1. What does the unemployment rate tell us about an economy's health?
1.1. How the government rate measures unemployment
1.1.1. There are three statuses from which people come from that the government surveys to collect data and create statistics on employment rates. The statuses are employed, unemployed, and not in labor force.
1.2. Full employment and the natural rate of unemployment
1.2.1. In a healthy economy, patterns in unemployment statistics are low. However, with every economy, even healthy economies, there are still patterns of unemployment that are affected by factors like seasonal, structural and frictional employment.
1.3. Problems of unemployment rate as an indicator of economic healthy
1.3.1. People who are not counted as employed but make money through illegal means (gambling, drugs, sex work) contribute to the economy but are not represented in the statistics, as well as people who are only partially employed. This can make the unemployment rate seem lower or higher than it actually. Economists argue that because of this this is an inaccurate way to measure the health of an economy.
1.4. The economic costs of high unemployment
1.4.1. Even though there are flaws with measuring the economy through unemployment, it is easy to tell overall that if a country's employment rate is low, the economy is poor.
2. How do economists measure the size of the economy?
2.1. They ask: how big is the economy?
2.1.1. To find this, economists must find the GDP.
2.2. What is the GDP (Gross Domestic Product?)
2.2.1. They calculate this by measuring expenditures, or the amount of money spent (divided into four parts: household, foreign trade, government and businesses). The formula for this is C + I + G + NX = GDP.
2.3. Adjusting for population and inflation.
2.3.1. An economist must consider not only the size of an economy, but also how it grows or shrinks. When looking at this, they must mull over factors such as inflation and population because measuring economies is not as simple as adding and subtracting.
2.4. How GDP growth makes people better off
2.4.1. Literacy rate is connected with countries that have a high GDP, and when there are more educated people in a country there are more opportunities for better jobs to be created and filled. This overall is very helpful to the economy.