Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Economic Measurements Overview Economic Goals • Standard of Living. • Are we better off than the previous generation? How can we tell? • Economic Growth • Usually measured by GDP • Economic Security • Usually measured by unemployment rate • Economic Stability • Usually measured by inflation Business Cycle 4 phases Economic Measurements • GDP • CPI • Inflation – Cost-push – Demand-pull – Push-Pull • Unemployment – Frictional – Seasonal – Structural • You will need to know the four basic measurements by the end of this unit. Gross Domestic Product (GDP) • Used to measure economic growth – Defined: The total dollar value of all goods and services produced in a country’s borders in a given year. – Represents the $ value of all FINAL GOODS AND SERVICES • No double counting – Gas, not crude oil – Only new products produced in that year. Characteristics • Used to measure changes in the amount of goods and services produced in a nation. • Compares different years – Nominal GDP – measured in current prices. – Inflation must be considered (dollar value adjusted) – Real GDP – adjusted for inflation to get real increase or decrease in production • GDP 4% - Inflation 2%, = Real GDP of 2% Components of GDP C+I+G+Nx • • • • • C = consumer spending I = investment spending G = government spending Nx = net exports (Exports – Imports) Which is the largest component of GDP? – Consumer spending of course (roughly 67% of GDP) Calculating GDP • Two approaches – income approach and expenditure approach • Income approach = – Wages + rents + interest + Profits = GDP • Expenditure Approach – C+I+G+Nx =GDP GDP By Component 20% -4% 71% 12% GDP Doesn’t measure… • Products used at resources (intermediate goods) – Ex. • Measures cars, not the parts used to make them • Bread, not the wheat used to make it. • Non-Market Transactions – Barter system • Quality of products • Second Hand Sales (used items, garage sales) • Transfer payments (welfare, social security, etc) Business Cycles Four Phases of the Business Cycle • In order to determine a trend, two quarters (6 months) are needed. • Peak – high point in the business cycle. GDP is at it’s highest, unemployment is low and inflation is starting to become a problem • Contraction – GDP decreasing, unemployment starting to rise, recession or depression possible • What’s the difference between recession and depression? – Recession – fairly mild, short lived – Depression – more severe, massive unemployment, longer lasting. • Trough – lowest point of the business cycle. Unemployment highest and lots of pain and suffering. • Expansion – recovery, GDP starting to rise, unemployment slowing, hiring begins, the economy is on the mend.