Measuring the Economy Measuring the Economy Economies fluctuate

Measuring the Economy

Measuring the Economy • Economies fluctuate through periods of prosperity and periods of struggle • Economic growth benefits everyone • Businesses are producing more goods and services • More workers are hired • People have more money to buy goods and services • Gross Domestic Product (GDP)- the dollar value of all goods and services produced in a country in a year • The economy fluctuates , but not at a constant rate.

• Business Cycle- alternating intervals of growth and decline in an economy

Business Cycle • Begins with expansion leading to an economic peak • Expansion- economy is growing (new businesses, more production, employment) • Peak- highest point of the business cycle, period of prosperity • Eventually the economy levels off and begins to contract into trough • Contraction- economy is slowing (businesses slow, less production, less employment) • Trough- lowest point of the business cycle, period of recession or depression • The economy then moves back up with expansion

• Recession- when the economy goes down for at least 6 straight months • Depression- long standing recession (several years, large number of people out of work, shortages, etc. ) • Unemployment Rate- percent of people in the labor force not working and looking for a job

Inflation • Inflation- increase in the general level of prices • Hurts the economy because it reduces purchasing power (a dollar doesn’t buy as much today as it did 10 years ago) • Inflation typically goes up overtime (it does not usually increase by a lot in a short period of time) • Consumer Price Index (CPI)- prices of 400 commonly used goods tracked by the US government to measure inflation