Measuring Economic Activity

Measuring Economic Activity Goal 1 Define gross domestic product. Goal 2 Describe economic measures of labor. Goal 3 Identify economic indicators for consumer spending.

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

GROSS DOMESTIC PRODUCT (GDP) Components of GDP Consumer spending for food, clothing, housing, and other aspect Business spending for buildings, equipment and inventory items Government spending to pay employees and to buy supplies and other goods and services The exports of a country less the imports into the country

GROSS DOMESTIC PRODUCT (GDP) Comparing GDP Total monetary value of GDP isn’t the full story Per capita – dividing total GDP by total population Increase in GDP per capita means the economy is growing Decrease in GDP per capita means the economy is facing difficulties

COMPARISON OF GDP IN SELECTED COUNTRIES

COMPARING GROSS DOMESTIC PRODUCT

Checkpoint  What types of economic activities are not included in GDP? GDP only applies to reported final goods and services. Money earned for goods or services that are not reported would not be included. Goods and services used in the manufacture of other products are only counted once—in the final product.

LABOR ACTIVITIES Employment Labor force consists of all people over the age of 16 who are actively working or seeking work Students, retired people, and others who cannot or do not wish to work are not included Unemployment rate is the portion of people in the labor force who are not working Main cause is reduced demand for goods and services If few people travel by bus, bus companies need fewer workers

LABOR ACTIVITIES Productivity Is the production output in relation to a unit of input Improvements in capital resources (equipment and technology), worker training, and management techniques can result in more output per worker. If wages increase faster than gains in productivity the cost of goods/services increases – workers still not able to improve their standard of living For this reason, strong attention has been focused on motivating workers to increase productivity which will allow them to increase their standard of living.

Checkpoint  How can productivity be increased? Productivity can be increased by improvements in capital resources (equipment and technology), worker training, and management techniques.

CONSUMER SPENDING Personal income Retail sales Salaries, wages, investment income, and government payments Retail sales Sales of durable and non-durable goods bought by consumers Indicator of general consumer spending patterns in the economy Increasing sales usually points toward economic growth

Checkpoint  What are the main sources of personal income? Sources of personal income include wages, salaries, investment income, and government payments