Measuring Economic Activity CHAPTER 2 7/10/2019 2-1 Measuring Economic Activity ITB

Measuring Economic Activity CHAPTER 2 7/10/2019 Measuring Economic Activity Learning Goals 1. Define gross domestic product. 2. Describe economic measures of labor. 3. Identify economic indicators for consumer spending. ITB

Key Terms Gross Domestic Product (GDP) GDP per capita CHAPTER 2 7/10/2019 Key Terms Gross Domestic Product (GDP) GDP per capita unemployment rate productivity personal income retail sales ITB

ECONOMIC MEASUREMENTS CHAPTER 2 7/10/2019 ECONOMIC MEASUREMENTS Productivity is output per worker hour. In the workplace it can be difficult to measure productivity. In sports, there are clear-cut measures. Improvements in capital resources, worker training, and management techniques can result in more output per worker. In the 1890s, the average worker worked 60 hours/week!  ITB

GROSS DOMESTIC PRODUCT (GDP) learning Goal #1 CHAPTER 2 7/10/2019 GROSS DOMESTIC PRODUCT (GDP) learning Goal #1 Most widely used measure of economic activity is Gross Domestic Product GDP is the total dollar value of all final goods and services produced using labor & property in a country during one year. One way to find out how well an economy is doing is to compare output from year to year. ITB

Components of GDP Four major categories of economic activity CHAPTER 2 7/10/2019 Components of GDP Four major categories of economic activity Consumer Spending for food, clothing, etc. Business Spending for buildings, equipment, and inventory items Government Spending to pay employees, buy supplies and other goods and services. Exports of a country less than the imports into a country (net exports) Services performed for self are not included in GDP (mowing your own lawn)  ITB

CHAPTER 2 7/10/2019 Components of GDP ITB

CHAPTER 2 7/10/2019 What’s not in the gdp? Services performed for self are not included in GDP (mowing your own lawn)  Only final goods are included Items like wood, steel, and plastic used to make things for sale are considered intermediate goods, which do not count towards the GDP If you measured intermediate goods, they would get counted again as part of the final goods ITB

Comparing GDP Increasing GDP usually signals a healthy economy CHAPTER 2 7/10/2019 Comparing GDP Increasing GDP usually signals a healthy economy Dollar value of GDP as a measure of economic growth is not the best method GDP per capita =output per person, or GDP ÷ by the total population Increase of GDP per capita signifies a growing economy ITB

LABOR ACTIVITIES Learning goal #2 CHAPTER 2 7/10/2019 LABOR ACTIVITIES Learning goal #2 Workers of a country contribute to the economy in several ways: Labor activities create needed goods and services Wages they receive are spent to create demand for various items  ITB

Employment U.s LABOR FORCE CHAPTER 2 7/10/2019 Employment U.s LABOR FORCE U.S. labor force consists of all people above age 16 who are working/seeking work U.S. labor force Statistic of most concern is the unemployment rate, (the portion of people in the labor force who are not working) The main cause of unemployment is reduced demand for goods/services being provided by various workers. ITB

CHAPTER 2 7/10/2019 Employment Some of the main reasons why employment rate has be decreasing are: Demographics of the aging baby boomers, who are retiring, living longer, and impacting this ratio; Technology/DotCom collapse eliminated lots of malinvestment driven Tech jobs; Financial/Credit crash eliminated lots of malinvestment driven banking/RE jobs; Ongoing outsourcing, globalization, etc. Robotics/Automation  ITB

CONSUMER SPENDING Learning Goal #3 CHAPTER 2 7/10/2019 CONSUMER SPENDING Learning Goal #3 Personal income refers to salaries and wages as well as investment income and government payments to individuals. The U.S. Dept. of Commerce measures retail sales, or the sales of durable and nondurable goods bought by consumers. Indicator of general consumer spending patterns in the economy.  ITB

Check it out Economy at a Glance List of Countries by GDP CHAPTER 2 7/10/2019 Check it out Bureau of Economic Analysis Releases: GDP by State Trade in Goods & Services Economy at a Glance List of Countries by GDP ITB

Labor Stats Bureau of Labor Statistics National rate? CHAPTER 2 7/10/2019 Labor Stats Bureau of Labor Statistics National rate? How is Ohio doing? Consumer Price Index ITB