macro: econ indicators

macroeconomics

macroeconomics

• the study of economics as a whole

  *are we doing better or worse?

economic indicators

1. gross domestic product (GDP) —> best indicator

2. unemployment rate —> inversely related to GDP (as GDP increases, unemployment rate should decrease)

3. consumer price index (CPI)

4. sales —> new products (production)

5. stock market —> worst indicator

gross domestic product (GDP)

• the dollar amount of goods, services, and structures produced within a country’s national borders in one year

  • goods: pizza being produced in a pizza restaurant

  • services: jobs, nurses

  • structures: homes, warehouses

    *excluded:

    • second hand sales (they were already counted when they were new)

      • antiques, used items

    • underground market (illegal things cannot be considered legitimate in the economy)

      • illegal drugs, guns, gambling

    • intermediate products — parts of a whole (cannot double dip because parts were already counted for when bought separately)

      • tires on a car, sugar in a cake

    • non-market transactions (quite impossible to keep track of the money exchanged)

      • babysitting, lawn mowing

  • PROS: most inclusive (indicates if people are better off from year to year)

    *most important economic statistic there is

  • CONS: quality of life (because there is more production and more money being spent, does not mean people are happy and the nation is thriving — "money doesn’t buy happiness”) and inflation (GDP would go up but production remains the same)

inflation

• a rise in price level of goods, services, and structures - change in price over a long period of time

  • about 3-4% this year in USA

    *this changes the GDP since things cost more, but people are not necessarily buying more

    • when the economy is doing well, CPI goes up

consumer price index (CPI)

• the overall change in prices over a short period of time

  • slight change

recession

• when the GDP goes down for six or more months

  • obama after 9/11 (2008) —> didn’t call it a recession but it was one

unemployment rate

• the percentage of unemployed workers in the total labor force

  • want it to go down

revenue

• income for the year (new money coming in)

  • ex. paycheck

    *in usa, the number 1 government revenue is income tax

expenditures

• money spent in a year

  • ex. bills, rent

    *in usa, social security, healthcare, defense

federal budget

• total revenue and expenditures within a nation in a year

  • usa’s number 1 expenditure is social security

    *people are living longer and there are more people (boomers)

deficit

• when the expenditures are more than the revenue in a year

  • deficit gets added to the national debt every year

    *had a deficit every year since 9/11

surplus

• when the revenue is more than the expenditures

  • clinton had a surplus

    • instead of paying debt, he gave 400 bucks to every homeowner (homeowners check)

debt vs. deficit

• debt is the TOTAL of all deficit in the country’s history

• deficit is debt from ONE YEAR

federal reserve board

• people in charge of the federal budget

  *chairperson —> jerome powell