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Measuring Economic Activity
GoalsDefine gross domestic product.
Describe economic measures of labor.Identify economic indicators for consumer spending.
1
2-1
Gross Domestic Product (GDP)◦ The total dollar value of all final goods and
services produced in a country during one year GDP per capita unemployment rate
◦ The portion of people in the labor force who are not working.
Chapter 2 2
Key Terms
Productivity◦ The production output in relation to a unit of
input. personal income
◦ Salaries and wages as well as investment income and government payments to individuals.
retail sales◦ The sales of durable and nondurable goods
bought by consumers
Chapter 2 3
Key Terms
Components of GDP1. Consumer spending for food, clothing,
housing, and other aspects.2. Business spending for buildings, equipment,
and inventory items3. Government spending to pay employees and
to buy supplies and other goods and services4. The exports of a country less the imports into
the country
Chapter 2 4
GROSS DOMESTIC PRODUCT (GDP)
Comparing GDP◦ GDP per capita is calculated by dividing
GDP by the total population.◦ GDP / POPULATION = GDP PER CAPITA
An increase in GDP per capita means that an economy is growing.
A decrease may means that an economy is facing difficulties.
Chapter 2 5
GROSS DOMESTIC PRODUCT (GDP)
Chapter 2 6
GROSS DOMESTIC PRODUCT (GDP)
Chapter 2 7
Comparison of GDP in Selected Countries
Source: CIA World Factbook
Chapter 2 8
What types of economic activities are not included in GDP?
Answer GDP only applies to reported final goods and services. Money earned for goods or services that are not reported
would not be included. Goods and services used in the manufacture of other
products are only counted once—in the final product.
Checkpoint >>
Employment◦ Members of the U.S. labor force are employed in
thousands of different jobs.◦ They produce thousands of different products and
services.◦ The labor force consists of all people above age
16 who are actively working or seeking work.
Chapter 2 9
LABOR ACTIVITIES
Unemployment◦ The unemployment rate is the portion of people in
the labor force who are not working.◦ The main cause of unemployment is reduced
demand for the goods and services being provided by various workers.
Chapter 2 10
LABOR ACTIVITIES
Productivity◦ A vital source of economic growth is and increase
in output per worker.◦ Improvements in capital resources (equipment,
and technology), worker training, and management techniques can result in more output per worker.
Chapter 2 11
LABOR ACTIVITIES
Chapter 2 12
LABOR ACTIVITIES
Chapter 2 13
How can productivity be increased?
AnswerProductivity can be increased by improvements
in capital resources (equipment and technology), worker training, and management techniques.
Checkpoint >>
Personal income◦ Salaries, wages, investment income, and
government payments to individuals.◦ Money earned by people from their participation
in production.◦ These funds provide the foundation for buying
needed goods and services.
Chapter 2 14
CONSUMER SPENDING
Retail sales◦ The sales of durable and nondurable goods
bought by consumers.◦ These retail sales are an indicator of general
consumer spending patterns in the economy.◦ Consumers spend money on: automobiles,
building materials, furniture, gasoline, clothing, as well as, purchases from restaurants, department stores, food stores, and drug stores.
Chapter 2 15
CONSUMER SPENDING
Chapter 2 16
What are the main sources of personal income?
AnswerSources of personal income include wages,
salaries, investment income, and government payments.
Checkpoint >>
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