1. Chapter 13.4: What Does the Inflation Rate Reveal About an Economy’s Health?
1.1. Once again, to answer the question, you must understand what it is they are asking you about. Inflation is due to an increase in the overall price of a large number of goods and services. This can happen naturally overtime to poorer countries that plunged into debt, but it can be reversed with the right economic strategy.
1.2. Current inflation rates are studied using a devise called the Consumer Price Index, or CPI for short. The CPI is a price index for a "market basket" of every good or service within a given country. The "market basket" is made up primarily of housing, and then of transportation, food and beverage, medical care, and several others.
1.3. There are currently three known types of inflation around the world. The first is creeping inflation, which is natural inflation caused by humanities desire to have more wealth. Creeping inflation affects nearly every country in the world. Next is hyperinflation, which is caused by the economy in a country to go haywire and make inflation go out of control. Finally, there is deflation, which is the opposite of inflation; the overall lowering of the prices of goods and services within a system. This is good news for consumers and savers, but bad for producers.
1.4. Inflation Rate: The percentage increase in the average price level of goods and services from one month or year to the next.
1.5. Consumer Price Index (CPI): A measure of price changes in consumer goods and services over time; the CPI shows changes in the cost of living from year to year.
2. Chapter 13.5: How Does the Business Cycle Relate to Economic Health?
2.1. To finalize this project,we must gain knowledge of what a business cycle is. A business cycle is the natural incline and decline in a nations or businesses economy. This happens periodically, and can shift for several reasons. This cycle is extremely hard to track and predict.
2.2. There are four phases to the business cycle. They are expansion, peak, contraction, and trough, respectively. Every phase is fairly self explanatory, but I will explain them anyway. Expansion is the growth of a business or economy, and peak is the largest said economy will be. Contraction is the shrinking of an economy, and a trough is the lowest point an economy will get before it cycles back into expansion.
2.3. There are three indicators that determine the phase of the business cycle. The first indicator is a leading indicator, which are economic tools that happen before economic expansions or contractions which help to make predictable outcomes of the economy. The second indicator is a coincident indicator, which happen during an economic expansion or contraction. Finally, lagging indicators are ones that are a result of an economic expansion or contraction.
2.4. Business Cycle: A recurring pattern of growth and decline in economic activity over time.
2.5. Leading Economic Indicators: Measures that consistently rise or fall several months before an expansion or a contraction begins.
3. Chapter 13.2: How do economists measure the size of an economy?
3.1. To understand how to begin to measure you must take into account all of the economies that make up the macro economy. All of the micro economies go into the entire American economy, as well as exports we ship to other countries, which add to ones economy.
3.2. Most economists judge a nations economy by it's gross domestic product. A GDP is the market value of all final goods and services produced within a country during a given period of time. There are several types of GDP's, most notably are Nominal, which does not account for inflation, and Real GDP, which does. The picture above represents every country in terms of the size of their GDP.
3.3. Gross Domestic Product is calculated by the equation: C+I+G+NX. The C represents all of the consumers within a given economy, the I represents all business investments, the G stands for Government purchases, and lastly the NX are all exports.
3.4. Gross Domestic Product (GDP): The market value of all final goods and services produced within a country during a given period of time.
3.5. Nominal GDP: A measure of a country’s economic output (GDP) valued in current dollars; nominal GDP does not reflect the effects of inflation.
4. Chapter 13.3: What Does the Unemployment Rate Tell Us About an Economy’s Health?
4.1. To first understand the question, you must initially know what unemployment is. It is not simply being jobless, but being jobless and looking for work. If someone is not in search of employment, they are no longer in the work force and not considered to be unemployed.
4.2. An unemployment rate for a particular country is all of the people unemployed, over all of the people currently in the work force. That means that you have to add the people with jobs to the people who are out of work and searching employment, in order to get the total people in the work force.
4.3. There are four main types of unemployment: Frictional, Structural, Seasonal, and Cyclical. Frictional unemployment deals with first time workers or people who have left a job in seek of another. Structural is when a job has been replaced due to restructuring, or advancements in technology making their job obselete. Seasonal is self explanatory, and Cyclical, which is the worst of the four, happens when a country is in a recession or worse.
4.4. Unemployment Rate: The percentage of the labor force that is not employed but is actively seeking work.
4.5. Cyclical Unemployment: A type of unemployment that results from a period of decline in the business cycle; unemployment caused by a contraction.
