Download ECONOMIC GROWTH AND MEASUREMENT

Economic
Growth and
Measurement
Economic Goals
 Economic
Freedom
 Economic Stability
 Economic Security
 Economic Equity
 Economic Efficiency
 Economic Growth
 Full-Employment
Economic Freedom
 The
freedom to choose careers, make
business decisions.
Economic Stability
 Price
stability and stable growth are
critical. Fiscal and Monetary Policies are
used to achieve this goal.
Economic Security
 Protection
from adverse economic events
such as layoffs and illnesses.
Economic Equity
 Equality
of opportunity and a fair
distribution of wealth.
Economic Efficiency
 The
productive use of scarce resources.
Economic Growth
 Sustained
period during which a nation’s
total output of goods and services
increases.
Full Employment
 Full
employment is the lowest possible
unemployment rate, with the economy
growing and all factors of production
being used as efficiently as possible.
Major Economic Indicators
 Gross
Domestic Product (GDP)
 Unemployment
 Consumer
Price Index (CPI)
Gross Domestic Product
 Gross
Domestic Product, or GDP, is the
total value of all goods and services
produced for final use during a given
year.
 It is considered the most comprehensive
measure of a country’s economic wellbeing.
 The target rate for GDP is 3 – 5% per year.
 The formula for GDP is C + I + G + (X – M)
C + I + G + (X – M) = GDP
 Consumption
– Consumer Sector
 Gross
Investment – Investment Sector
(Businesses)
 Government
 Net
– Government Sector
Exports – Foreign Sector
GDP
 GDP
 Per
v. GNP
Capita GDP
 Real
v. Current GDP
 What
isn’t included in GDP?
 Environmental
Impact
Unemployment

The labor force is the sum of employed and unemployed
persons. To be considered unemployed, the person has to
be actively looking for work.

Unemployment Rate = Number Unemployed/Labor Force

Economists consider the labor force to be fully employed
when the unemployment rate is less than 4 – 6%.

Underemployment is a growing problem.

Current statistics can be found at www.bls.gov.
Unemployment
 There
are five categories of
unemployment.
 Seasonal unemployment is
unemployment resulting from changes in
the weather or changes in the demand
for certain products or services.
 Technological unemployment is
unemployment caused by automation
that reduces the need for workers.
 Structural
unemployment is
unemployment that occurs when a
fundamental change in the operation of
the economy reduces the demand for
workers and their skills. It is the most
serious type of unemployment.
 Cyclical unemployment is unemployment
directly related to swings in the business
cycle.
 Frictional unemployment is
unemployment caused by workers who
are between jobs.
Consumer Price Index
 The
CPI should be 3% or less.
 There are two types of inflation.
 Cost-Push Inflation
 Demand-Pull Inflation
 www.bea.gov
The Business Cycle




The Business Cycle refers to the systematic
changes in real GDP marked by alternating
periods of expansion and contraction.
There are four stages of the business cycle:
expansion, peak, contraction, trough.
A recession is when there are two quarters of
a contraction in real GDP.
A depression is a severe, prolonged recession.
For example, a 25% unemployment rate,
instead of an 11% unemployment rate.
The Business Cycle
Business Cycles 1970 - 2008
A final thought….