MAROECONOMIC GOALS WHAT ARE THE COMPONENTS OF GROSS DOMESTIC PRODUCT? HOW DO WE MEASURE THE ECONOMY TO SEE IF WE ARE MEETING ECONOMIC GOALS?

FULL EMPLOYMENT PRICE STABILITY ECONOMIC GROWTH

HOW DO I KNOW TWO LAWS OF THE LAND

EMPLOYMENT ACT OF 1947 COMMITTED THE FEDERAL GOVERNMENT TO MAXIMIZE EMPLOYMENT AND ECONOMIC GROWTH, AND MAINTAIN A STABLE PRICE LEVEL

THE FULL EMPLOYMENT AND BALANCED GROWTH ACT OF 1978 REACH AN UNEMPLOYMENT RATE OF 4% STABILIZE THE PRICE LEVEL WITH A TARGET INFLATION RATE OF ZERO % MAINTAIN STEADY ECONOMIC GROWTH

FULL EMPLOYMENT WHY IS IT IMPORTANT?

ZERO INFLATION WHY IS IT IMPORTANT?

STEADY ECONOMIC GROWTH WHY IS IT IMPORTANT?

IN GENERAL, THE GOALS CONFLICT SOCIETY IS FACED WITH TRADE-OFFS

OUR JOB IS TO UNDERSTAND THE VALIDITY OF THE MEASUREMENT OF ECONOMIC VARIABLES IN ORDER TO UNDERSTAND THE IMPLICATIONS OF THE TRADE-OFFS AMONG GOALS

Read activity 11

THE UNEMPLOYMENT RATE IS A BROAD MEASURE OF ECONOMIC ACTIVITY TO EMPLEMENT PROGRAMS TO HELP THE UNEMPLOYED, WE NEED TO KNOW MORE ABOUT THEM –SKILL LEVEL –ETHNIC & RACIAL GROUPS –AGE GROUPS

The unemployed does not include The military* The too old (over 65) The too young (under 16) The unable (institutionalized) The unwilling

The unemployment rate number of unemployed UR = * 100 labor force

The labor force participation rate number in labor force LFPR = * 100 adult population

CPI – THE CONSUMER PRICE INDEX current year price CPI = * 100 base year price

Base year index is always 100 Subtract the base year index from any year’s index to determine the percent change in prices from the base year

Year to year price change new cpi – old cpi Price change = * 100 old cpi

The cpi Measures the price level And from this the inflation rate can be calculated Includes items people may not buy every year, ie; house, car – thus may overstate actual change in cost of living

Real vs Nominal GDP The growth rate of Real GDP is a better measure of macroeconomic conditions than growth rate of Nominal GDP because nominal GDP includes effects of inflation The growth rate of real GDP per capita captures a measure of changes in the standard of living

The GDP Deflator Real GDP = nominal GDP/the index

Short-run economic growth Measures changes in real output because of more or less labor applied to the existing level of technology and capital stock Measured quarter to quarter or year to year

The real interest rate Real rate = nominal rate – rate of inflation

Long-run growth Changes in productive capability through changes in the amount of –Plant, equipment and resources –Technology –Labor force: size And Quality –Education and skill level

For economists and the AP exam! Short-run growth refers to fluctuations in real output Economic growth refers to Long-Run growth, changes in the economies ability to produce