Economic Indicators

Essential Questions: Why does government

intervene in the economy?

How does government know when to intervene?

Key Terms

Pre-assess your knowledge of Key Terms #26-38—K, H, N on the left.

Define Key Term #30 only.Homework tonight is to define the

others from today’s notes.

Warm-Up: A Letter from a Young Woman

Read the letter to yourself…and then, discuss it with a partner, and answer the questions in the top part of your notes…

What does the letter reveal about this woman’s life?

During what time period was this letter written? How do you know?

What do you think was happening to consumer spending and business during the Great Depression? To people’s jobs? To prices and wages?

What details can you share about the health of the US economy during the Great Depression?

Modern-Day Connection

Click the image to watch the video

Economic IndicatorsEconomies have times of health and

sickness.

Economic indicators: statistics that help economists judge the health of economies.

How Do Economists Measure the Size of an Economy?Gross Domestic Product (GDP)

Per Capita GDP

Consumer Price Index (CPI)

Unemployment

Inflation

Deflation

What is GDP? Gross Domestic Product (GDP): The market

value of all final goods and services produced within a country during a given period of time

It is the measure of a country’s total output

The main measure of the size of a nation’s economy

GDP Definition Breakdown…

The market value…—the price consumers are willing to pay for a good or service in a competitive marketplace.

…of all final goods and services…—any legal good or service that is ready for use by consumers (not intermediate goods like steel, grain, etc.)

GDP Definition Breakdown…

…produced within a country…—goods and services made within its borders (but not necessarily a U.S. company-Ex. Toyota)

…during a given period of time…the Bureau of Economic Analysis calculates GDP every quarter (3 months)

Calculating GDP GDP Video Clip

What is Per Capital GDP? Per Capita: per person

Per Capita GDP: a nations real GDP divided by its population.

A good measure of a society’s standard of living

Per Capita GDP Example 2011 US GDP

$14.4 trillion

What is the US per capita GDP?

2011 Norway GDP $492 billion

What is the Norway per capita GDP?

Which has a higher standard of living?

What is Consumer Price Index (CPI)?

Consumer Price Index (CPI): A measure of price changes in consumer goods and services.

It shows changes in the cost of living over time.

Sometimes called “cost-of-living index”

Serves as the main measure of inflation

Consumer Price Index (CPI)

The Bureau of Labor & Statistics surveys thousands of households and researches retail prices monthly.

Using this data, they track changes over between two periods (Oct. 2008-Oct. 2009)

Example: A 2% increase in the CPI from Oct. to Oct. would indicate a 2% rate of inflation.

What is Unemployment?

Unemployment rate: The percentage of the labor force that is not employed, but is actively seeking work.

Like GDP and CPI, it is an indicator of an economy’s health.

Unemployment Types Frictional unemployment: People “between

jobs” and looking for for the “right job”

Example: people who have left one job to look

for another, or are looking for

their first job

Unemployment Types Structural unemployment: Loss of jobs due

to technology creating a decrease in demand for their skills

Examples: Travel agent, VCR repair

Causes hardships, but is overall good for an economy—technological progress

Unemployment Types Seasonal unemployment: Loss of jobs due

to the time of year

Examples: tourism, holidays, construction, agriculture

Cyclical unemployment: Loss of jobs during a period of economic decline

Example: Dot-com web development in early 2000s

Economic Indicators Gallery Walk

Visit each of the four visuals-- Examine each and answer the related

questions about GDP, unemployment, inflation and the business cycle during the depression.

Complete the Handout to turn it in.

Exit Ticket—Comprehension Check

Answer each question On Your Own Paper—

1. What does GDP stand for?

2. How is GDP calculated?

3. What kinds of goods and services ARE included in GDP?

4. What are the 4 types of unemployment?

5. In your own words, which of these economic indicators is the BEST indicator of an economy’s health? WHY?

What is Inflation? Inflation: an increase in the overall price level

of goods/services produced in an economy.

Germany after WWI is a prime example of an unhealthy economy.

Forced to pay war reparations at the end of the war in 1918, Germany’s economy printed more money. The result was hyperinflation (Click me!)

What is Inflation? Demand-pull inflation: inflation caused by

a “pull” on prices—consumers demand more goods/services than an economy can produce, driving prices up

Cost-push inflation: inflation caused by a “push” on prices—rising cost of production causes prices to rise

Video Clip

What is Deflation? Deflation: the opposite of inflation, fall in

the price of goods or services

Good news for consumers and savers. -The value of saved $ will increase as prices fall

Bad news for businesses. -Price drops result in decreased demand as they wait for prices to drop more.

Collaborative Practice

Draw your number—You will work your group of 3-4 students.

Each group will get 3 pieces of construction paper, highlighters (blue, green, yellow, and pink), scissors, and glue sticks.

At the top of each piece of paper, label each economy’s puzzle— “Puzzle for Economy A,” etc.

Glue each of the economy’s descriptions to their “board.”

Cut each of the puzzle pieces and sort them (photos, GDP graphs, unemployment graphs, and inflation graphs) and set them to the side.

Below each economy’s description, use the highlighters to create 4 boxes slightly larger than each of the puzzle pieces.

Blue Green

Yellow Pink

STEP 1: Setting Up the “Puzzle” Boards

Read each economy’s description. Information from each will match up to one of the each of the economic indicators provided.

Highlight the information from each description related to each of the indicators. For example, highlighting the text in the description related to GDP green.

DO NOT glue the pieces until you have agreed and are sure they have sorted correctly according to the information in the description.

STEP 2: Examine the Economies

OYOP—USING COMPLETE SENTENCES, ANSWER EACH

Analyze each of the 3 economies and answer the following questions:

1) Identify one way the government intervened in each economy.

2) Based on the information you examined, which economy would you say is the “healthiest?” Provide at least 2 pieces of information from the data provided to justify your answer.

STEP 3: You’re the Economist…

EXIT TICKET—Comprehension Check

On your own paper, use complete sentences to answer the following questions:

1. What does GDP stand for? How is it calculated?

2. What kinds of goods are NOT used in calculating GDP?

3. What kinds of goods and services are used to calculate CPI?

4. What are the 4 types of unemployment?

5. In your opinion, which of these is the BEST indicator of an economy’s health AND WHY?