Chapter 13 Measuring the economy

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Chapter 13 Measuring the economy by Mind Map: Chapter 13 Measuring the economy

1. chapter 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 its gross domestic product.A sign of good economic health is a steadily growing GDP

1.1.1. Gross domestic- product is the market value of all final goods services produced within the country during given period of time.

1.2. Many economist use GDP numbers to figure out how big the economy is and at what rate it is growing at.

1.2.1. Current Dollars- Reflects the purchasing power of the dollars in the year they are spent.

1.3. Adjusting for the population or the Per Capita GDP is a very important thing to. They use GDP to compare the economies of individual countries. Per Capita is the accepted measure of a society's standard of living.

1.3.1. Per Capita GDP- Is a nation's real gross domestic product divided by its population.

1.4. The Gross domestic product is a useful tool for measuring economic growth. But it has many limitations such as unpaid household and volunteer work. Things are also ignores negative externalities and says nothing about incom distribution. Overall GDP makes people better off with Literacy and education, health and life expectancy, and standard of living.

1.4.1. Informal economy- One that operates without government regulation.

2. Chapter 13.3 What does the unemployment Rate Reveal about an Economy's Health

2.1. The Government Measures Unemployment Every month, the BLS reports the total number of people who were unemployed for the previous month.

2.1.1. unemployment rate—the percentage of the labor force that is seeking work.

2.2. Four Types of Unemployment are Frictional unemployment,Structural unemployment,Seasonal unemployment, and Cyclical unemployment.

2.2.1. Structural unemployment comes about mainly when advances in technology reduce the demand for certain skills.

2.2.2. Frictional unemployment is that it applies to people who change jobs as well as to people seeking their first jobs.

2.2.3. Seasonal unemployment occurs when businesses shut down or slow down for part of the year, often because of weather.

2.2.4. cyclical unemployment-This type of unemployment occurs during periods of decline

2.3. Full Employment and the Natural Rate of Unemployment is always going on.Some people will always be out of work, even in an economy with full employment

2.3.1. When an economy reaches full employment, jobs exist for everyone who wants to work, even though a certain percentage of those jobs and workers will not yet have been matched together. Economists call this percentage the natural rate of unemployment

2.4. Problems with the Unemployment Rate as an Indicator of Economic Health is that The first problem is that at any one time, a number of unemployed people have given up looking for work.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. Chapter 13.4 What does the inflation Rate Reveal about an economy's Health?

3.1. Economists use the Consumer Price Index (CPI) to determine changes in the price level from one period to another.

3.1.1. real cost of living is the nominal cost of basic goods and services, adjusted for inflation.

3.2. A strong economy is likely to have a low level of inflation.

3.3. A high inflation rate indicates an unhealthy economy, or deflation.

3.4. Limitations of the CPI as a Measure of Inflation and effects it.

4. chapter 13.5 How does the Business Cycle Relate to Economic Health?

4.1. The business cycle consists of four phases: expansion, peak, contraction (or recession), and trough.

4.2. As measured by real GDP, the economy grows during an expansion and shrinks during a contraction.

4.3. The peak marks the end of an expansion and the start of a contraction. The trough marks the end of a contraction and the start of a new expansion.

4.4. 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.

4.4.1. A depression is a prolonged economic downturn characterized by a plunging real GDP and extremely high unemployment