Ch. 13 Measuring the Economy

Get Started. It's Free
or sign up with your email address
Ch. 13 Measuring the Economy by Mind Map: Ch. 13 Measuring the Economy

1. 13. 2 How do Economists Measure the size of an economy.

1.1. The main measure of the size of a nation's economy is it's gross domestic product (GDP). GDP is the market value of all final goods and services produced within a country during a given period of time.

1.2. Economists use GDP figures to determine not only how big an economy is, but whether it is growing or shrinking and at what rate. Economists typically calculate GDP by measuring expenditures on goods and services produced in a country. They divide the economy into four sectors: households, businesses, government, and foreign trade.

1.3. There are two types of GDP: Nominal and Real. Nominal GDP measures the output of an economy valued at today’s prices, or in current dollars. Real GDP measures the output of an economy not in current dollars, but in constant dollars.

2. 13.3 What does the Unemployment Rate tell us about an economy's health.

2.1. Every month, the Bureau of Labor Statistics reports the total number of people who were unemployed for the previous month. To arrive at this figure, the BLS does not attempt to count every job seeker in the country. Instead, it conducts a sample survey each month.

2.2. Unemployed. Members of the labor force who are jobless, but are looking for work, are classified as unemployed. To be counted as unemployed, individuals must have actively looked for work in the four weeks preceding the survey week.

2.3. Unemployed workers also pay a serious economic cost. They and their families lose income and the goods and services that income would have purchased. They may become unable to pay their monthly mortgage, leading to the loss of a home. Unemployment can also mean the loss of medical benefits, which then become an added expense.

2.4. This site explains how the Unemployment rate affects the economy, the individuals in the economy, and society, It also helps with how to prevent becoming unemployed. http://www.investopedia.com/financial-edge/0811/the-cost-of-unemployment-to-the-economy.aspx

3. 13.4 What does the Inflation Rate reveal about an Economy's Health

3.1. The BLS tracks inflation by gathering information on Americans’ cost of living. That is, it studies the cost of buying the goods and services that households like yours purchase every day. As you would expect, the cost of living changes all the time because prices do not stay the same.

3.2. Hyperinflation-Nobody can predict how high prices will go, and people lose confidence in their currency as a store of value Creeping Inflation- Since 1913, the average annual rate of inflation has been about 3.2 percent. During your lifetime it has stayed fairly close to that average. Deflation- Occurs when prices go down over time.

3.3. Higher real interest rates on bank deposits provide an incentive for people to save more. But higher real rates also slow economic growth by making loans too costly. Lower real interest rates discourage saving. At the same time, they encourage borrowing by allowing borrowers to repay most of their loans in dollars that will be worth less tomorrow than they were today.

4. 13.5 How does the business cycle relate to Economic Heath

4.1. Expansion- Period of Growth Peak- Expansion ends Contraction- a period of general economic decline marked by a falling GDP and rising unemployment. Trough- Lowest part of contraction

4.2. The term business cycle implies that expansions and contractions occur at regular, predictable intervals. But in fact, the opposite is true. Business cycles are irregular in both length and severity. This makes peaks and troughs difficult to predict

4.3. Business cycles are popularly known as periods of boom and bust. A boom is the expansion phase of the cycle. It may also be known as a recovery, upturn, upswing, or period of prosperity. All these terms mean the same thing—the economy is healthy and growing.