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Macro: Crash Course Economics #5 Measuring the Economy : Economic Indicators
1. Define Macro – study of the entire economy as a whole, rather than individual markets
2. Three Economic Goals of Policy Makers a. Keep econ. Growing over time
b. Limit Unemployment
c. Keep Prices Stable
Interesting notes on Macro:
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Relatively new field of study since Great Depression (had no way to measure the economy)
Relies on Data – Data analysis – not perfect science – many opinions
Not a traditional science ; cannot conduct experiments.
3. Three Key Economic Measures (Indicators)
a. GDP
b. Unemployment
c. Inflation
4. GROSS DOMESTIC PRODUCT : Most important measure of an economy
a. Define GDP :
b. GDP Does Not Count everything – used goods, financial assets (like stocks or a co. buying another, plumber
fixing own sink ) Why? NO NEW GOOD OR SERVICE IS PRODUCED
{ or illegal activities. }
c. Designed to account for…….
d. GDP is reported in …..
e. Nominal GDP ….
f.
Real GDP ……
g. The real GDP does not tell you much unless we can compare to other years / and/or other countries (ex:
Greece – showed GDP had fallen for 6 consecutive years)
h. Recession …
i.
Depression …
j.
*GDP (and most economic measurements) are NOT perfect ; not 100% accurate, cannot account for all
factors in the economy
k. Economic Growth ….
l.
The standard growth economist look for is 3%
5. Unemployment
a. Unemployment rate is calculated by…
b. Labor force includes people that are….
i.
ii.
Do not count in labor force: children, elderly, retired, stay at home parents, prison population
Discouraged Workers…
- Do not count in Labor Force
Underemployed – might be working part time, or in a lower skill job than what they are qualified for –
do not count in the unemployment rate
The official unemployment rate UNDERESTIMATES problems in the labor market
Ex: if there is 7% unemployment rate (= about 10 million people unemployed) ;
There are probably another 1-3 million discouraged and / or underemployed people ; which would bring
the unemployment rate to about 9%
iii.
iv.
c. There will always be SOME unemployment – the goal is NOT …..
d. There will always be “frictional” and “structural” unemployment
e. Goal is to have NO ….
f.
The natural rate of unemployment …
g. GDP Growth Rate and Unemployment are …
6. INFLATION:
a. Goal is to keep prices stable; avoid ….
b. Inflation…..
c.
Inflation Rate …..
d. Some inflation is normal
e. Too much inflation is bad because it reduces the purchasing power of money. Explain …..
f. Deflation…..
g. Falling prices are bad – may discourage some from buying now because they think prices will
fall more in the future ; also businesses are taking less revenue and will have to make cuts in
their own order of resources or labor