Measuring Economic Activity 2-1 Measuring Economic Activity Goals Define gross domestic product. Describe economic measures of labor. Identify economic indicators for consumer spending.

Key Terms Gross Domestic Product (GDP) GDP per capita The total dollar value of all final goods and services produced in a country during one year GDP per capita unemployment rate The portion of people in the labor force who are not working. Chapter 2

Key Terms Productivity personal income retail sales The production output in relation to a unit of input. personal income Salaries and wages as well as investment income and government payments to individuals. retail sales The sales of durable and nondurable goods bought by consumers Chapter 2

GROSS DOMESTIC PRODUCT (GDP) Components of GDP Consumer spending for food, clothing, housing, and other aspects. Business spending for buildings, equipment, and inventory items Government spending to pay employees and to buy supplies and other goods and services The exports of a country less the imports into the country Chapter 2

GROSS DOMESTIC PRODUCT (GDP) Comparing GDP GDP per capita is calculated by dividing GDP by the total population. GDP / POPULATION = GDP PER CAPITA An increase in GDP per capita means that an economy is growing. A decrease may means that an economy is facing difficulties. Chapter 2

GROSS DOMESTIC PRODUCT (GDP) Chapter 2

Comparison of GDP in Selected Countries Source: CIA World Factbook Comparison of GDP in Selected Countries Chapter 2

Checkpoint >> What types of economic activities are not included in GDP? Answer GDP only applies to reported final goods and services. Money earned for goods or services that are not reported would not be included. Goods and services used in the manufacture of other products are only counted once—in the final product. Chapter 2

LABOR ACTIVITIES Employment Members of the U.S. labor force are employed in thousands of different jobs. They produce thousands of different products and services. The labor force consists of all people above age 16 who are actively working or seeking work. Chapter 2

LABOR ACTIVITIES Unemployment The unemployment rate is the portion of people in the labor force who are not working. The main cause of unemployment is reduced demand for the goods and services being provided by various workers. Chapter 2

LABOR ACTIVITIES Productivity A vital source of economic growth is and increase in output per worker. Improvements in capital resources (equipment, and technology), worker training, and management techniques can result in more output per worker. Chapter 2

LABOR ACTIVITIES Chapter 2

Checkpoint >> How can productivity be increased? Answer Productivity can be increased by improvements in capital resources (equipment and technology), worker training, and management techniques. Chapter 2

CONSUMER SPENDING Personal income Salaries, wages, investment income, and government payments to individuals. Money earned by people from their participation in production. These funds provide the foundation for buying needed goods and services. Chapter 2

CONSUMER SPENDING Retail sales The sales of durable and nondurable goods bought by consumers. These retail sales are an indicator of general consumer spending patterns in the economy. Consumers spend money on: automobiles, building materials, furniture, gasoline, clothing, as well as, purchases from restaurants, department stores, food stores, and drug stores. Chapter 2

Checkpoint >> What are the main sources of personal income? Answer Sources of personal income include wages, salaries, investment income, and government payments. Chapter 2