Download Business Cycle and Economic Indicators

Warm-up: Get a yellow text
1.
2.
3.
4.
What does GDP stand for?
How do we calculate GDP?
What do we use to measure inflation?
How do we measure unemployment?
Begin Unit 3 Macroeconomics
SSEMA1
b. Define Gross Domestic Product (GDP),
economic growth, unemployment,
Consumer Price Index (CPI), inflation,
stagflation, and aggregate supply and
aggregate demand.
c. Explain how economic growth,
inflation, and unemployment are
calculated.
N.B. #22- Business Cycle and
Economic Indicators
You should be able to answer the following
at the end of this lesson:
1. What is GDP, inflation, and unemployment? How is
each calculated?
2. What are the characteristics of the four types of
unemployment?
The Business Cycle
• The ups and downs of the
economic activity
• The good times and bad
times
• P. 310
The Business Cycle
4 phases
1. Expansion- increasing
GDP and growth
2. Peak- the top of the
expansionary periodlowest unemployment
3. Contraction- decreasing
GDP-increasing
unemployment
4. Trough- “the bottom” of
the contraction
The Business Cycle
Peak
contraction
Expansion
Trough
Economic Indicators
1. GDP
2. Inflation
3. Unemployment
MEASURES OF ECONOMIC
PERFORMANCE
• GROSS DOMESTIC PRODUCT
(GDP): total amount (and value) of
goods that a country makes
• Real GDP – adjusted for inflation
• Per capita GDP – (per person)
How it’s measured…
GDP = sum of Consumption, Investment,
Government Spending and Net Exports
(exports – imports)
C + I + G + (ex-im)
GDP
a) Consumer spending –what people
decide to spend their money on. (movie
tickets, TV, go to the mall and shop)
b) Investments-spending by businesses
c) National Government
Spending
• National Defense
• Social Security: payments to aged, disabled,
and retired persons
• National Debt
• Medicare: health care program available to all
senior citizens regardless of income
• Health: medicaid – medical insurance
program for low income persons
National Government
Spending
d) Net Export
• Exports – Imports
– Export: goods that are sent out of the
country (results in money coming into the
country)
– Imports: goods that are coming in from
outside sources (other countries) – results
in money being sent out by home country
Gross Domestic Product
• Per Capita GDP
– GDP of a Country / Population
Inflation
• Rise in the prices of goods and services
in an economy over a period of time
– Results in less purchasing power
• How is it calculated: Consumer Price
Index (CPI)
– Example:
Inflation Calculator
http://data.bls.gov/cgibin/cpicalc.pl
Types of Unemployment
Frictional Unemployment
• People are temporarily unemployed
• Usually when people are moving in
between jobs (ex. graduates or people
changing jobs)
• There will always be some frictional
unemployment
Structural Unemployment
• Unemployment caused when your
talents do not meet the requirements for
the job
– Not enough jobs to support all the people
who are trained in a certain field
– Technology causes less demand for
human labor
– Another example: a decline in coal mines
leads to less demand for coal miners
Cyclical Unemployment
• Due to the economic climate and state
of the job market
• Rises and falls with the economy
– During times of economic growth, more
jobs are available. Conversely, during a
recession, less jobs are available.
Seasonal Unemployment
• Unemployment due to the time of
season
• For example, during Christmas, there
are more retail job opportunities due to
the increase in shopping
• Another example, a resort town along
the coast will have fewer jobs available
during the colder months
Question 1
What type of unemployment?
• Construction
workers are laid off
for the winter, but
plan to return to
work when the
weather is better.
Question 2
What type of unemployment?
• Workers are laid off at a Pog factory. A
downturn in the economy has lowered
demand for luxury items.
Question 3
What type of unemployment?
• The United States has lost
manufacturing jobs as a result of a
change to a service-oriented economy.
Question 4
What type of unemployment?
• A fast-food worker graduates from
college and quits his job to look for a
better career.
Question 5
True or False?
Unemployment in the U. S. has recently
been higher than 8 percent.
Quiz!!
1. In your own words, describe what
GDP attempts to measure.
2. Explain the formula for calculating
GDP.