CHAPTER 12 & 13

ECONOMIC PERFORMANCE

GROSS DOMESTIC PRODUCT

•TOTAL DOLLAR VALUE

•FINAL GOODS AND SERVICES

•NEW ONLY

GDP EXPENDITURE MEASUREMENT

• CONSUMER GOODS AND SERVICES PURCHASED +

• BUSINESS GOODS PURCHASED +

• GOVERNMENT GOODS +• NET EXPORTS

GDPINCOME

MEASUREMENT

• WAGES +

• INTEREST +

• RENTS +

• BUSINESS PROFIT

INFLATION

•RISE IN GENERAL PRICE LEVEL

–DEFLATION?

CAUSES OF INFLATION

• DEMAND-PULL• COST-PUSH• WAGE-PRICE SPIRAL• EXCESSIVE MONETARY GROWTH

EFFECTS OF INFLATION• PURCHASING POWER DOWN

• SPENDING HABITS • SPECULATION INCREASE

• DISTRIBUTION OF INCOME

MEASURING INFLATION

• CONSUMER PRICE INDEX–MARKET BASKET

• PRODUCER PRICE INDEX• EMPLOYMENT COST INDEX• INTERNATIONAL PRICE

PROGRAM

BUSINESS CYCLE

•PEAK/BOOM•CONTRACTION•TROUGH•EXPANSION

RECESSIONvs.

DEPRESSION

BUSINESS FLUCTUATIONS

• INVESTMENT• GOVERNMENT ACTIVITY• EXTERNAL FACTORS• PSYCHOLOGICAL FACTORS

IN THE WORKFORCE

•LABOR FORCE

–OVER 16

–LOOKING FOR JOB

NOT IN THE WORKFORCE• DISABLED• ILL• HOMEMAKER• RETIREE• DISCOURAGED• UNDEREMPLOYED

FIGURING UNEMPLOYMENT

UNEMPLOYMENT RATE

____________________

LABOR FORCE PARTICIPATION RATE

TYPES OF UNEMPLOYMENT

•FRICTIONAL–seasonal

•STRUCTURAL•CYCLICAL

UNEMPLOYMENT BENEFITS

Who is eligible?

Poverty Rate

• Income distribution

• Income gap

• Anti-poverty policies– Earned Income Tax Credit– Employment Assistance– Housing Assistance– Welfare Reform