1. Measuring the Economy
Economics
Chapter 13

2. How do Economists Measure a Nation’s Economic Health?
1. What is GDP and what is included in its measurement?
Market value of all goods and services produced within a given country during a given time (total output)
2. Write an equation to calculate GDP
C (Consumption) + I (investment) + G (govt) + [X-M] (net exports)
3. Complete the following Chart
Definition
How it’s measured
Nominal GDP
Output of an economy valued at today’s prices
Current $
Real GDP
Output of an economy valued in constant $
 Constant $
(Current in a specific year)
Per Capita GDP
GDP Per Person
 GDP population

3. How do Economists Measure a Nation’s Economic Health?
What is the literacy rate and how is it usually related to a country’s GDP?
% of people in a country that an read and write
Higher GDP is related to a higher literacy rate
4. What is the infant mortality rate and how is it affected
by a country’s GDP?
rate at which babies die in their first year
low GDP leads to high infant mortality rate
high GDP = low infant mortality rate

4. Section 13.3 What is the unemployment rate?
Measures the % of the population that is jobless and seeking work
6. How is the unemployment rate calculated?
Govt uses survey method. Bureau of Labor Statistics
Eligible workers classified as employed, unemployed, or not in labor force (students, retired, disabled, housewives)

5. Types of Unemployment Complete the chart Seasonal Type of Unemployment
Definition
Example
 Frictional
People changing jobs or seeking 1st job
Recent college graduate
 Structural
People lose jobs due to new technology, reduction in demand
Automated machine, robots!
 Seasonal
People unemployed due to seasonal work
Park Ranger
Construction workers
farmers
 Cyclical
People lose jobs during economic decline
Recession or depression

6. Section 13.4 Explain the natural rate of unemployment.
Between 4-6%, jobs exist, not everyone in work force is matched
Section 13.4
What is inflation?
% increase in average price level of goods and services
What is the CPI?
Price index for a market basket of goods/services
What are the 3 types of inflation?
Creeping – gradual increase since % annually
Hyper – runaway, (Zimbabwe 100,000% in 2008)
Deflation – gradual decrease in prices (Great Depression)
What are the main causes of inflation?
Demand-pull = increase in overall demand forces prices up
Cost-push = rising costs of factors of production push prices higher

7. Section 13.5
Create a drawing that illustrates how the business cycle works.
14. Complete the following Chart
Characteristics of an expanding economy
Characteristics of a contracting economy
Increasing GDP
Decreasing unemployment
Inflation generally increasing
New resources
Innovation 
Decreasing GDP
Rising Unemployment
Inflation rate decreasing

8. Section 13.5
Why might an economy stop expanding and start contracting?
Negative shock to economy, rise in interest rates, shortage of raw materials
What is the difference between a recession and a depression?
Recession – decline in economic activity lasting at least 6 months
Depression – longer recession, GDP plunges, high unemployment