ECONOMIC MEASUREMENTS Unit 2, Part 2 Chapter 4 1/12/2019 ECONOMIC MEASUREMENTS Unit 2, Part 2 Explain how gross domestic product (GDP), GDP per capita, and labor productivity are used as measurements of economic performance. Describe the four phases of the business cycle. Define inflation and deflation.

MEASURING ECONOMIC GROWTH Chapter 4 1/12/2019 MEASURING ECONOMIC GROWTH Gross domestic product (GDP) – total value of all final goods and services produced in the US in one year Real GDP – removing the effects of inflation to compare years GDP per capita – each person’s share (total GDP divided by # of people in population) Labor productivity Consumer Price Index (CPI) – compares prices of one year to a base year.

GROSS DOMESTIC PRODUCT (GDP) Chapter 4 1/12/2019 GROSS DOMESTIC PRODUCT (GDP) Three major categories of expenditures What consumers spend for food, clothing, and housing What businesses spend for buildings, equipment, and supplies What government agencies spend to pay employees and buy supplies

THE BUSINESS CYCLE Prosperity – high point Chapter 4 1/12/2019 THE BUSINESS CYCLE Prosperity – high point Recession – GPD slows for 2 or more consecutive quarters Depression – low point Recovery - GDP begins to increase again

INFLATION AND DEFLATION Chapter 4 1/12/2019 INFLATION AND DEFLATION Inflation is a sustained increase in the general level of prices. High inflation – wages can’t keep up Mild inflation (2-3%) – stimulates the economy Deflation means a decrease in the general level of prices.