Macroeconomics

Macroeconomics - the performance, structure, behavior, and decision- making of the entire economy. This includes a national, regional, or global economy An economy is measured using economic indicators

“Time Vocabulary” Annual – one year Quarter – three months First Quarter (Q1): January – March Second Quarter (Q2): April – May Third Quarter (Q3): June – August Fourth Quarter (Q4): September - December

Inflation – an increase in prices as a result of a growing economy Economic indicators are used to measure and explain inflation

Economic Indicators 1)Gross Domestic Product (GDP) The total value of all final goods and services produced within a country’s borders in a given year It is measured by estimating annual amounts spent on: – Consumer goods and services – Business goods and services – Government goods and services – Net exports (goods sent out of country) or imports (goods brought into country) of goods and services

GDP is a good indicator of “standard of living” (level of economic prosperity— are people living well?)

*** GDP growth is most important statistic about economy’s health – If GDP growing – jobs, personal income, and businesses increasing – If GDP slowing down – businesses slow down, no hiring, consumers not buy g/s – If GDP growth rate is negative  recession

U.S. ideal GDP growth rage range 2-3% – But in 2007: Q1.1%, Q2 4.8%, Q3 4.8%, Q4 -.02%

2) Gross National Product (GNP) - the amount of goods produced by a country in one year - Can be misleading: 1) only looks at final product 2) foreign business

3) Consumer Price Index (CPI) Measures the change in the price of a standard group of goods and services (market basket) of a typical urban consumer. Economic growth = CPI rate increases Economic decline = CPI rate of increase slows or prices may even fall Measures changes in purchasing power

Market Basket 1.Food and drinks (Examples: breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks) 2. Housing (Examples: rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture) 3. Apparel (Examples: men's shirts and sweaters, women's dresses, jewelry) 4. Transportation (Examples: new vehicles, airline fares, gasoline, motor vehicle insurance)

5. Medical Care (Examples: prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services) 6. Entertainment (Examples: televisions, toys, pets and pet products, sports equipment, admissions) 7. Education and Communication (Examples: college tuition, postage, telephone services, computer software and accessories) 8. Other goods and services (Examples: tobacco and smoking products, haircuts and other personal services, funeral expenses)

4) Industrial Production - Measures output of American industry - Includes manufacturing, mining, and utilities Economic Growth – IP increases Economic Decline – IP decreases

5) Unemployment Rate Measures percentage of people in labor force who were not working during the week of the survey, but had been looking for work within the previous four weeks

6) Poverty Line/Poverty “Threshold” Dollar amounts used to determine poverty status Thresholds vary according to: – Size of the family – Ages of the members