Chapter 13 Measuring the Economy

1. 13.2 How do Economists Measure the Size of the Economy?

1.1. Purpose of Measuring the Economy- The purpose of measuring is to compare production in countries from one year to another.

1.2. How do Economists Calculate GDP- Household consumption+Business Investment+Government Purchases+Net of Exports minus Imports=GDP

1.3. How to keep it fair for every country- Economists take population into all the calculation so that numbers don't get imbalanced.

1.4. Economists use GDP not only to measure economic growth but also the health of an economy. It can also be directly tied to literacy rate.

2. 13.3 What does the Unemployment rate tell us about an economies health?

2.1. The unemployment rate can tell a lot about the economy of a country because it can represent how many jobs are available.

2.2. Unemployment rate= Number unemployed/Number in labor force x 100

2.3. The unemployment rate can be dysfunctional however because some of the people represented in it are not looking for a job.

2.4. This number also does not represent the underground economy, such as drug dealer, gambling, and other illegal activities.

3. 13.4 What does inflation rate tell us about and economy's health?

3.1. Inflation is measured by tracking the costs of living and the prices of everyday objects.

3.2. The cost of living index is what is used to measure inflation in the U.S.A. economy.

3.3. Another thing that needs to be measured when talking about inflation is the increase in pay, and the value of a dollar.

3.4. Since 1913 the average inflation rate is 3.2%

4. 13.5 How does the business cycle relate to economic health.

4.1. The business cycle has troughs, contraction, peaks, and expansions. They all represent the current state of the economy.

4.2. There are specific indicators that represent the state of the economy.

4.3. There is never one reason that an economy grows or shrinks, it is always a combination of things.

4.4. l