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Unit 3 Review Measuring the Macroeconomy

Unit 3 Review Measuring the Macroeconomy. GDP, Economic Growth, Unemployment, Inflation, AD-AS Curve. GDP. Gross Domestic Product Measure of output of an economy Calculated in several ways C+I+G+(x-m)=Gross Domestic Product Most of GDP is Consumer Spending

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Unit 3 Review Measuring the Macroeconomy

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  1. Unit 3 ReviewMeasuring the Macroeconomy • GDP, Economic Growth, Unemployment, Inflation, AD-AS Curve

  2. GDP • Gross Domestic Product • Measure of output of an economy • Calculated in several ways • C+I+G+(x-m)=Gross Domestic Product • Most of GDP is Consumer Spending • Increases in C, I, G result in increased GDP, decreases result in decreases • Exports increase GDP increase • Imports increase GDP decrease

  3. ECONOMIC GROWTH • Slow long term growth in per capita income • Leads to expansion of economy, more and better products • Results in improved standard of living

  4. UNEMPLOYMENT • Types and Causes

  5. TYPES AND CAUSES OF UNEMPLOYMENT • Frictional Unemployment-workers taking time to find jobs, between jobs, after school or training • New high school and college graduates, stay at home moms entering the workforce

  6. TYPES AND CAUSES OF UNEMPLOYMENT • Seasonal Unemployment-Unemployment caused by seasonal changes in harvest or production schedules

  7. TYPES AND CAUSES OF UNEMPLOYMENT • Cyclical Unemployment • Caused by recession • Business lays off in response to decreased demand during recession • As economic conditions improve workers return to work

  8. TYPES AND CAUSES OF UNEMPLOYMENT • Structural Unemployment • Caused by worker’s skills do not match the jobs available • Development of new technology • Discovery of new resources • Globalization • Lack of education

  9. 4. What are the costs and causes of inflation? • The causes of inflation can be explained by one of three theories; quantity theory that says too much money in the economy causes inflation, the demand-pull theory that says that inflation is the result of demand for goods and services exceeding supply, and the Cost-Push theory that says inflation is the result of increased prices to cover increased costs.

  10. The costs, or effects, of inflation are; erosion of purchasing power, erosion of income particularly for fixed income, can erode savings if inflation is greater than interest.

  11. AS-AD CURVE Aggregate Supply Aggregate Demand Total amount of goods and services in an economy that will be purchased at all price levels Curve slopes down because as prices fall purchasing power increases • Total amount of goods and services available at all prices • Curve slopes up because as price level rises real GDP rises

  12. AS-AD Curve Shifts in the aggregate Supply Curve Decrease in the costs of production land, labor, capital). Improvements in technology. Increase in productivity Increase in the cost of production. Deterioration in technology. Decreases in productivity

  13. Changes in Aggregate Demand Factors that cause a shift to left or right consumer spending business investment government spending exports imports Price level and real GDP will increase. Price level and real GDP will decrease. *Find new equilibriums and make comparisons

  14. AD-AS REVIEW Find the new equilibrium and then make comparisons

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