Economic Indicators
Why do we care?
How is our economy now?
 Are people working?
 What if you want to open a new
business?
 What if you want to launch a new
product?

Economic Indicator

A number or symbol that tells you about
the status of the economy
◦ Ex. Temperature is an indicator of the amount
of heat
◦ Ex. Dollars are an indicator of the value of a
product
5 Major Economic Indicators

GDP – Gross Domestic Product
◦ Gross = everything
◦ Domestic = within the borders of the country
◦ Product=final goods, services, and ideas
produced in the country

GDP=the total value of all final products
produced in a country during a specific
time period (economic output)
GDP is also the total amount of money
that the economy spends to buy final
products (goods, services, ideas).
 The major spenders are:

◦ Consumers-food, clothes, cars, medical care,
hair cuts, concert tickets…
◦ Business-computers, warehouse, machinery…
◦ Government-national defense, food for school
lunch programs, police protection, roads…
Consumer purchases make up the largest
amount spent.
 Because of that, our economy is called a
consumer economy.

Consumers (as a group) have power in
our economy because of the large
amounts of money they spend.
 If consumers buy a lot, the economy
grows, if they don’t it slows down.

Economic Indicators

Tools used to measure the economy.
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Gross Domestic Product
Standard of Living
Consumer Price Index
Inflation Rate
Unemployment Rate
Gross Domestic Product (GDP)

Total value of all final products produced
in a country during a specific time period
(also called “Economic Output”)
◦ Estimated GDP for U.S.= roughly $14 trillion
How to Use GPD

The Growth Rate of the Economy
measures the rate of change in an
economy and is calculated by using a
country’s GDP taken at different points in
time
*Rate of Change: an indicator that measures how
much something changes over time, also called
“percent change over time”
Standard of Living (Per Capita GDP)

How much the average person in a
country has; measured by per capita GDP
◦ Per Capita GDP formula
 GDP/Total Population= Per Capita GDP
 Estimated GDP for U.S. = roughly $45,800
*Per Capita GDP Defined: a nation’s GDP/nations
Population; tells you how much GDP there is for each
person in the country
Consumer Price Index (CPI)

Measures the average change in prices over
time of goods and services purchased by
households (not measured in $ amount)
◦ Current CPI roughly= 207 (From base rate of 100
in 1982-1984)
*Base Rate Defined: time period chosen and set at 100
CPI to measure CPI at future dates
*Index Defined: a number that shows change in value,
not the actual value itself
Inflation Rate

Rate of change in prices
◦ Formula for calculating Inflation Rate:
CPI (time 2) – CPI (time 1)/ CPI (time 1)x100
*Inflation Defined: general rise in prices throughout
the economy (aggregate)

207-201.6 / 201.6 x 100 = 2.7% inflation
Levels of inflation

LOW
◦ 1-4%- Good, rates are stable

MEDIUM
◦ 4-9%- Some problems, prices rising higher
than wages

SEVERE (Double Digit)
◦ 10% or higher- Problems severe

HYPERINFLATION
◦ Over 1000%- Rare, destroys economy… Get
out of town!
Unemployment Rate

Percent of the labor force that does not
have a job but is looking for one
◦ Unemployment rate formula
 (# of unemployed/total civilian force)x100
*Employed Defined: Refers to everyone who is working
*Unemployed Defined: Refers to those who do not have a
job but want one and are actively looking for one
Purchasing Power

The amount of goods and services you
can buy with a specific amount of money
(i.e. “value of the dollar”).
◦ Inverse relationship with Inflation
 Purchasing Power high when inflation is low
 Purchasing Power low with inflation is high
Stock Market

Marketplace where stocks are bought and
sold (stocks representing the right to
ownership in a corporation)
Stock Market as an Indicator

Can be used as an indicator of health of
the economy, but be careful!
◦ Hard to determine what the stock market
indicators are telling you
◦ Stock market changes rapidly
◦ May have more of an impact in changing
people’s perception of the economy, which
can have an effect on the economy