Transcript Economic Indicators powerpoint

Basics of Economics
Key terms and ideas
Economics
❖ The
science that deals with the
production, distribution, and
consumption of goods and
services, or the material welfare
of humankind.
Economic Indicators
❖ The
strength or weakness of an
economy is often measured by
“economic indicators” - pieces of data
that relate whether the economy is
expanding or contracting
Gross Domestic Product
❖ The
total value of goods and services
produced in a country
❖ “per
capita” = “for each head” = per
person
❖ Is
an indicator of a country’s standard of
living
Examples of GDP
Country
Total GDP (in
millions of U.S. dollars)
Rank by
IMF
GDP per
capita (in U.S. $)
Rank by
IMF
United States
14,657,800
1
47,284
9
China
5,878,257
2
4,382
94
Brazil
2,090,314
7
10,816
53
Switzerland
523,772
19
67,246
4
Zimbabwe
5,574
141
594
163
Unemployment Rate
❖
According to the U.S.Bureau of Labor Statistics: Persons are classified
as unemployed if they do not have a job, have actively looked for work in
the prior 4 weeks, and are currently available for work. Persons who were
not working and were waiting to be recalled to a job from which they had
been temporarily laid off are also included as unemployed. Receiving
benefits from the Unemployment Insurance (UI) program has no bearing
on whether a person is classified as unemployed.
❖
July 2011 - United States: 9.1%
❖
June 2011 - Ohio: 8.8%
❖
Unemployment Rate Graph
Inflation
❖
Inflation measures the value of a country’s currency over
time
❖
Usually a measure of the RISE in prices for goods or
services
❖
Let’s try it! Calculate Inflation Rates
Inflation
❖
The Federal Reserve
Board will try to curb
inflation by limiting the
amount of money that is
circulating in the
economy.
❖
When too much money is
in circulation, the value of
each bill will decrease,
thus costing MORE to
purchase goods.
Interest Rates
❖
An “interest rate” is the percentage at which a loan is
repaid to the lender
❖
For example, when people get a mortgage (loan for a
house) they pay the bank the total amount borrowed
PLUS a percentage of the total mortgage amount
Interest Rates
❖
The Federal Reserve also influences interest rates
❖
The Federal Reserve is the “banker’s bank” - it lends
money to banks at a “discount rate” = interest rate for
banks
❖
When the discount rate is lowered, banks can offer
customers lower interest rates and still make a profit
❖
This usually provides an economic “boost”
Consumer Price Index (CPI)
❖
a measure of the average change over time in the prices
paid by urban consumers for a market basket of
consumer goods and services.
❖
Whose buying habits does the CPI reflect?
The CPI reflects spending patterns for each of two
population groups: all urban consumers and urban wage earners and clerical workers. The all urban
consumer group represents about 87 percent of the total U.S. population. It is based on the
expenditures of almost all residents of urban or metropolitan areas, including professionals, the selfemployed, the poor, the unemployed, and retired people, as well as urban wage earners and clerical
workers. Not included in the CPI are the spending patterns of people living in rural nonmetropolitan
areas, farm families, people in the Armed Forces, and those in institutions, such as prisons and mental
hospitals. Consumer inflation for all urban consumers is measured by two indexes, namely, the
Consumer Price Index for All Urban Consumers (CPI-U) and the Chained Consumer Price Index for
All Urban Consumers (C-CPI-U). (from www.bls.gov)
❖
Let’s Look at the CPI!
Housing Data
❖
A final economic
indicator is “housing
data;” it includes the
following:
❖
1) foreclosure rates
❖
2) new construction
❖
3) real estate transfers