Indicators of economic efficiency

Июль 24, 2022

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Indicators of economic efficiency

Содержание

2. 3 Key Economic indicators
3. Gross Domestic Product market value of all final goods and services produced within a country in
4. Intermediate goods Resources of any kind Used goods Ex: Used cars, purchase of an older home,
5. C: consumer spending Daily spending on goods and services I: business investment spending Machinery, factories, equipment
6. G: government spending Spending by all levels of government - military, school, highways, supplies etc. NX:
7. Example: In 2000, estimates in trillions of dollars GPP = C + I + G +
8. Unemployment Rate Percentage of labor force who is not working Labor Force: everyone 16 – 65
9. People are out of work temporarily Seasonal work Changing jobs Looking for 1st job This is
10. Unemployment because your job skills are no longer needed Ex. Technology replaces workers so people are
11. People are unemployed due to fluctuations in the business cycle As the economy declines, people lose
12. Consumer Price Index Index of all goods and services produced in a country Measured by a
13. Inflation Rising price levels purchasing power of the dollar falls Dollar buys less Deflation Falling price
14. Hyperinflation: rapid inflation ex. Germany after WWII Stagflation: rising prices with falling GDP and rising unemployment
15. As GDP rises, unemployment rates fall and prices begin to rise As GDP falls, unemployment rises
16. 4 STAGES OF THE BUSINESS CYCLE Expansion The 1st stage: when the economy has economic growth
17. BUSINESS CYCLE Peak 2nd stage: GDP is at it’s maximum
18. BUSINESS CYCLE Contraction 3rd stage: GDP is falling 6 months or more of a contraction is
19. BUSINESS CYCLE Trough The bottom of the contraction where GDP stops falling
20. BUSINESS CYCLE – 4 STAGES Expansion Peak Contraction Trough
21. Aggregate means “total” Total demand for ALL FINAL goods and services in the economy from all
22. Aggregate demand consists of: consumer spending (C) investment spending (I) government spending (G) net export spending
23. High price level leads to lower quantity of aggregate demand THE CURVE P AD Q P
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3 Key Economic indicators

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Gross Domestic Product
market value of all final goods and services produced

within a country in a year
Final goods are purchased by the last user and will not be resold or used to produce anything else

GDP

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Intermediate goods
Resources of any kind
Used goods
Ex: Used cars, purchase of an

older home, thrift store clothing, Craigslist, Ebay
Illegal goods/services
Ex: Drugs, theft etc.
Purely financial transactions
Ex: Investment in stocks or savings
Transfer Payments
Ex: Social Security, Food Stamps
Barter
Ex: Babysitting for yardwork

NOT COUNTED IN GDP

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C: consumer spending
Daily spending on goods and services
I: business investment spending
Machinery,

factories, equipment etc.

4 COMPONENTS OF GDP

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G: government spending
Spending by all levels of government - military, school,

highways, supplies etc.
NX: net export spending
Purchases of U.S. goods and services by foreign buyers (exports) minus purchases of foreign goods and services by U.S. consumers (imports)

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Example:
In 2000, estimates in trillions of dollars
GPP = C + I +

G + NX
$10.04 = $6.81 + $1.87 + $1.75 + ($1.13-$1.52)

GDP= C+I+G+NX

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Unemployment Rate
Percentage of labor force who is not working
Labor Force: everyone

16 – 65 who is working or actively looking for work
3 types of unemployment

Unemployment

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People are out of work temporarily
Seasonal work
Changing jobs
Looking for 1st job
This

is acceptable unemployment

FRICTIONAL

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Unemployment because your job skills are no longer needed
Ex. Technology replaces

workers so people are laid off
People can go back to school and learn new skills

STRUCTURAL

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People are unemployed due to fluctuations in the business cycle
As the

economy declines, people lose their jobs
Worst kind of unemployment, can not easily fix. Economy must recover first.

CYCLICAL

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Consumer Price Index
Index of all goods and services produced in a

country
Measured by a market “basket” of all goods and services that are commonly bought year after year by the typical urban household

CPI

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Inflation
Rising price levels
purchasing power of the dollar falls
Dollar buys less
Deflation
Falling price

levels
purchasing power of the dollar rises
Dollar buys more

EFFECTS OF CHANGING CPI

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Hyperinflation: rapid inflation
ex. Germany after WWII
Stagflation: rising prices with falling GDP

and rising unemployment

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As GDP rises, unemployment rates fall and prices begin to rise
As

GDP falls, unemployment rises and prices begin to decline

RELATIONSHIP BETWEEN GDP, UNEMPLOYMENT AND CPI

GDP

Prices

Unemployment

Prices

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4 STAGES OF THE BUSINESS CYCLE
Expansion
The 1st stage: when the economy

has economic growth
GDP is rising

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BUSINESS CYCLE
Peak
2nd stage: GDP is at it’s maximum

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BUSINESS CYCLE
Contraction
3rd stage: GDP is falling
6 months or more of a

contraction is called a recession

If the recession is bad enough, it is a depression

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BUSINESS CYCLE
Trough
The bottom of the contraction where GDP stops falling

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BUSINESS CYCLE – 4 STAGES
Expansion
Peak
Contraction
Trough

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Aggregate means “total”
Total demand for ALL FINAL goods and services in

the economy
from all people in the economy
for all prices levels

Aggregate Demand

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Aggregate demand consists of:
consumer spending (C)
investment spending (I)
government spending

(G)
net export spending (NX).
If any component increases, GDP increases, AD curve shifts right.
If any component decreases, GDP decreases, AD curve shifts left

COMPONENTS

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High price level leads to lower quantity of aggregate demand
THE CURVE
P
AD
Q
P

stands for price levels in the economy
AD is aggregate demand – total demand for all final goods and services in the economy
Q is real GDP (output) of all final goods and services

Indicators of economic efficiency

Содержание

3 Key Economic indicators

Gross Domestic Productmarket value of all final goods and services produced

Intermediate goodsResources of any kindUsed goodsEx: Used cars, purchase of an

C: consumer spendingDaily spending on goods and servicesI: business investment spendingMachinery,

G: government spendingSpending by all levels of government - military, school,

Example:In 2000, estimates in trillions of dollarsGPP = C + I +

Unemployment RatePercentage of labor force who is not workingLabor Force: everyone

People are out of work temporarilySeasonal workChanging jobsLooking for 1st jobThis

Unemployment because your job skills are no longer neededEx. Technology replaces

People are unemployed due to fluctuations in the business cycleAs the

Consumer Price IndexIndex of all goods and services produced in a

InflationRising price levelspurchasing power of the dollar fallsDollar buys lessDeflationFalling price

Hyperinflation: rapid inflation ex. Germany after WWIIStagflation: rising prices with falling GDP

As GDP rises, unemployment rates fall and prices begin to riseAs

4 STAGES OF THE BUSINESS CYCLEExpansionThe 1st stage: when the economy

BUSINESS CYCLEPeak2nd stage: GDP is at it’s maximum

BUSINESS CYCLEContraction3rd stage: GDP is falling6 months or more of a

BUSINESS CYCLETroughThe bottom of the contraction where GDP stops falling

BUSINESS CYCLE – 4 STAGESExpansionPeakContractionTrough

Aggregate means “total”Total demand for ALL FINAL goods and services in

Aggregate demand consists of: consumer spending (C)investment spending (I) government spending

High price level leads to lower quantity of aggregate demandTHE CURVEPADQP

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