Goals:

• Define gross domestic product.
• Describe economic measures of labor.
• Identify economic indicators for consumer spending

Key Terms:

• gross domestic product (GDP)
• GDP per capita
• unemployment rate
• productivity
• personal income
• retail sales

 Lesson 2-1    Measuring Economic Activity 

• Gross Domestic Product (GDP) – the total dollar value of all final goods and services produced in a country during one year.
• Consumer spending for food, clothing, housing, and other aspects
• Business spending for buildings, equipment, and inventory items
• Government spending to pay employees and to buy supplies and other goods and services
• The exports of a country less the imports of a country
• GDP does NOT include the value of the work you do for yourself (mowing your own lawn). If you pay someone to mow your yard, it would count.
• Only final goods, such as cars, are counted when you measure GDP
• Intermediate goods used in manufacturing (steel and fabric used to make a car) are not counted.
• If GDP is increasing from year to year, it is usually a sign that the economy is healthy and growing.
• GDP per capita – or output per person. Calculated by dividing the GDP by the total population
• Labor Force – consists of all people above age 16 who are actively working or seeking work. Students, retired people and others who cannot or do not wish to work are not part of the labor force.
• Unemployment Rate – the portion of people in the labor force who are not working. People are considered to be “unemployed” if they looking for work, but unable to find a job. The main cause for unemployment is reduced demand for the goods and services being provided by various workers.
• Productivity – the production output in relation to a unit of a unit of input, such as workers. Improvements in capital resources (equipment and technology) can result in more output per worker.
• If wages increase faster than gains in productivity, the cost of producing goods increases and prices rise. In cases such as this, even though workers are making more money, they cannot improve their standard of living because of rising prices.
• An ability to produce more goods and services makes it possible to reduce the number of hours in a workweek. In the 1890s, the average US worker put in about 60 hours per week. Today, that number has decreased to less that 40 hours.
• Because of technology and efficient work methods, even though US employees work fewer hours, more is produced and earned than ever before.
• Personal Income -  refers to salaries and wages as well as investment income and government payments to individuals. These are the funds people use for buying needed goods and services.
• Retail Sales – the sales of durable goods and nondurable goods bought by consumers. Increasing retail sales usually points towards economic growth.
• The main items whose sales are measured for estimating retail sales include automobiles, building materials, furniture, gasoline, and clothing as well as purchases from restaurants, department, grocery and drug stores.

Assignments - GDP

Define Key Terms

Working in teams of three:
Compose a three paragraph paper (use MS Word) explaining the following - The GDP of a country presents information about the economic output of a country. Prepare a list of drawbacks: resulting from only looking at GDP when evaluating the economic progress of a nation. What aspects of economic growth may not be reflected in the GDP of a country?