Chapter
Two:
Useful Tools and
Concepts
Our Tools for Understanding
Table 2.1: Unemployment Rate and Real GDP
Growth Rate, United States, 2000-2012 (in percent)
Year
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Unemployment Rate
4.0%
4.7%
5.8%
6.0%
5.5%
5.1%
4.6%
4.6%
5.8%
9.3%
9.6%
8.9%
8.1%
Real GDP Growth Rate
4.1%
1.1%
1.8%
2.5%
3.5%
3.1%
2.7%
1.9%
-0.3%
-3.1%
2.4%
1.8%
2.2%
Sources: U.S. Bureau of Economic Analysis, http://bea.gov/iTable/index_nipa.cfm ;U.S. Bureau of Labor Statistics,
http://bls.gov/cps/cpsaat01.htm.
Figure 2.B1: Unemployment Rate, United States,
2000-2012
12%
Unemployment Rate
10%
8%
6%
4%
2%
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Year
Sources: United States Bureau of Labor Statistics, http://bls.gov/cps/cpsaat01.htm; United States Bureau of Economic Analysis,
http://bea.gov/iTable/index_nipa.cfm.
Figure 2.B2: Relationship between Unemployment
and GDP Growth Rate, United States, 2000-2012
12.0%
Unemployment Rate
10.0%
8.0%
2008 (5.8, -0.3)
6.0%
4.0%
2.0%
0.0%
-4%
-2%
0%
2%
4%
6%
Real GDP Growth Rate
Sources: United States Bureau of Labor Statistics,http://bls.gov/cps/cpsaat01.htm; United States Bureau of Economic Analysis,
http://bea.gov/iTable/index_nipa.cfm.
Figure 2.B3: Relationship between GDP Growth Rate
and Greenhouse Gas Emissions Growth Rate,
United States, 1990-2012
Annual Growth Rate in Greenhouse
Gas Emissions (Percent)
4
2
0
-4
-2
0
2
4
-2
-4
-6
-8
Real GDP Growth Rate (Percent)
Source: Greenhouse Gas data from United States Environmental Protection Agency, http://www.epa.gov/
climatechange/ghgemissions/usinventoryreport.html.
6
Economic Tradeoffs
Figure 2.1: Society’s Production-Possibilities
Frontier
B
C
PPF
D
A
Quantity of Butter
Figure 2.2: An Expanded Production-Possibilities
Frontier
PPF with Additional
Resources or
Technological Progress
Original PPF
Quantity of Output 1
Figure 2.3: Society’s Production/Maintenance Frontier
B
A
Quantity of Resource-Depleting Production
Figure 2.4: Possible Future PPFs
Future PPF with
High Resource
Maintenance Now
Future PPF with
High Resource
Depletion Now
Quantity of Output 1
The Role of Markets
Figure 2.5: The Circular Flow Diagram for the Basic
Neoclassical Model
Factor Markets
Land, Labor, and Capital Services
Wages, Rents,
Interest, and Profits
Households
Firms
Payments for
Produced Goods
and Services
Produced Goods and Services
Product Markets