1. Copyright © Cengage Learning. All rights reserved.1 | 1 Measuring Economic Performance Productivity –The average level of output per worker per hour Economic indicators –Gross domestic product (GDP) The total value of all goods and services produced by all people within the boundaries of a country during a one-year period –Inflation A general rise in the level of prices

2. Copyright © Cengage Learning. All rights reserved.1 | 2 GDP in Current and Inflation-Adjusted Dollars Source: U.S. Bureau of Economic Analysis website at www.bea.gov, accessed September 14, 2008.

3. Copyright © Cengage Learning. All rights reserved.1 | 3 Common Measures Used to Evaluate a Nation’s Economic Health Balance of trade –The total value of a nation’s exports minus the total value of its imports over a specific period of time Bank credit –A statistics that measures the lending activity of commercial financial institutions Corporate profits –The total amount of profits made by corporations over selected time periods

4. Copyright © Cengage Learning. All rights reserved.1 | 4 Common Measures Used to Evaluate a Nation’s Economic Health (cont’d) Inflation rate –An economic statistic that tracks the increase in prices of goods and services over a period of time; usually calculated on a monthly or annual basis National income –The total income earned by various segments of the population, including employees, self- employed individuals, corporations, and other type of income New housing starts –The total number of new homes started during a specific time period.

5. Copyright © Cengage Learning. All rights reserved.1 | 5 Common Measures Used to Evaluate a Nation’s Economic Health (cont’d) Prime interest rate –The lowest interest rate that banks charge their most creditworthy customers Productivity rate –An economic measure that tracks the increase and decrease in the average level of output per worker Unemployment rate –The percentage of a nation’s labor force unemployed at any time

6. Copyright © Cengage Learning. All rights reserved.1 | 6 The Business Cycle The recurrence of periods of growth and recession in a nation’s economic activity –Recession Two consecutive three-month periods of decline in a country’s gross domestic product –Depression A severe recession that lasts longer than a recession –Monetary policies Federal Reserve decisions that determine the size of the supply of money in the nation and the level of interest rates

7. Copyright © Cengage Learning. All rights reserved.1 | 7 The Business Cycle (cont’d) Fiscal policy –Government influence on the amount of savings and expenditures; accomplished by altering the tax structure and by changing the levels of government spending Federal deficit –A shortfall created when the federal government spends more in a fiscal year than it receives National debt –The total of all federal deficits