3 How do doctors measure our health? Tools to measure the economy:Gross Domestic Product – total value of all FINAL goods and services produced WITHIN the United StatesOnly final goods counted to avoid double countingIncludes all Consumer goods (C) + Investments (I) + Government Purchases (G) + Net Exports (Exports – Imports) CIGNXMeasured usually over 1 yearReal v Nominal: Nominal is GDP in current prices, Real is GDP adjusted for inflation
4 Consumer Price IndexPrice index that measures the cost of a particular “basket” or group of goodsCompares the value of the basket in one time period to a particular base yearMeasures price increases or “inflation”Inflation is an increase in the overall average of prices in the economy
5 Unemployment Rate What does it mean to be UNEMPLOYED? What causes unemployment?How can we fix unemployment?
6 Unemployment occurs when people want jobs but can’t find them People are in the labor force if they are 16 – 62 and are ACTIVELY SEEKING workUnemployment rate is the number of people who are unemployed / the # of people in the labor force
7 3 Types of UnemploymentFrictional: people are temporarily out of a job but will be working again soonEx. People who quit 1 job to go to another, seasonal employeesStructural: people are unemployed because their job skills are no longer neededEx. Employees at a car plant when new technology is brought inCyclical: people who are unemployed due to drops in the business cycleBusiness cycle is the pattern of contractions (recessions) and expansions (growth) in the economyRecession is at least 6 months of decline in economic growth
8 Business Cycle Peak Contraction Expansion Trough 4 Stages: Bottoming out & move into expansionTrough