13 Measuring The Economy’S Performance

OBJECTIVE: COVER VARIOUS METHODS OF MEASURING THE ECONOMIC HEALTH OF A NATION Measuring the Economy’s Performance

National Income Accounting
Is the measurement of the national economy’s performance
There are five major statistics that measure economic performance
Gross Domestic Product (GDP), Net Domestic Product (NDP), National Income, Personal Income, and Disposable Income

Gross Domestic Product
Is the total dollar value of all final goods and services produced in the nation in a single year
NDP does the same thing as GDP except it factors in depreciation
Depreciation is the loss of value because of wear and tear to durable goods and capital goods

National Income
Is the total amount of income earned by everyone in the economy
This is determined by adding up; wages, salaries, income of self-employed, rental income, corporate income, interest on savings and other investments
Personal Income is money you have before taxes; Disposable Income is what your have after you pay your taxes

Keeping track of the Business Cycle
Each month the government checks the price of over four hundred different products
This price check is called the Consumer Price Index (CPI)
The CPI is then compared to pervious CPI’s
If there is a huge change this could indicate inflation

Aggregate Demand and Supply
Aggregate Demand- is the total quantity of all goods and services in the entire economy demanded by all people
Aggregate Supply- real domestic output of producers based on the rise and fall of the price level

The Business Cycle
The business cycle has four parts
Expansion
Peak
Recession
If the recession is severe it will be called a depression
Trough

Causes of the Business Cycle
High consumer demand causes expansion of the economy
Once people begin to spend less this causes a recession
Government policy can also cause the economy to expand or recess

Review
National Income Accounting measures what?
Ans. the national economy’s performance
What is the GDP?
Ans. Is the total dollar value of all final goods and services produced in the nation in a single year
Name the four parts of the business cycle.
Ans. Expansion, Peak, Recession, and Trough

13 Measuring The Economy’S Performance

by David Rogers

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