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Unit Overview | Economic Indicators and Business Cycle
Unit Overview | Economic Indicators and Business Cycle
Weight on the Exam: 12-17%
Essential Questions:
How is one person's spending another person's income?
How do we know if an economy is doing well or poorly?
Big Ideas Covered:
Economic Measures
There are many different ways of measuring the health of an economy. These economic indicators include the gross domestic product (GDP_, the unemployment rate, and the rate of inflation. A rising GDP is generally a sign of a healthy economy, as are low rates of unemployment and inflation.
GDP is a measure of final output of the economy.
GDP is a useful indicator of a nation's economic performance, but it has some limitations, such as failing to account for nonmarket transactions.
The unemployment rate is the percentage of the labor force that is out of work.
The labor force participation rate is another measure of the labor market activity in the economy.
The Consumer Price Index (CPI) measures the change in income a consumer would need in order to maintain the same standard of living over time under a new set of prices as under the original set of prices.
Unexpected inflation arbitararily redistributes wealth from one group of individuals to another group, such as lenders to borrowers.
Nominal GFP is a measure of how much is spent on output. Real GDP is a measure of how much is produced.
Business Cycles are fluctuations in aggregate output and employment because of changes in aggregate supply and/ or aggregate demand.
–Krugman, p. 1
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