Four Indicators that tell us how the economy is doing

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Presentation transcript:

Four Indicators that tell us how the economy is doing Measuring the Economy Four Indicators that tell us how the economy is doing

BUSINESS CYCLE

1. Gross Domestic Product (GDP) A. GROSS DOMESTIC PRODUCT (GDP)-this is a measure of the economy’s output. 1. this is the dollar amount of all final goods and services produced in a country in a year. all of the money spent on items bought and sold in the country goes into GDP. In times of expansion, GDP increases. In times of contraction, GDP decreases.

1. Gross Domestic Product (GDP) A RECESSION takes place when GDP goes down for at least 6 months. C. A DEPRESSION is a recession that lasts for an extended period of time

2. UNEMPLOYMENT RATE If unemployment is high, typically the economy is struggling. The unemployment rate is the % of people in the civilian workforce that are not working but are actively looking for work. The civilian workforce includes: All civilian (non-military) people who are actively seeking work. All people 16 or older, who are actively seeking work. About ½ the people in the U.S. are part of the workforce.

2. UNEMPLOYMENT RATE If you chose not to work, you are not included in the unemployment rate. There is always round 4-5% unemployment because there will always be people changing jobs, moving, graduating and looking for a job.

3. INFLATION -a sustained increase in the level of prices over time. To track inflation, the government looks at about 400 commonly used products to see how the prices change-this is called the Consumer Price Index (CPI). B. Inflation decreases the value of our money. If prices go up, our money doesn’t buy as much

HOW DOES INFLATION IMPACT PRICES?

4. STOCK MARKET not only does the stock market shows us stock prices, it also shows what investors expect to happen in the future. BULL MARKET- If investors expect economic growth, stock prices will rise, b/c investors think the economy will be strong. B. BEAR MARKET-Term used to describe when investors think the market isn’t going to be strong. As a result, stock prices will drop.