3. Economic Measurements A healthy economy has 3 goals Increase productivity Decrease unemployment Maintain stable prices Nations routinely use measurements to determine their economic strength
4. Productivity Is output per worker measure over specific time period Business cans increase productivity by Investing (in new equipment or facilities) Provide employee training Reduce # of workforce and increase responsibilities *specialization & division of labor are key (think assembly line)*
5. Gross Domestic Product (GDP) Output of goods and services produced by labor and property Made up of: Gov’t spending Personal spending Net exports of goods and services Change in business inventories
6. Standard of Living Measurement of the amount and quality of goods and services that a nation’s people have Reflects quality of life
7. Inflation Rate Refers to rising prices (low = 1-5% per year is good) Money looses value when inflation gets too high Gov’t tries to control this 2 Measures: Consumer Price Index (CPI) : measures change in price over period of time for some 400 retail goods used (“cost of living index”) Producer Price Index (PPI): Measures wholesale price levels
8. Unemployment Rate All nations chart this The higher the unemployment rate the greater the chance of economic slowdown
9. Recession vs. Depression Depression Recession Period of prolonged recession Nearly impossible to find a job Businesses forced to shut down Low spending Results in poverty Period of economic slowdown Lasts 2 quarters or 6 months Consumers spend less $ Companies reduce workforce Future plans for spending are put on hold
