Ch. 13--Measuring the Economy

1. Trough--The economy has hit a low-point!

2. 13.4--What does the inflation rate reveal about an economies health?

2.1. Inflation rate is: the percentage increase in the average price level of goods and services from one month or year to the next

2.2. CPI--Consumer Price Index--market basket of goods at market price. CPI is used to measure inflation.

2.3. Deflation--inflation rate is negative. Price levels decrease.

2.4. Creeping Inflation--slow or gradual inflation. This is OK!

2.5. Inflation decreases Purchasing Power!!!!

3. 13.5--How does the business cycle relate to economic health?

3.1. Expansion Phase--Economy is growing!

3.2. Peak Phase--Economy has reached a high-point!

3.3. Contraction Phase--Economy is slowing down, or in decline!

4. 13.2--How Do Economists Measure the Size of an Economy?

4.1. Economists use GDP (Gross Domestic Product) to measure the growth of an economy.

4.2. GDP measures the value of all FINAL goods and services produced in a country in a given time period.

4.3. C + I + G + Xn = GDP

4.4. Per Capita GDP--shows wealth per person

5. 13.3--What Does the Unemployment Rate Tell Us About an Economy’s Health?

5.1. Unemployed = somebody without a job, that is actively seeking a job

5.2. 1.) Frictional Unemployment--People that have quit their job

5.3. 2.) Structural Unemployment--When jobs are replaced by technology.

5.4. 3.) Seasonal Unemployment--loss of job due to the time of year.

5.5. 4.) Cyclical Unemployment--Loss of job due to downturn in economy.

5.6. Acceptable Unemployment Rate: 4-6%