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 How Do Economists Measure the Size of an Economy?

1.1. Two ways

1.1.1. Study the economic decision making of individuals, households, and firms—the field known as microeconomics

1.1.2. Study the workings of the economy as a whole, the focus of macroeconomics

1.2. The main measure of the size of a nation's economy is its GDP

1.3. As a country's per capita GDP increases, so too do other indicators of well-being, such as those listed below.

1.3.1. Per capita GDP is a nation's real gross domestic product divided by its population. It is an accepted measure of a society's standard of living.

2. 13.3 What Does the Unemployment Rate Tell Us About an Economy’s Health?

2.1. Bureau of Labor Statistics (BLS)

2.1.1. A government agency that collects and analyzes economic data. This agency determines the unemployment rate

2.2. How the Government Measures Unemployment

2.2.1. Every month, the BLS reports the total number of people who were unemployed for the previous month.

2.3. Four Types of Unemployment

2.3.1. Frictional unemployment between jobs

2.3.2. Structural unemployment. a type of unemployment that results when the demand for certain skills declines

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

2.3.4. Cyclical unemployment a type of unemployment that results from a period of decline in the business cycle

2.4. Cost of high unemployment

2.4.1. lost potential output.

2.4.2. Unemployed workers are unable to pay their monthly mortgage, leading to the loss of a home

2.4.3. Unemployed workers no longer contribute income taxes to the government

3. 13.4 What Does the Inflation Rate Reveal About an Economy’s Health?

3.1. The BLS tracks inflation by gathering information on Americans' cost of living

3.1.1. BLS track changes in the cost of living using what is known as the consumer price index A price index measures the average change in price of a type of good over time The consumer price index (CPI) is a price index for a “market basket” of consumer goods and services.

3.2. The cost in current dollars of all the basic goods and services that people need is the nominal cost of living.

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

3.3. Consumers pay nominal costs with nominal wages, or wages based on current prices.

3.3.1. As prices go up, wages generally go up as well. By using the CPI to adjust for inflation, economists can calculate real wages and compare them over time.

3.4. Inflation can be both good and bad

3.5. we do know that inflation of any amount exacts economic costs. Loss of purchasing power.

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

4.1. Four Phases

4.1.1. A period of economic growth is known as an expansion.

4.1.2. The point at which an expansion ends marks the peak of the business cycle.

4.1.3. Following the peak comes the contraction phase of the business cycle

4.1.4. The lowest point of a contraction is called the trough

4.2. Business cycles are irregular which makes peaks and troughs difficult to predict

4.3. Measures that consistently rise or fall several months before an expansion or a contraction begins are called leading economic indicators.

4.4. Coincident economic indicators are measures that consistently rise or fall along with expansions or contractions

4.5. Measures that consistently rise or fall several months after an expansion or a contraction are known as lagging economic indicators

5. Key Terms misc.

5.1. GDP

5.1.1. C + I + G + NX = GDP

5.1.2. An economic indicator that measures a country's total economic output

5.2. Inflation rate

5.2.1. the percentage increase in the average price level of goods and services from one month or year to the next

5.3. Unemployment rate

5.3.1. unemployment rate = number unemployed/number in labor force x 100

5.4. Final good

5.4.1. Any new good that is ready for use by a consumer.

5.5. Current dollars

5.5.1. Reflects the purchasing power of the dollars in the year they are spent

5.6. Nominal GDP

5.6.1. Measures the output of an economy valued at today's prices

5.7. Involuntary part-time workers

5.7.1. people who settle for part-time employment because they are unable to find full-time work