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ECONOMIC INDICATORS. Real GDP Growth Gross Domestic Product (GDP) measures the dollar value of all goods and services produced in the U.S. economy in.

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Presentation on theme: "ECONOMIC INDICATORS. Real GDP Growth Gross Domestic Product (GDP) measures the dollar value of all goods and services produced in the U.S. economy in."— Presentation transcript:

1 ECONOMIC INDICATORS

2 Real GDP Growth

3 Gross Domestic Product (GDP) measures the dollar value of all goods and services produced in the U.S. economy in one year. The Department of Commerce Bureau of Economic Analysis measures the Gross Domestic Product by adding the spending in the consumer, investment (firms), government, and foreign (exports minus imports) sectors. While the current GDP can give us a good indication of current production, we must remove the effects of inflation from current GDP to compare the current figures to GDP numbers from other years. Real GDP is the current GDP divided by the GDP price deflator. The real GDP is one of the most important indicators of economic performance. A rise in real GDP indicates economic growth, while a fall in real GDP indicates economic decline. Use the chart above to see how Gross Domestic Product illustrates how our economy is performing. GDP = multiply the number of units produced by the price per unit

4 Consumer Price Index

5 The Consumer Price Index (CPI) measures the change in the overall cost of a variety of consumer goods and services. The Department of Labor Bureau of Labor Statistics measures the Consumer Price Index by creating a market basket of thousands of items purchased by consumers -- food, housing, clothing, transportation, medical care, recreation, education, communication, and energy. The prices of the specified products are measured each month, and the percentage change in price is reported as the Consumer Price Index. The Consumer Price Index generally increases during economic growth; during economic decline, the rate of price increase slows or prices may even decline. Use the chart above to see how the Consumer Price Index illustrates how our economy is performing.

6 Industrial Production

7 Industrial Production measures the output of American industry. The Federal Reserve Board of Governors measures Industrial Production 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 more sensitive to economic changes than are other manufacturing products. Generally, Industrial Production increases during economic growth and falls during periods of economic decline. However, the growth cycle suggests this is not always true. Use the chart above to see how Industrial Production illustrates how our economy is performing.

8 Interest Rates

9 The Ten-Year Treasury Interest Rate measures the percentage return investors receive on U.S. Treasury bonds. The Federal Reserve Board of Governors measures Ten-Year Treasury Interest Rates, as determined daily in the bond market. Treasury Interest Rates can be indicative of changes in other long-term interest rates such as mortgages and long-term business loans. A decline in interest rates can precede increased investment spending to promote economic growth; high interest rates can lead to lower levels of investment and a decline in the rate of growth. Use the chart above to see how Interest Rates illustrate how our economy is performing.

10 Change in Nonfarm Payrolls

11 The Change in Non-farm Payroll measures the number of people employed by companies and government. The Department of Labor Bureau of Labor Statistics surveys approximately 390,000 establishments to count the number of people employed each month, and the change from the previous month in the number of employed people is reported as the Change in Non-farm Payrolls. Non-farm Payroll generally rises during economic growth and falls during economic decline. Use the chart above to see how Change in Non-farm Payrolls illustrates how our economy is performing.

12 Unemployment Rate

13 The Unemployment Rate measures the percentage of people in the labor force who were not working during the week of the survey, but had specifically looked for work within the previous four weeks (unless they were waiting to be recalled from layoff, in which case they need not have been looking for work to be counted as unemployed). The Department of Labor Bureau of Labor Statistics surveys thousands of Americans each month to calculate the size of the labor force (those working plus those not working, but seeking work) and the unemployment rate (the unemployed divided by the labor force). The number of people unemployed as a percentage of the labor force is reported each month as the Unemployment Rate. The Unemployment Rate generally falls during economic growth and rises during economic decline. Use the chart above to see how the Unemployment Rate illustrates how our economy is performing Unemployment Rate = unemployed/labor force

14 Types of Unemployment  frictional unemployment - The time lag between when people decide to work and begin working.  Cyclical unemployment – when people lose their jobs because the economy grows at a slow rate.  Structural unemployment – when worker’s skills no longer match the job.  Seasonal unemployment – this occurs during certain times of the year, usually during the holidays. Unemployment Rate = [Number of Unemployed] ÷ [Labor Force] × 100%

15 Calculating Inflation Rate If the CPI was 212 in 2010 and 200 in 2009, what was the inflation rate?


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