Transcript Economic Problems in our Nation

Today’s Topic:
The Misery Index
What is the business cycle?
• A measure of
recurring ups
and downs in
the level of
economic
activity
–
–
–
–
Recovery
Peak
Decline
Trough
• How is the
business cycle
measured?
– Real GDP
GDP with
inflation
factored out
What is the “Misery Index”?
• It is the sum of the rate of inflation and the
unemployment rate
• Increasing rates indicate a worsening
economic situation
• Decreasing rates indicate an improving
economic situation
• Also known as the “Discomfort Index”
Why do politicians pay attention to
such things as the misery index?
• Incumbents USUALLY win if…
– the misery index decreases the year
preceding the election OR
– the growth rate of real income per capita is
greater than 3%
• Incumbents USUALLY lose if…
– the misery index has increased during the
year preceding the election OR
– The growth rate of real income per capita is
less than 3%