Transcript Economic Measurements

Economic
Measurements
When is an Economy Successful ?
Increased
Productivity
Decreased
Unemployment
Stabilized
Prices
Economic Measurements
Accurate information about an economy is
essential to the measurement of an
economy.
Countries use key measurements to
measure their economic strength.
Employee Productivity
Productivity is output per worker hour that is
measured over a defined period of time
(a week, month, or year).
Productivity is a crucial factor in a country’s
standard of living.
Higher productivity, improves company’s profit
Ways To Improve Productivity
Invest in new equipment or facilities
that allow workers to be more efficient
2. Provide additional training
3. Provide financial incentives
4. Reduce workforce and increase the
responsibilities of those staying in the
workplace
1.
Gross Domestic Product (GDP)
A measure of the goods and
services produced using labor
and property located within a
country.
Gross National Product (GNP)
The total dollar value of goods and
services produced by a nation,
including goods produced abroad.
With GNP, it doesn’t matter where
it is produced!
 Difference between GDP vs GNP
 With GNP, it is not where the production
takes place but who is responsible for it.
Standard of Living
 A measurement of the amount of goods and
services that a nation’s people have.
 Reflects their quality of life
Inflation Rate
Inflation refers to rising prices.
A low inflation rate is good (1-5%) because it
shows that the economy is stable
Double digit inflation devastates an economy (10
or higher)
When inflation gets high money does not have
the same value it did under times of lower
inflation
When inflation gets high, money losses its value
Inflation Rate
Controlling inflation is one of a government’s
major goals
When inflation goes up many governments raise
interest rates to reduce everyone’s ability to
borrow money
The rise in interest rates causes a slow-down in
economic growth which helps to bring inflation
down
Consumer Price
Index (CPI)
Also called the cost
of living index
Measures the price
increases in over
400 goods and
services used by
the average urban
household
Items such as food,
housing, utilities,
medical care, and
transportation
Producer Price
Index (PPI)
Measures wholesale
price levels in the
economy.
It is often a trend
setter because the
price increases are
often passed along
to the consumer
When there is a drop
in the PPI there is
usually a drop in the
CPI
The Unemployment Rate
All nations chart unemployment or jobless rates
The higher the unemployment rates the greater
the chances of an economic slowdown
The lower the unemployment the greater the
chances for an economic expansion
This rise and fall manipulates the economy
because the number of people working,
spending money, and paying taxes contributes
to the economy and keeps the government
from paying so much for social services
Business Cycle
Expansion
Recession
Recovery
Trough
Business Cycle
Expansion/Prosperity – a period of economic
growth and expansion (low unemployment,
increased output of goods, and high consumer
spending)
Recession – a period of economic slowdown (rise in
unemployment, fewer goods and services are
produced, and consumer spending decreases)
Depression/Trough – a period of prolonged and
deep recession (very low consumer spending,
unemployment is very high, and production of
goods and services is very low) Poverty results
Recovery – a period of renewed economic growth
(reduced unemployment, increased spending, and
moderate expansion by business)