1. 13.2 How do economists measure the size of an economy?
1.1. The Bureau of Economic Analysis calculates GDP every quarter, or three-month period.
1.2. This annual GDP includes all final goods and services produced between January 1 and December 31.
1.3. Economists use the calendar year GDP to compare production from year to year or from country to country.
1.4. GDP is an economic indicator that measures a country’s total economic output.
1.5. Per Capita GDP is the nation's real gross domestic product divided by the population.
2. 13.3 What does the unemployment rate tell us about an economy's health?
2.1. Despite its flaws, the official unemployment rate serves as a fairly good indicator of conditions in the labor market.
2.2. The smaller the number of people who are working, the fewer goods and services the economy can generate. Potential output is lost because labor resources are not being fully utilized.
2.3. They and their families lose income and the goods and services that income would have purchased. They may become unable to pay their monthly mortgage, leading to the loss of a home.
2.4. discouraged workers: unemployed workers who have ceased to look for work; they are not considered part of the labor force and are not factored into the unemployment rate
2.5. frictional unemployment: a type of unemployment that results when workers are seeking their first job or have left one job and are seeking another
2.7. This article ties in to the unemployment rate affecting the economy as a whole (macroeconomics). It mentions that if one person loses a job, then that's one less person paying state and federal taxes, and they will cut back on spending and save money.
3. 13.4 What does the inflation rate reveal about an economy's health?
3.1. Inflation erodes purchasing power—the amount of goods and services that can be bought with a given amount of money. As a result, it undermines one of the basic functions of money: its use as a store of value.
3.2. The expectation that inflation will erode future purchasing power drives up interest rates.
3.3. When prices fluctuate due to inflation, buyers and sellers cannot rely on an increase or decrease in prices to give them clear information about market conditions. By making price signals harder to interpret, inflation reduces market efficiency.
3.4. creeping inflation: a gradual, steady rise in the price of goods and services over time
3.5. deflation: a fall in the price of goods and services; the opposite of inflation
4. 13.5 How does the business cycle relate to economic health?
4.1. One of the key characteristics of a growing economy is an increase in business investment.
4.2. An economic expansion can go on for years, leading people to think that it might go on forever. But inevitably, boom turns to bust. The bust of the business cycle is also called a downturn, a downswing, or a recession.
4.3. Consumers typically react to higher prices and higher interest rates by cutting back on spending. As sales slow, businesses begin to see profits fall and inventories rise.
4.4. recession: a period of declining national economic activity, usually measured as a decrease in GDP for at least two consecutive quarters (six months)
4.5. inventory: merchandise that companies or stores have on hand
