Chapter 13- Measuring the Economy

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Chapter 13- Measuring the Economy by Mind Map: Chapter 13- Measuring the Economy

1. 13.4--What Does the Inflation Rate Reveal About an Economy’s Health? -The German experience was proof, if any was needed, that runaway inflation can send an economy into a tailspin. That is why economists keep a close eye on a third economic indicator: the inflation rate

2. 13.5--How Does the Business Cycle Relate to Economic Health? -Business cycles are irregular in both length and severity. This makes peaks and troughs difficult to predict. Nonetheless, economists attempt to do just that, using a variety of economic indicators

3. 13.2--How Do Economists Measure the Size of an Economy? - They can study the economy in two different ways. 1. They can study households, firms and any other thing known as microeconomics. 2. They can also study the economy as a whole called Macroeconomics. Lastly they can look at something called the GDP.

3.1. C + I + G + NX = GDP: Economists typically calculate GDP by measuring expenditures on goods and services produced in a country. They divide the economy into four sectors: households, businesses, government, and foreign trade. Each sector's spending makes up one of the four components of GDP: household consumption (C), business investment (I), government purchases (G), and the net of exports minus imports (NX).

4. 13.3--What Does the Unemployment Rate Tell Us About an Economy’s Health? -Like the GDP, the unemployment rate is a useful indicator of the health of an economy. In general, a high unemployment rate means the overall health of the economy is poor.

5. 10 vocab words: 1. business cycle [business cycle: a recurring pattern of growth and decline in economic activity over time] . 2. contraction [contraction: a period of general economic decline marked by falling GDP and rising unemployment]. 3. [peak: the highest point of an expansion, or period of economic growth; a peak is followed by economic decline] 4. [expansion: a period of economic growth]. 5. [unemployment rate: the percentage of the labor force that is not employed but is actively seeking work]. 6. [frictional unemployment: a type of unemployment that results when workers are seeking their first job or have left one job and are seeking another]. 7. [cyclical unemployment: a type of unemployment that results from a period of decline in the business cycle; unemployment caused by a contraction]8. [natural rate of unemployment: the percentage of the labor force without work when the economy is at full employment; a condition in which the economy is strong and there is no cyclical unemployment]. 9. [discouraged workers: unemployed workers who have ceased to look for work; discouraged workers are not considered part of the labor force and are not factored into the unemployment rate] 10. [underground economy: a sector of the economy based on illegal activities, such as drug dealing and unlawful gambling].

6. A steadily growing GDP is generally considered a sign of economic health.

7. The main measure of the size of a nation's economy is its gross domestic product. GDP is an economic indicator that measures a country's total economic output.

8. Members of the labor force who are jobless, but are looking for work, are classified as unemployed.

9. Every economy goes through prosperous times and hard times. Such cycles of growth and decline are the cause of cyclical unemployment. This type of unemployment occurs during periods of decline.

10. The CPI is slow to reflect changing trends in shopping patterns.

10.1. the BLS cannot predict which new products will succeed, the new products are not incorporated into the market basket until they have become commonplace.

11. There are four phases in the Business Cycle: Expansion, Peak, contraction, and trough

12. The Business Cycle helps the economy go up and down and always stay stable.