Chapter 13- Measuring the Economy

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Chapter 13- Measuring the Economy by Mind Map: Chapter 13- Measuring the Economy

1. 13.2

1.1. How do economists measure the size of the economy?

1.1.1. Well they measure it using GDP. Or Gross Domestic Product. Its the country's total market value sold. To find GDP You take GDP = C + I + G + (X - M)

1.1.2. They use Market value as well. Market value is the price people are willing to pay for a product in a competitive market. This is what leads to the overall GDP

1.1.3. Goods that are sold legally are all that contribute to GDP. Final goods are products that are brand new and ready to be sold. Stuff that has been resold or already made and sold off again like used cars. Or other used products. Do NOT contribute to the overall GDP

1.1.4. Adjusting and looking at inflation. Inflation happens when the value of the dollar decreases and people can't buy as many things with the same amount of money they have. To adjust to this they calculate real GDP. Calculates not current dollars, but constant dollars.

2. 13.3

2.1. What does the unemployment rate tell us about an economy's health

2.1.1. Like GDP. The unemployment rate tells us the overall health of an economy. If the Employment rate is pretty high. Then the over all health of an economy is poor.

2.1.2. Terms: Unemployed: Members of a labor force who are jobless and actively seeking a job Employed: Members of a labor force that are currently employed. Not in the labor force: Everyone eligible for a labor force, but is currently neither looking for a job or working

2.1.3. 4 types of unemployment Frictional unemployment: a type of unemployment that results when workers are seeking their first job or have left one job and are seeking another structural unemployment: a type of unemployment that results when the demand for certain skills declines, often because of changes in technology or increased foreign competition; under such conditions seasonal unemployment: a type of unemployment that results when businesses shut down or slow down for part of the year, often because of weather cyclical unemployment: a type of unemployment that results from a period of decline in the business cycle; unemployment caused by a contraction

2.1.4. The overall economic cost of high unemployment

3. 13.4

3.1. What does the inflation rate tell us about the economy's health

3.1.1. Inflation can be both beneficial to economic recovery and in some cases, negative. If inflation becomes too high the economy can suffer. If inflation is controlled and at reasonable levels, the economy may prosper.

3.1.2. Types of Inflation Creeping inflation: Gradual increase in overall prices Hyperinflation: A rapid increase in prices. Causing money to basically be worthless if it gets too bad Deflation: A fall in price Stagflation: Increased price in over all but slow economic growth.

3.1.3. Why does inflation happen? It's somewhat out fault. Prices increase because we demand it causing the price to get increased. Another reason at fault. Is the producer. The producer can rake up the prices to products or just the cost to make it is higher.

4. 13.5

4.1. How does the business cycle relate to Economic Health?

4.1.1. There are 4 phases of the business cycle. Expansion: Which is a period of economic growth Peak: This marks the highest point of economic growth Contraction: This is a decline in market Trough: This is like the peak, but with the lowest point of a contraction.

4.1.2. All of this relates to economic health because if an economy is booming their business cycle may continue to expand and only have very little contractions, and their overall Peak would be pretty high and their Trough wouldnt be that low.

4.1.3. On the contrary if an economy is doing pretty poor. They will have much lower peaks and consistent contractions With much lower troughs. Can overall be incredibly rough for a countries economy.