3How 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
4Consumer 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
5Unemployment Rate What does it mean to be UNEMPLOYED? What causes unemployment?How can we fix unemployment?
6Unemployment 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
73 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
8Business Cycle Peak Contraction Expansion Trough 4 Stages: Bottoming out & move into expansionTrough