Measuring Economic Growth

Chapter 2-1

GDP – is the total dollar value of all final goods

and service produced in one country in one year.

Measures the national output (how much are we producing)

2013 GDP - $16.7 trillion

Gross Domestic Product

1. Consumer Spending – spending for food,

clothing housing, and other spending2. Investment Spending – spending by

businesses for buildings, equipment, and inventory (investment in the business)

3. Government Spending – spending by the government to pay employees and to buy supplies and services

4. Net Exports – export of the country minus imports into the country

Four components of GDP

C + G + I + NX

Components of GDP

GDP does not include work you do for yourself.

Example: If you pay for a lawn mowing service it is included. However, if you mow your own lawn, the value of that is not included.

Only FINAL goods are counted. If intermediate goods (raw materials) were counted as well, the value of the intermediate goods would be counted twice.

What is included?

The US had an annual GDP of about $16

trillion. Just referring to the dollar amount does not

tell the whole story. In order to compare country to country you

need to calculate GDP per Capita (or GDP per person)

Take GDP and divide it by the total population

Comparing GDP

USA Singapore

GDP 16.7 trillion 295 billion

Population 318 million 5.5 million

GDP Per Capita $52,800 $62,400

Comparing GDP

Workers of a country contribute to the

economy in several ways.1. Their labor activities create needed goods and

services.2. The wages they receive are spent to create

demand for various items.3. Increase in demand results in an increase in

employment.

Labor Activities

Labor Force consist of all people above age 16 who are actively working or seeking work. Are you in the labor force???

Unemployment rate is the portion of people in the labor force who are not working.

People are considered to be unemployed if they are looking for work and willing to work but unable to find a job.

The main cause of unemployment is reduced demand.

Employment

US Labor Force 155,400,000

Unemployment Rate: 5.9%

Number of individuals who are willing and able to work but can’t find work: 155,400,000 * .059 = 9,168,600

Unemployment Rate

Productivity is the production output in

relation to a unit of input, such as workers, machine hours, man hours…

How to improve productivity: Management techniques Improved capital resources (better equipment) Worker training Incentives Improved working conditions

Productivity

Personal income refers to the salaries and

wages as well as investment income and government payments to individuals

Retail sales are the sales of durable and nondurable goods bought by consumers. These are an indicator of general consumer spending patterns in the economy

Consumer Spending