Unit 2: Macro Measures 1

THE BUSINESS CYCLE

Define Macroeconomics What are the 3 economic goals that all countries have What does GDP measure Identify w hat is NOT included in GDP List the 4 components of GDP Explain the difference between Nominal and Real GDP Explain Real GDP per Capita If Mary can paint a house in 3 hours and Sam can paint the same house in 5 hours, how long will it take them to paint it together?

The Roller Coaster Ride Paul Solman Video: The Roller Coaster Ride 4

The national economy fluctuates resulting in periods of boom and bust. THE BUSINESS CYCLE The national economy fluctuates resulting in periods of boom and bust. Inflation Unemployment Full employment A Recession is 6 month period of decline in output, income, employment, and trade. (If really bad…then depression)

200 Years of the Business Cycle Why is the business cycle like a roller coaster? How do wars affect the economy?

The Business Cycle Why does the economy fluctuate? Retailer and Producers send misleading information about consumer demand. Advances in tech, productivity, or resources. Outside influences (wars, supply shocks, panic). Who cares? Macroeconomics measures these fluctuations and guides policies to keep the economy stable. The government has the responsibility to: Promote long-term growth. Prevent unemployment (resulting from a bust). Prevent inflation (resulting form a boom).

2010 GDP Growth Rate= 2.8%

What is Economic Growth? An increase in real GDP over time An increase in real GDP per capita over time (usually used to determine standard of living) Why is economic growth the goal of every society? Provides better goods and services Increases wages and standard of living Allows more leisure time Economy can better meet wants

Connection to PPC The shifters of the PPC affect GDP The same information shown on the business cycle can be shown on a production possibilities curve. Full employment Unemployment Inflation The shifters of the PPC affect GDP Change in quantity/quality of resources Changes in technology Changes in trade