Ch. 13: Measuring the Economy

Get Started. It's Free
or sign up with your email address
Rocket clouds
Ch. 13: Measuring the Economy by Mind Map: Ch. 13: Measuring the Economy

1. 13.2: How do economists measure the size of the economy?

1.1. key point 1: Gross Domestic Product phase by phase: 1. The market value: used to add up all of goods and services in the country. 2. of all final goods and services: called final good, intermediate goods do not count towards GDP 3. produced within a country: must be produced in the country 4. during a given period of time: usually every quarter, or three months

1.2. key point 2: Economist calculate GDP by the following equation; C+I+G+Nx=GDP

1.3. key point 3: Nominal Vs. Real GDP: nominal is total, real is with the effects of inflation

1.4. key point 4: GDP is limited when determining economic health, but still makes people better of by indicated levels of literacy rate, life expectancy, and infant mortality.

2. 13.3: What does the unemployment rate tell us about an economy's health?

2.1. key point 1: the BLS measures employed, unemployed, and not in the labor force for adults in the population.

2.2. key point 2: the four 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, workers may need retraining to find new jobs, 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

2.3. key point 3: some problems with the unemployment rate as an indicator of Economic Health include the following; a number of unemployed people have given up looking for work, the official unemployment rate does not recognize involuntary part-time workers, people work in informal and underground economies.

2.4. key point 4: Economic costs of high unemployment; lost potential output, pay a serious economic cost, and costly for society at large.

3. 13.4: What does inflation rate reveal about an economy's health?

3.1. key point 1: the consumer price index is a "basket" measurement of the price of all the goods and services a person uses in a certain period of time.

3.2. key point 2: Nominal vs. real cost of living.

3.3. key point 3: nominal and real wages.

3.4. key point 4: types of inflation; creeping inflation (gradual inflation), hyperinflation (a rapid increase in inflation), deflation (prices going down over time), stagflation.

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

4.1. key point 1: four phases of the business cycle; expansion, peak, contraction, trough

4.2. key point 2: types of indicators: leading indicators, coincident indicators, and lagging indicators.

4.3. key point 3: recessions: a decline in economic activity lasting at least six months.

4.4. key point 4: depression is a prolonged economic downturn

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

6. GDP (Gross Domestic Product): the market value of all final goods and services produced within a country during a given period of time

7. Unemployment: the percentage of the labor force that is not employed but is actively seeking work.

8. Market Value: the price buyers are willing to pay for a good or service in a competitive market.

9. Net exports: the value of all exports minus all imports

10. Involuntary part-time workers: people who settle for part-time employment because they are unable to find full-time work

11. Underground economy: a sector of the economy based on illegal activities, such as drug dealing and unlawful gambling

12. demand-pull inflation: a rise in the price of goods and services caused by an increase in overall demand

13. business cycle: a recurring pattern of growth and decline in economic activity over time

14. cost-push inflation: a rise in the price of goods and services caused by increases in the cost of the factors of production