Ch. 13--- Measuring the Economy

1. 13.3 What Does the Unemployment Rate Tell Us About an Economy's Health?

1.1. Every month, the BLS surveys 60,000 households and determines how many people are employed, unemployed, or in the labor force. They'll use this data to determine the nationwide unemployment rate.

1.2. The BLS adds together the number of people employed and unemployed to get the amount of people in the labor force. To calculate the unemployment rate, it then divides the number of unemployed people by the number in the labor force.

1.3. The official unemployment rate serves as a fairly good indicator of conditions in the labor market and in general, when the rate is high, the overall health of the economy is poor

1.4. Unemployment Rate - Measure of the prevalence of unemployment.

1.5. Underground Economy - A sector of the economy based on illegal activities.

2. 13.2 How Do Economists Measure the Size of an Economy?

2.1. The main measure of the size of a nation's economy is it's gross domestic product.

2.2. Economist typically calculate GDP by measuring expenditures on goods and services produced in a country.

2.3. Economists use GDP figures to determine not only how big an economy is but whether it is growing or shrinking and at what rate.

2.4. Gross Domestic Product (GDP) - The market value of all goods and services produced within country during a given period of time.

2.5. Per Capita GDP - A nation's real GDP divided by it's population; a measure of average economic output per person.

3. 13.4 What Does the Inflation Rate Reveal About an Economy's Health?

3.1. The BLS tracks inflation by gathering information on Americas' cost of living. They track changes in the cost of living using what is known as the consumer price index.

3.1.1. e

3.2. The CPI market basket is based on surveys of thousands of households about their spending habits.

3.3. Using its monthly price data, the BLS can track the change in the CPI between any two periods. They use the data to adjust for inflation. By using the CPI to adjust for inflation, economists can calculate real wages and compare them over time

4. 13.5 How Does The Business Cycle Relate to Economic Health?

4.1. The business cycle consists of four phases, Expansion ( period of economic growth ), Peak ( point at which expansion ends ), Contraction ( period of general economic decline ), Trough ( lowest point of the contraction phase ).

4.2. Economists categorize the indicators they use to track the business cycle based on whether they signal a future change, an ongoing change, or a change that has already begun. Leading Indicators, Coincident Indicators, and Lagging Indicators.

4.3. Business Cycles are known as Boom and Busts. A Boom is the expansion phase of the cycle.

4.4. Business Cycle - A recurring pattern of growth and decline in economic activity over a period of time.