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Level 23

Indicators of Economic Performance

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is about everyone taken together, it's about the entire economy
to what extent are we satisfying human needs
Gross Domestic Product (GDP)
the total market value of all final goods and services produced in a country in a given year
What constitutes GDP
a monetary measure
Expenditures approach (calculating GDP)
add up everyone's spending on goods and services
Income approach (calculating GDP)
add up everyones income ( wages, rent, interest)
expenditure approach to calculating GDP
net investment
gross investment = gross investment-depreciation
gov spending
net exports
nominal prices
prices not adjusted for inflation
use price index
how do you convert nominal prices to real prices?
price index
a general measure of prices in the economy
economic growth
growth is a goal, an increase in GDP
ideal increase in GDP
3-4% b/c populations rise and the typical rate of growth for modern economy
rule of 70
a shortcut measure of how long it takes something to grow
do not have a job but looking for a job
unemployment rate
the percentage of the total number of people in the labor force who are unemployed
frictional unemployment
happens voluntarily, refers to friction in peoples lives
structural unemployment
ones skills are no longer needed in the economy
cyclical unemployment
happens when economy does badly
job only in season
full employment
everyone who wants to be working is working within reason
ideal rate of unemployment
Okun's law
estimates cost of unemployment for the economy
a general rising level of prices in the economy
consumer price index (CPI)
measures of prices of things consumer buy
producer price index (PPI)
measures of prices of things producers buy
GDP price deflator
measure of the prices of every single thing in the economy
demand pull inflation
caused by changes in demand (demand inflation); shortage; from changes in consumers
cost push inflation
caused by changes in supply (supply inflation); surplus; from changes in suppliers
helped by unanticipated inflation
hyper inflation
runaway inflation (germany after WW2)