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Economic Indicators Gross Domestic Product • Gross Domestic Product (GDP) is the value, expressed in dollars, of all _____________________ produced in a year. • The production of these goods and services provides __________ for people in the economy. • The income people earn is then used to __________________________ goods and services. • _____________________________ are the goods and services sold to consumers. • Intermediate goods are things that are produced and then ______________________________ of other goods and services. • For example, the denim produced in mills is used in the production of jeans. – In this example, denim is an _______________________________ good and the jeans are a _________________ good. • On your paper… • Make a list of all of the final goods and services you used from the time you woke up yesterday until you went to bed last night. Items should not be listed more than once. • Be sure to include final goods easily overlooked. – For example, how was breakfast prepared? (Microwave, toaster, refrigerator) Did you turn on the light in the bathroom to shower? (electricity) Did you use soap, shampoo, toothbrush, and toothpaste? Consumption • Spending by households is called _________________________________ or consumer spending because the products provide direct satisfaction to consumers. • When we measure GDP, consumer spending represents the ______________________ category – Consumer spending makes up over _________________________ of the GDP. Durable and Nondurable Goods • Durable goods refers to consumer goods that will last __________________________________ • Nondurable goods includes consumer goods expected to last ____________________________ Consumer Price Index • The Consumer Price Index (CPI) measures the change in the _____________________________ of a variety of consumer goods and services. • Consumer Price Index is measured by first creating a ___________________________________ of thousands of items purchased by consumers -– Such as food, housing, clothing, transportation, medical care, recreation, education, communication, and energy. • The prices of the specified products are measured each month, and the ______________________________________________________________________________ is reported as the Consumer Price Index. • The Consumer Price Index generally _______________________ during economic ___________ – During economic decline, the rate of price increase ______________ or prices may even ______________ Industrial Production • Industrial Production measures the output of American __________________________ • Industrial Production is measured by calculating the manufacturing output in the consumer goods, business equipment, construction supplies, materials, manufacturing, mining, and utility industries. • Production is calculated in each sector monthly, and the percentage change in output is reported as Industrial Production. • Durable goods, such as cars, appliances, and furniture, as well as construction supplies, tend to be _________________________ to economic changes than are other manufacturing products. • Generally, Industrial Production increases during economic _________________ and falls during periods of economic ____________________. Interest Rates • Interest rate is the _______________________________________ that you have to pay back on something. – • A 10% interest rate means you have to pay back what you owe, plus 10% more A decline in interest rates can lead to more __________________________ in order to promote economic growth; – High interest rates can lead to lower levels of investment and a decline in the rate of growth Non-farm Payroll • The Non-farm Payroll measures the number of people employed by ____________________________________________________________________________ • Non-farm Payroll generally rises during economic ________________________ and falls during economic _________________________. Unemployment • Unemployment surveys are conducted once a __________ • The Unemployment Rate measures the percentage of people in the labor force who __________ working during the week of the survey – • The Department of Labor Bureau of Labor Statistics surveys thousands of Americans each month to calculate the size of the ______________________________ – • But they had looked for work within the previous ___________________________ The Labor Force consists of those ARE working plus those that ARE NOT working, but seeking work The unemployment rate is calculated via the number of _______________________________ divided by the total _______________________________ Demand • Periods of economic growth are often fueled by ______________________________________ for economic products. – This increased demand often causes _________ to increase, while simultaneously causing ______________ to go up. • Firms increase their production to meet that increased demand, and often hire additional workers, increasing the payroll and reducing the _______________________________________ • The increased demand for products can also result in increased demand for ________________ to purchase products, increasing ________________________________________ • Recessions, on the other hand, are often fueled by a _______________________ in demand for goods and services. • Firms reduce production in response, lowering ______________________________________ – • Production cutbacks lead firms to lay off workers, increasing the ___________________ Reduced demand for loans can result in ____________________ interest rates, and the Federal Reserve may further reduce interest rates in an attempt to stimulate ______________________ in the economy 1. Explain what Real Gross Domestic Product growth statistics measure. 2. Explain what Consumer Price Index statistics measure. 3. Explain what Industrial Production statistics measure. 4. Explain what Interest Rate statistics measure. 5. Explain what Change in Non-farm payroll statistics measure. 6. Explain what Unemployment Rate statistics measure. 7. How does knowledge of these statistics help us to understand how the economy is doing?