2 1 MEASURING ECONOMIC ACTIVITY 1 MEASURING ECONOMIC

2 -1 MEASURING ECONOMIC ACTIVITY 1

MEASURING ECONOMIC ACTIVITY Learning Goals 1. Define gross domestic product. 2. Describe economic measures of labor. 3. Identify economic indicators for consumer spending. 2

KEY TERMS Gross Domestic Product (GDP) GDP per capita unemployment rate productivity personal income retail sales 3

ECONOMIC MEASUREMENTS Productivity is output per worker hour. In the workplace it can be difficult to measure productivity. In sports, there are clear-cut measures. Improvements in capital resources, worker training, and management techniques can result in more output per worker. In the 1890 s, the average worker worked 60 hours/week! 4

GROSS DOMESTIC PRODUCT (GDP) LEARNING GOAL #1 Most widely used measure of economic activity is Gross Domestic Product GDP is the total dollar value of all final goods and services produced using labor & property in a country during one year. One way to find out how well an economy is doing is to compare output from year to year. 5

COMPONENTS OF GDP Four major categories of economic activity 1. Consumer Spending for food, clothing, etc. 2. Business Spending for buildings, equipment, and inventory items 3. Government Spending to pay employees, buy supplies and other goods and services. 4. Exports of a country less than the imports into a country (net exports) Services performed for self are not included in GDP (mowing your own lawn) 6

COMPONENTS OF GDP 7

WHAT’S NOT IN THE GDP? Services performed for self are not included in GDP (mowing your own lawn) Only final goods are included Items like wood, steel, and plastic used to make things for sale are considered intermediate goods, which do not count towards the GDP If you measured intermediate goods, they would get counted again as part of the final goods 8

COMPARING GDP Increasing GDP usually signals a healthy economy Dollar value of GDP as a measure of economic growth is not the best method GDP per capita =output person, or GDP ÷ by the total population Increase of GDP per capita signifies a growing economy 9

LABOR ACTIVITIES LEARNING GOAL #2 Workers of a country contribute to the economy in several ways: Labor activities create needed goods and services Wages they receive are spent to create demand for various items 10

EMPLOYMENT U. S LABOR FORCE U. S. labor force consists of all people above age 16 who are working/seeking work U. S. labor force Statistic of most concern is the unemployment rate, (the portion of people in the labor force who are not working) The main cause of unemployment is reduced demand for goods/services being provided by various workers. 11

EMPLOYMENT Some of the main reasons why employment rate has be decreasing are: Demographics of the aging baby boomers, who are retiring, living longer, and impacting this ratio; Technology/Dot. Com collapse eliminated lots of malinvestment driven Tech jobs; Financial/Credit crash eliminated lots of malinvestment driven banking/RE jobs; Ongoing outsourcing, globalization, etc. Robotics/Automation 12

CONSUMER SPENDING LEARNING GOAL #3 Personal income refers to salaries and wages as well as investment income and government payments to individuals. The U. S. Dept. of Commerce measures retail sales, or the sales of durable and nondurable goods bought by consumers. Indicator of general consumer spending patterns in the economy. 13

CHECK IT OUT Bureau of Economic Analysis Releases: GDP by State Trade in Goods & Services Economy at a Glance List of Countries by GDP 14

LABOR STATS Bureau of Labor Statistics National rate? How is Ohio doing? Consumer Price Index 15