Transcript Chapter One

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
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GDP in Current and
Inflation-Adjusted Dollars
Source: U.S. Bureau of Economic Analysis website at www.bea.gov, accessed September 14, 2008.
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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
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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, selfemployed individuals, corporations, and other type
of income
• New housing starts
– The total number of new homes started during a
specific time period.
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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
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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
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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
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