unit 13 - measuring economic activity

• Full employment

• Economic Growth

• Price Stability

• Income distribution

counts the total spending on final goods and services within a year

GDP = C+I+G+(X-M)

counts GDP through the market view of the circular flow of income, adding up all income earned from FOP, wages, interest, rent and profits are all factor payments

W+I+R+P = C+I+G+(X-M)

seeks to determine the final value of all goods and services produced within a year

identify value at each stage and then the total is then added to the national income number

GDP = national output = national income = national spending

Gross domestic product: monetary value of all goods and services produced in a country, geographically and domestically, in a year

Gross National income: the total domestic and foreign output ina country in a year

Subtracts foreign owned FOP in country and adds income in domestically owned FOP in other countries

measures value of current output at current prices

measures value of current output at constant prices, taking inflation into account

• High GDP: significant foreign presence in firms/workers

• High GNI: significant workers/firms who send income overseas

Consumption + Investment + Government Spending + Net exports

GDP + (Factor income flowing in - factor income flowing out)

(Nominal GDP/Price deflator) x 100

(Nominal GDP/Real GDP) x 100

per head income

• gives approximate standard of living

• shows economic growth of populaton

buying power adjusted for local prices in difference economies, used to more accurately assess the standard of living available for a given income

1. Comparing countries

• comparing the standard of living across countries

• allows us to recognize economic progress and ideas for further growth

2. Evaluation of Economic Performance Over Time

• Impacts policies made

• votes can use these results to assess the effectiveness of current governing approach

• business can use info to predict change in market demand

• increasing life spans

• estimated value of black market and parallel market

• unpaid work

• negative externalities

• under-reporting the loss of natural resources

• composition of output: real GDP values do not communicate the types of production and their value to society

• quality of life: trust in law, group participation, life satisfaction

• income distribution: unaware if lower income areas are receiving fair income distribution

Better life index

• intergovernmental organization for economic cooperation and development

• adds examination of gender disparities: level of satisfaction men and women experience at different indicators

• desplays regions at similar rankings

• created by UN Sustainable Development Solutions Network

• surveys indiviiduals based on their level of happiness

• incorporates environmental impact

• combines self reporting happiness and life expectancy

• environmental impact by determining the amount of natural resources used per capita

used to show the fluctuations of national income in a long term trend

two consecutive quarters of declining national output (when GDP declines over 6 months)

• lowest point of a recession

• no one knows when this point is hit until growth has resumed

• lowest point on GDP line

• as GDP line rises from trough

• returning to national output value prior recession

• economy grows beyond its intial level of output

• usually occurs in short bursts

• when short bursts hit an apex

• only observed after another recession begins