Economic Goals 10.17.24 WarmUp

The dollar value of all final goods and services produced within a country's borders in one year. Most important measure of economic growth

• Gross Domestic Product

• GDP Per Capita

• Real GDP

• Nominal GDP

GDP divided by the population. It identifies on average how many products each person makes. Best measure of standard of living.

• GDP Per Capita

• Income Approach

• Labor Force Participation Rate

• Problems with the CPI

What are the criticisms of the unemployment rate?

• Discouraged workers: some people are no longer looking for a job because they have given up.

  Underemployed workers: Someone who wants more hours but can't get them is still considered employed

• Percent of population in the labor force. If people leave the labor force, the unemployment rate falls.

• Index numbers assigned to each year that show how prices have changed relative to a specific base year (base year given 100)

• Unemployment caused by a recession. As demand for goods/services falls, demand for labor falls and workers are fired

How do you calculate the unemployment rate?

• Percent of people unemployed(# unemployed)/(# in labor force) x 100

• Frictional + structural unemployment

• % change in prices = (year 2 - year 1)/(year 1) x 100

Who is in the labor force?

• -Above 16 years; -Able/willing to work

• All of these are correct.

• -Not institutionalized (jail/hospital)

• -Not in military, in school full time, or retired

Why is zero percent unemployment not our goal?

• Because people will always be between jobs or replaced by technology

• The amount of employment that exists when the economy is healthy and growing

• If people leave the labor force, the unemployment rate falls

• some people are no longer looking for a job because they have given up

The rising in the general level of prices and it reduces the "purchasing power" of money

• Inflation

• Price Indices

• Real Wage

• Inflation Rate

1. Consumer Spending

2. Investment (business spending on tools/equipment

3. Government spending (NOT transfer payments)

4. Net exports -- exports (x) - Imports (M)

• Four components of GDP

• factors of productivity

• Major Economic Goals for Every Country

• The Business Cycle

1. Promote economic growth

2. Limit unemployment

3. Keep prices stable (limit inflation)

• Major Economic Goals for Every Country

• factors of productivity

• components of GDP

• Income approach adds up

What is NOT included in GDP?

• Intermediate goods

• stocks, bonds, real estate

• illegal activities

• All of these are correct.