Measuring the Economy
Economics
Chapter 13
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
Current $
at today’s prices
Real GDP
Output of an economy valued Constant $
in constant $
(Current in a specific year)
Per Capita GDP
GDP Per Person
GDP
population
How do Economists Measure a
Nation’s Economic Health?
3. 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
Section 13.3
5. 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)
Types of Unemployment
7. Complete the chart
Type of Unemployment
Definition
Example
Recent college graduate
Frictional
People changing jobs or
seeking 1st job
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
Recession or depression
Cyclical
People lose jobs during
economic decline
Structural
8. Explain the natural rate of unemployment.
Between 4-6%, jobs exist, not everyone in work force is matched
Section 13.4
9. What is inflation?
% increase in average price level of goods and services
10. What is the CPI?
Price index for a market basket of goods/services
11. What are the 3 types of inflation?
Creeping – gradual increase since 1941 3% annually
Hyper – runaway, (Zimbabwe 100,000% in 2008)
Deflation – gradual decrease in prices (Great Depression)
12. 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
Section 13.5
13. Create a drawing that illustrates how the business cycle works.
14. Complete the following Chart
Characteristics of an expanding economy
Increasing GDP
Decreasing unemployment
Inflation generally increasing
New resources
Innovation
Characteristics of a contracting economy
Decreasing GDP
Rising Unemployment
Inflation rate decreasing
Section 13.5
15. Why might an economy stop expanding and start
contracting?
Negative shock to economy, rise in interest rates, shortage of
raw materials
16. 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