1. 13.2 How do economists measure the size of the economy?
1.1. The main measure of the size of a nation’s economy is its gross domestic product.
1.1.1. Goss domestic product: the market value of all final goods and services produced within a country during a given period of time
1.1.1.1. Market value: the price buyers are willing to pay for a good or service in a competitive market
1.2. The Bureau of Economic Analysis comes up with a single measure of the economy's output by attaching a market value to each product.
1.2.1. Final good: any new good that is ready for consumer use; final goods are included in the calculation of GDP
1.2.1.1. Intermediate good: a good used in the production of a final good; intermediate goods are not included in the calculation of GDP
1.3. To compensate for the effects of inflation, the Commerce Department calculates what is called real GDP.
1.3.1. Real GDP: a measure of a country’s economic output (GDP) valued in constant dollars; real GDP reflects the effects of inflation
1.3.1.1. Constant dollars: the value of the dollar fixed at a specified base year; a measure of the dollar’s value adjusted for inflation to reflect purchasing power over time
2. 13.3 What does the unemployment rate tell about the economy's health?
2.1. Like the GDP, the unemployment rate is a useful indicator of the health of an economy. In general, a high unemployment rate means the overall health of the economy is poor.
2.1.1. Unemployment rate: the percentage of the labor force that is not employed but is actively seeking work
2.2. When an economy is healthy and growing, it experiences little cyclical unemployment. But there will always be some frictional, seasonal, and structural unemployment.
2.2.1. Natural rate of unemployment: the percentage of the labor force without work when the economy is at full employment; a condition in which the economy is strong and there is no cyclical unemployment
2.3. Despite its flaws, 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.
3. 13.4 What does the inflation rate reveal about the economy's health?
3.1. 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.
3.1.1. Price index: a measure of the average change in price of a type of good over time
3.2. Between 2000 and 2012, the annual rate of inflation in the United States ranged from a low of -0.4 percent to a high of 3.8 percent. Whether inflation at these relatively low levels is “healthy” for the economy is open to debate. However, we do know that inflation of any amount exacts economic costs.
3.3. A dramatic increase in the amount of money in circulation can cause hyperinflation. But even a more modest increase may trigger inflation if the result is too many dollars chasing too few goods.
3.3.1. Hyperinflation: occasionally inflation goes into overdrive.
4. 13.5 How does the business cycle relate to economic health?
4.1. http://www.frbsf.org/education/publications/doctor-econ/2002/may/business-cycles-economy
4.1.1. This article relates to The business cycle because it effects the ups and downs or health of the economy. The article shows graphs and turning points in our economy.
4.2. The business cycle consists of four phases. These phases include a period of growth and a period of decline, as well as the turning points that mark the shift from one period to the next. Expansion is a big part of this.
4.2.1. Expansion: a period of economic growth
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.
4.4. Measures that consistently rise or fall several months before an expansion or a contraction begins are called leading economic indicators.
4.4.1. Leading economic indicators: measures that consistently rise or fall several months before an expansion or a contraction begins