Eco Unit 5

Economic Growth Economic growth is the increase in the market value of the goods and services produced by an economy over time.

Stability Economic stability refers to an absence of excessive fluctuations in the macroeconomy.[1] An economy with fairly constant output growth and low and stable inflation would be considered economically stable. An economy with frequent large recessions, a pronounced business cycle, very high or variable inflation, or frequent financial crises would be considered economically unstable.

Full Employment Full employment, in macroeconomics, is the level of employment rates where there is no cyclical or deficient-demand unemployment. It is defined by the majority of mainstream economists as being an acceptable level of unemployment somewhere above 0%.

PPI 'Producer Price Index - PPI' A family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time. PPIs measure price change from the perspective of the seller.

Inflation In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.

Unemployment Unemployment occurs when a person who is actively searching for employment is unable to find work. Unemployment is often used as a measure of the health of the economy. The most frequently cited measure of unemployment is the unemployment rate. This is the number of unemployed persons divided by the number of people in the labor force.

GDP Gross domestic product (GDP) is defined by OECD as "an aggregate measure of production equal to the sum of the gross values added of all resident institutional units engaged in production (plus any taxes, and minus any subsidies, on products not included in the value of their outputs)."

CPI The CPI is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically. The annual percentage change in a CPI is used as a measure of inflation. A CPI can be used to index (i.e., adjust for the effect of inflation) the real value of wages, salaries, pensions, for regulating prices and for deflating monetary magnitudes to show changes in real values. In most countries, the CPI is, along with the population census and the USA National Income and Product Accounts, one of the most closely watched national economic statistics.

Housing Starts Housing starts is an economic indicator that reflects the number of privately owned new houses (technically housing units) on which construction has been started in a given period. This data is divided into three types: single-family houses, townhouses or small condos, and apartment buildings with five or more units. Each apartment unit is considered a single start. The construction of a 30-unit apartment building is counted as 30 housing starts.

Retail Sales An aggregated measure of the sales of retail goods over a stated time period, typically based on a data sampling that is extrapolated to model an entire country.

Goals of economic policy To maintain a strong economy, the federal government seeks to accomplish three policy goals: stable prices, full employment, and economic growth. In addition to these three policy goals, the federal government has other objectives to maintain sound economic policy. These include low or stable interest rates, a balanced budget (or at least a budget with a reduced deficit from the previous budget), and a trade balance with other countries.

Stable Prices When prices for goods and services increase sharply, the value of money is reduced, and it costs more to buy the same things. This condition is called inflation. When inflation is kept low, prices remain at the same level. Circumstances beyond the government's control can affect prices. A prolonged drought in the corn belt or an early freeze that hits the orange crop in Florida creates shortages that lead to higher prices. Higher prices for certain critical goods, such as oil, can create inflationary prices throughout the economy.

Full Employment Absolute full employment is impossible to achieve; at any given time, people are quitting their jobs or are unable to work for a variety of reasons. An unemployment rate, the percentage of the labor force that is out of work, of 4 percent or less is considered full employment. The unemployment rate varies from region to region and from state to state. For example, California's rate was higher than the national average in the early 1990s because of cutbacks in the aerospace industry and companies moving out of the state.

Economic Growth Economic growth is measured by the gross domestic product (GDP), the dollar value of the total output of goods and services in the United States. A thriving economy may have a GDP growth rate of 4 percent a year; a stagnant economy may grow at less than 1 percent a year. In a stagnant economy, unemployment is high, productivity is low, and jobs are hard to find. A recession is defined as two consecutive quarters of negative GDP. In the 1970s, the United States experienced a strange combination of high unemployment and high inflation, which is known as stagflation.