Econ: Chapter 13 Review


Economic_Indicators graphsEconomists use various indicators to measure the health of n economy. Three key indicators are a country’s gross domestic product, unemployment rate, and inflation rate. These and other indicators help economists figure out the economy’s position in the business cycle.

Gross domestic product (GDP) is the main measure of an economy’s overall size. Nominal GDP is the measure of the current year’s total output. Real GDP measures total output adjusted for inflation. Per capita GDP measures a country’s average output per person, allowing for country to country comparisons.

People who do not have jobs but who are looking for work are officially unemployed. A rising unemployment rate is usually associated with an unhealthy economy.

Inflation is a rise in the overall price level.Economists use the Consumer Price Index (CPI) to determine changes in the price level from one period to another. A strong economy is likely to have a low level of inflation. A high inflation rate indicates an unhealthy economy.

Business-CycleThe business cycle consists of four phases: expansion (or recovery), peak, contraction (or recession), and trough. As measured by real GDP, the economy grows during an expansion and shrinks during a contraction. The peak marks the end of an expansion and the start of a contraction. The trough marks the end of a contraction and the start of a new expansion.

 

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