Transcript Economic Indicators PowerPoint File

ECONOMIC
INDICATORS
Gross Domestic Product
• Gross Domestic Product (GDP) is the value, expressed in
dollars, of all final goods and services produced in a
year.
• The production of these goods and services provides
jobs for people in the economy.
• The income people earn is then used to consume goods
and services.
Gross Domestic Product
• Final goods are the goods and services sold to
consumers.
• Intermediate goods are things that are produced and then
used in the production of other goods and services.
• For example, the denim produced in mills is used in the
production of jeans.
• In this example, denim is an intermediate good and the jeans are
a final good.
Which of the following is the
INTERMEDIATE GOOD
• Wood
• Table
Which of the following is the
INTERMEDIATE GOOD
• Steel
• Bridge
Which of the following is the
INTERMEDIATE GOOD
• Flour
• Muffins
Top 10 Countries (GDP)
• 1 United States
• 2 China
• 3 Japan
• 4 Germany
• 5 France
• 6 Brazil
• 7 United Kingdom
• 8 Italy
• 9 Russian Federation
• 10 India
15,094,000,000,000
7,318,499,000,000
5,867,154,000,000
3,570,556,000,000
2,773,032,000,000
2,476,652,000,000
2,431,589,000,000
2,194,750,000,000
1,857,770,000,000
1,847,982,000,000
On your paper…
• Make a list of all of the final goods and services you used
from the time you woke up yesterday until you went to
bed last night. Items should not be listed more than once.
• Be sure to include final goods easily overlooked.
• For example, how was breakfast prepared? (Microwave, toaster,
refrigerator) Did you turn on the light in the bathroom to shower?
(electricity) Did you use soap, shampoo, toothbrush, and
toothpaste?
• Look over the list you have just created and think about
the large number of goods and services you rely on to
satisfy your wants each day.
• Who buys these items?
• How does your family obtain most of the goods and services it
wants?
Consumption
• Spending by households is called consumption or
consumer spending because the products provide direct
satisfaction to consumers.
• When we measure GDP, consumer spending represents
the largest category.
• Consumer spending makes up over two-thirds of the GDP.
Durable and Nondurable Goods
• Durable goods refers to consumer goods that will last
longer than three years.
• Nondurable goods includes consumer goods expected to
last less than three years.
• Going to the dentist is an example of a:
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a) durable good
b) nondurable good
c) service
• Going to the dentist is an example of a:
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a) durable good
b) nondurable good
c) service
• A computer is an example of a:
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a) durable good
b) nondurable good
c) service
• A computer is an example of a:
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a) durable good
b) nondurable good
c) service
• Gasoline is an example of a:
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a) durable good
b) nondurable good
c) service
• Gasoline is an example of a:
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a) durable good
b) nondurable good
c) service
• Car insurance is an example of:
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a) durable good
b) nondurable good
c) service
• Car insurance is an example of:
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a) durable good
b) nondurable good
c) service
Consumer Price Index
• The Consumer Price Index (CPI) measures the change in
the overall cost of a variety of consumer goods and
services.
• Consumer Price Index is measured by first creating a
market basket of thousands of items purchased by
consumers -• Such as food, housing, clothing, transportation, medical care,
recreation, education, communication, and energy.
Consumer Price Index
• The prices of the specified products are measured each
month, and the percentage change in price from month
to month is reported as the Consumer Price Index.
• The Consumer Price Index generally increases during
economic growth
• During economic decline, the rate of price increase slows or prices
may even decline.
Consumer Price Index
• http://www.bls.gov/cpi/cpid1210.pdf
Industrial Production
• Industrial Production measures the output of American
industry.
• Industrial Production is measured by calculating the
manufacturing output in the consumer goods, business
equipment, construction supplies, materials,
manufacturing, mining, and utility industries.
• Production is calculated in each sector monthly, and the
percentage change in output is reported as Industrial
Production.
Industrial Production
• Durable goods, such as cars, appliances, and furniture,
as well as construction supplies, tend to be more
sensitive to economic changes than are other
manufacturing products.
• Generally, Industrial Production increases during
economic growth and falls during periods of economic
decline.
Interest Rates
• Interest rate is the percentage more that you have to pay
back on something.
• A 10% interest rate means you have to pay back what you owe,
plus 10% more
• A decline in interest rates can lead to more spending in
order to promote economic growth;
• High interest rates can lead to lower levels of investment and a
decline in the rate of growth
Non-farm Payroll
• The Non-farm Payroll measures the number of people
employed by companies and government.
• Non-farm Payroll generally rises during economic growth
and falls during economic decline.
Unemployment
• Unemployment surveys are conducted once a week
• The Unemployment Rate measures the percentage of
people in the labor force who were not working during the
week of the survey
• But they had looked for work within the previous four weeks
Unemployment
• The Department of Labor Bureau of Labor Statistics
surveys thousands of Americans each month to calculate
the size of the labor force
• The Labor Force consists of those ARE working plus those that
ARE NOT working, but seeking work
• The unemployment rate is calculated via the number of
unemployed divided by the total labor force
Demand
• Periods of economic growth are often fueled by
increased demand for economic products.
• This increased demand often causes GDP to increase, while
simultaneously causing prices to go up.
• Firms increase their production to meet that increased
demand, and often hire additional workers, increasing the
payroll and reducing the unemployment rate.
• The increased demand for products can also result in
increased demand for loans to purchase products,
increasing interest rates.
Demand
• Recessions, on the other hand, are often fueled by a
reduction in demand for goods and services.
• Firms reduce production in response, lowering GDP, and
prices.
• Production cutbacks lead firms to lay off workers, increasing the
unemployment rate.
• Reduced demand for loans can result in lower interest
rates, and the Federal Reserve may further reduce
interest rates in an attempt to stimulate spending in the
economy.