
    dollars)
    Does take into
    Per
    GDP
    DoesCapita
    NOT take
    into
    account inflation
    inflation
    -account
    A nations
    real GDP/population

    - Acts as a measure of a societys


    standard of living

    Put these countries per capita GDP is


    order from highest to lowest

    New Zealand
    Japan
    South Korea
    Saudi Arabia
    Norway
    Singapore
    U.S.

    U.S. GDP rank


    Per
    IMF
    capit
    a
    U.S.
    9
    Total
    GDP
    U.S.
    1

    Worl C.I.A. U.N.


    d
    Bank
    13
    14
    12

    Per Capita GDP

    rker color = higher p/capita G

    Higher per capita GDP


    Usually means
    Higher literacy rates
    Greater life expectancy
    Lower infant mortality

    Measuring the Economy

    UNEMPLOYMENT

    Questions
    1. If you need to figure out how many
    people were employed in the U.S.,
    how would you go about doing this?
    2. True or false? Included in
    unemployment statistics
    1.
    2.
    3.
    4.

    Under age 16
    Active duty in military
    In a nursing home
    In prison

    Measuring unemployment
    Employed
    Not in
    labor
    force

    Unemploy
    ed
    Calculation
    for
    unemployme
    nt

    Unemployment rate =
    # unemployed/# in labor force x 100

    Do Now
    1.
    2.
    3.
    4.
    5.

    What does GDP stand for?


    What is the definition of GDP?
    Why do we measure GDP?
    What is the formula for GDP?
    Whats the difference between real
    and nominal GDP?
    6. Why is per capita GDP a good way
    to compare countries GDP?

    Types of unemployment
    Frictional
    Structural
    Seasonal
    Cyclical

    Unemployment statistics do a poor


    job of capturing data about
    discouraged workers
    Involuntary part-time workers
    Underground economy

    Unemployment

    Question
    1. How are GDP and unemployment
    rate related?
    2. What is the current unemployment
    rate?
    3. What is the Feds unemployment
    rate target?

    Measuring the economy

    INFLATION

    How is inflation measured?


    By tracking the changes in in cost of
    living using the consumer price index
    (CPI)

    Causes of inflation
    Increase in the money supply
    Increase in overall demand for G/S
    Increase in cost of factors of
    production

    Types of inflation
    Creeping inflation
    Hyperinflation
    Zimbabwe

    Deflation

    U.S. inflation rate

    Economic costs of inflation


    Loss of purchasing power
    Higher interest rates
    Loss of economic efficiency

    Videos

    Economic Lowdown GDP


    Types of unemployment
    Fiscal policy
    EconUSA - inflation

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