2. Two Types of GDP Nominal GDPprice levels for the year in which GDP is measured states GDP in terms of current value of goods and services Real GDPGDP adjusted for changes in prices estimate of GDP if prices were to remain constant

3. Nonmarket Activities Some productive activities outside of economic markets Examples: performing own home repairs, volunteer work Biggest nonmarket activity is homemaking

4. Underground Economy Illegal activities are unreported when goods are rationed or restricted, black market arises Legal activities paid for in cash not always declared Estimates suggest underground economy 8 to 10 percent of U.S. GDP

5. Quality of Life GDP does not measure quality of life Countries with high GDPs have high living standards GDP does not show how goods and services are distributed GDP does not show what goods are being made or services offered

6. Aggregate Demand Aggregate demand total amount of products that might be bought at every level includes all goods and services, all purchasers Aggregate demand curve is downward sloping vertical axis shows average price of all goods and services horizontal axis shows the economys total output

7. Aggregate Supply Aggregate supplysum of all goods and services that might be provided at every price level Aggregate supply curve almost horizontal when real GDP is low businesses do not raise prices when economy is weak Curve slopes upward as prices increase with rise in real GDP Curve almost vertical with inflationno rise in real GDP

8. Contraction During contraction, producers cut back and unemployment increases resources become less scarce, so prices tend to stabilize or fall Recessioncontraction lasting two or more quarters Depressionlong period of high unemployment, slow business activity Stagflationstagnation in business activity with inflation of prices

9. Background Poland was under Communist rule from 1948 to 1989. In 1990, it held free elections and began moving toward a free market economy. Since then, Poland has experienced a surge in economic growth. In 2004, it joined the European Union. Whats the Issue How successful is Polands economy? Thinking Economically Which economic measurements and indicators are evident in documents A and C? Explain what they convey about the strengths and weaknesses of Polands economy. What factors have driven Polands economic growth? Compare documents A and C, written about six months apart. What continued economic trends and new economic strengths do they describe?