1. How Do Economists Measure the Size of an Economy?
1.1. GPD (gross domestic product): the market value of final goods and services of a country at a specific time that measures the size of the economy.
1.2. GPD is used to measure the size of a nation's economy by the value of all outputs.
1.3. To measure the GPD, the economy is split into four different sections; households, businesses, government, and foreign trade.
1.4. Because of inflation, the difference between GPDs of different years may not be the economy growing, but mostly prices inflating.
1.5. Per capita can also be used to split the GPD into different countries and assign it to a population.
1.6. Final good: any good that is ready for cunsumption
1.7. Market value: the price a person is willing to pay for a specific good
1.8. Intermediate good: a good that is used to make a final good that is sold to individual consumers
2. What Does the Unemployment Rate Tell Us About an Economy’s Health?
2.1. Unemployment rate: the percentage of the labor force that is looking for work
2.2. The unemployment rate is the number of people employed over the number of people in the workforce times 100.
2.3. There are four different kinds of unemployment; frictional, structural, seasonal, and cyclical. The worst kind is cyclical unemployment.
2.4. Even if an economy is in full employment, there will still be people with no work. There must be enough jobs for anyone who wants one, even if they aren't employed yet.
2.5. The unemployment rate won't always be an accurate display of economic heath because there are people that have given up looking for work, people who have part-time jobs who want a full-time job, and people who work in illegal kinds of business (i.e. gambling, drug dealing)
2.6. Cyclical unemployment: when there is a period of decline in the business cycle; a contraction
2.7. Seasonal unemployment: when a business is temporarily shut down for a part of the year
2.8. Structural unemployment: when advances in technology cause a decreased need in workers
2.9. Frictional unemployment: when people are between jobs or looking for their first job
3. What Does the Inflation Rate Reveal About an Economy’s Health?
3.1. Inflation rate: the percentage of change in the price of common goods from one period of time to the next
3.2. The BLS tracks inflation by using the average cost of living in America. The change in cost of living is the consumer price index.
3.3. There are two different costs of living: nominal and real cost of living, Nominal is used everyday and the real cost is calculated based on inflation.
3.4. Inflation can be cause by the increase in money supply, increase in overall demand, or increase in costs of production.
3.5. The CPI has many biases, which include not accounting for substitutions, changes in shopping patterns, new products, and changes in quality.
4. How Does the Business Cycle Relate to Economic Health?
4.1. There are four phases to a business cycle: expansion, peak, contraction, and trough.
4.2. Peaks and troughs are predicted in an economy using indicators. There are leading indicators, coincident indicators, and lagging indicators.
4.3. Leading indicators: measures that consistently rise or fall several months before an actually expansion or contraction occurs.
4.4. Coincident indicators: measures that rise and fall along with expansions and contractions.
4.5. Lagging indicators: measures that rise of fall several months after an expansion or contraction are observed.
4.6. Business are expected to go through periods of boom and bust. Anything that booms must eventually bust.
4.7. If a recession is a bust that lasts longer than six months. If a recession lasts for a long time and causes damage to the economy, then it's a depression.
