UNIT 3: MEASUREMENT OF ECONOMIC PERFORMANCE MODULES

MODULE 10 KEY TERMS & REVIEW NATIONAL INCOME AND PRODUCT ACCOUNTS PRODUCT MARKETS FACTOR MARKETS GOVERNMENT TRANSFERS DISPOSABLE INCOME PRIVATE SAVINGS FINANCIAL MARKETS EXPORTS IMPORTS NET EXPORTS INVENTORIES INVESTMENT SPENDING

SIMPLE CIRCULAR FLOW DIAGRAM

EXPANDED CIRCULAR FLOW DIAGRAM (PGS )

GROSS DOMESTIC PRODUCT TOTAL VALUE OF ALL FINAL GOODS AND SERVICES PRODUCED IN AN ECONOMY IN A GIVEN PERIOD $17.7 TRILLION COMPONENTS OF GDP (SEE FIGURE 10.4, PG. 112)

CALCULATING GDP INCLUDED NOT INCLUDED

3 METHODS OF CALCULATING GDP VALUE-ADDED APPROACH – FIGURE 10.3, PG. 110 THE DIFFERENCE BETWEEN A PRODUCER’S SALES AND THE VALUE OF THE INPUTS/INTERMEDIATE GOODS PURCHASED FROM OTHER BUSINESSES

3 METHODS CONT. EXPENDITURES APPROACH AGGREGATE SPENDING = INCOME APPROACH ADD UP ALL INCOME EARNED FROM THE FACTORS OF PRODUCTION

SHORTCOMINGS OF GDP

MODULE 11 KEY TERMS & REVIEW AGGREGATE OUTPUT NOMINAL GDP GDP PER CAPITA

NOMINAL V. REAL GDP YEAR TO YEAR COMPARISONS ARE DISTORTED BY INFLATION REAL GDP =

REAL GDP TOTAL VALUE OF ALL FINAL GOODS AND SERVICE PRODUCED IN AN ECONOMY A YEAR, CALCULATED USING THE PRICES OF A BASE YEAR CHAINED DOLLARS Calculating Nominal and Real GDP Year 1Year 2 Quantity of peanut butter2,0002,200 Price of peanut butter$0.25$0.30 Quantity of Oreos1,0001,200 Year of Oreos$0.50$0.70 Nominal GDP Real GDP (base year = Year 1)

MODULE 14 KEY TERMS & REVIEW REAL INCOME INFLATION RATE NOMINAL INTEREST RATE REAL INTEREST RATE DISINFLATION

THE IMPACT OF INFLATION INFLATION RATE = SHOE-LEATHER COSTS MENU COSTS UNIT-OF-ACCOUNT COSTS

WHO IS HELPED AND HURT BY INFLATION? IN CONTRACTS, THE PRINCIPAL AND INTEREST RATE ARE LISTED IN NOMINAL TERMS REAL INTEREST RATE =

DISINFLATION

TYPES OF INFLATION DEMAND-PULL COST-PUSH

MODULE 15 KEY TERMS & REVIEW MARKET BASKET CONSUMER PRICE INDEX PRODUCER PRICE INDEX

CALCULATING PRICE LEVELS AGGREGATE PRICE LEVEL – MEASURE OF OVERALL LEVEL OF PRICES IN AN ECONOMY MARKET BASKET – SAMPLE OF COMMONLY PURCHASED CONSUMER GOODS AND SERVICES USED TO CREATE A PRICE INDEX PRICE INDEX =

CONSUMER PRICE INDEX

HOW ACCURATE IS THE CPI?

OTHER PRICE MEASURES PRODUCER PRICE INDEX TRACKS PRICES OF COMMODITIES SUCH AS STEEL, ELECTRICITY GDP DEFLATOR – OVERALL MEASURE OF THE PRICE LEVEL REAL GDP = WHAT IS THE VALUE OF THE DEFLATOR IF THERE IS NO INFLATION?

PRACTICAL USES FOR THE CPI SOCIAL SECURITY INCOME TAX BRACKETS COST OF LIVING ALLOWANCES (COLAS) MINIMUM WAGE???

MODULE 12 KEY TERMS & REVIEW UNEMPLOYED LABOR FORCE LABOR FORCE PARTICIPATION RATE RELATIONSHIP BETWEEN GROWTH & UNEMPLOYMENT (PGS )

UNEMPLOYMENT RATE LABOR FORCE PARTICIPATION RATE IN JUNE 2015 – 62.6% UNEMPLOYMENT RATE = IS IT ACCURATE? MARGINALLY ATTACHED WORKERS – DISCOURAGED WORKERS – UNDEREMPLOYED WORKERS –

UNEMPLOYMENT DATA Aug Aug Aug Jun Unemployment rate U.S.8.1%7.3%6.1%5.3% Florida8.8%7.1%6.2%5.5% Jacksonville9.0%7.5%6.6%5.4% Underemployment rate U.S.14.6%14.3%12.9%11.3% Florida17.0%15.1%13.9%12.3% Average Hourly Earnings (U.S.) $23.52$24.05$24.53$24.95

MODULE 13 KEY TERMS & REVIEW (YOYO) FRICTIONAL UNEMPLOYMENT STRUCTURAL UNEMPLOYMENT EFFICIENCY WAGES NATURAL RATE OF UNEMPLOYMENT CYCLICAL UNEMPLOYMENT

TYPES OF UNEMPLOYMENT

UNIT 3 REVIEW