Chapter 13: Measuring the Economy

1. 13.5- How Does the Business Cycle Relate to Economic Health?

1.1. Key Point 1

1.2. Key Point 2

1.3. Key Point 3

1.4. Term 1

1.5. Term 2

2. 13.4-What Does the Inflation Rate Reveal About an Economy's Health?

2.1. Inflation increase in aggregate price level

2.2. Consumer price index causes an increase in the money supply, increasing aggregate demand, increasing the costs of production.

2.3. Aggregate demand is a demand-pull, and an increase in the costs of production is a cost-push.

2.4. inflation rate = % increase in inflation over time

2.5. Consumer Price Index: A measure of price changes in consumer goods and services over time; the CPI shows changes in the cost of living from year to year

3. 13.2-How do Economists Measure the size of the Economy?

3.1. The main measure of the size of a nation’s economy is its gross domestic product (GDP).

3.2. GDP can be calculated by taking the household consumption (C), business investment (I), government purchases (G), and the net of exports minus imports (NX). Economists calculate GDP using this formula: C + I + G + NX = GDP

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

3.4. GDP-The the market value of all final goods and services produced within a country during a given period of time.

3.5. Key Term 2

4. 13.3-What Does the Unemployment Rate Tell us About the Economy?

4.1. The Bureau of Labor Statistics (BLS) conducts a survey each month, with 60,000 households interviewed each week

4.2. A healthy economy always has frictional, seasonal, and structural unemployment, but has little cyclical unemployment. The natural rate of unemployment for the US is between 4 and 6 percent

4.3. When labor sources are not being fully utilized less economic output is the result, so Increasing unemployment=decreasing GDP

4.4. Unemployment Rate= Number unemployed/number in labor force x 100

4.5. - Employed: people who worked for at least 1 hour during the week - Unemployed: jobless that are actively looking for work, laid off waiting for recall do not count - Not in the Labor Force: Full time, retired, disabled, or family responsibilities preventing them from working