Economic Indicators Measuring the Health of the Economy

Economic Indicators: Measuring the Health of the Economy Economist use a variety of tools to measure the health of an economy Can you name any?

GDP vs GNP – the total value of goods and services produced in a given year (-includes production outside the country) - GNP = GDP + NR (net income abroad) GDP – Gross Domestic Product – Total worth of a country’s production within a given year (total production inside a country) - GDP = C+I+G+(X-M) Personal Consumption + Investments + Government Purchases + (exports – imports)

C, G, I, (exports – imports) C – Personal Consumption G – Government Purchases I – Investments (E – M) – exports – imports Write examples of each:

Final vs Intermediate Goods Economists only count final goods to avoid double counting A final good is a product in its final form - example a desk An intermediate good is a good used to make a final product – example: wood and metal to make the desk

The Flow of Product vs The Earnings and Cost Approach These are ways of counting the value of goods and services – both give the same answer The Flow of Product – by counting all the money spent by the buyers of goods and services; Ex – A chair cost 50$, buyer adds to the GDP Earnings and Cost – by counting all the money received by those who produce the goods and services; Ex – The same chair – 20$ in lumber, 5$ to the paint store owner, 5$ for wear and tear of tools used, and 20$ for the labor

Unemployment Rate The unemployment rate measures the percentage of employable people in a country's workforce who are over the age of 16 and who have either lost their jobs or have unsuccessfully sought jobs in the last month and are still actively seeking work. - A healthy economy will have a 4% unemployment rate Unemployment Rate = Number of Unemployed / Total Labor Force Is the unemployment rate an accurate indicator?

Inflation Rate Simply- this is the rate at which products and prices rise compared to the value of money Ex. Demand can increase price and so can the money suppy

Does GDP Indicate Good Health of a Nation? Make a list of things we talked about in class that indicate an unhealthy nation.