Per Capita and the Uses of GDP

when there is something to share, it’s important to know among how many people
growth in real GDP doesn’t account for changes in population
there can be large differences for countries with rapidly growing/shrinking populations
- if population is growing faster than GDP, then GDP per capita is actually falling

$real GDP per capita:$ a rough measure of a country’s standard of living
- $standard of living:$ the degree of wealth and material comfort available to a person or community
growth in real GDP per capita is usually best reflection of changing the standard of living

$business fluctuations (or business cycles):$ short-run movements in real GDP around its long-term trend

problem at the trough is typically unemployment
- as business activity falls towards the trough, the need for labor inputs falls so unemployment is the result
problem at peak is usually price inflation
- as economy “heats ups” towards the top of the cycle there is a tendency for price inflation to occur
consist of concerted cyclical upswings and downswings in the borad measure of economic activity
- output, employment, income, and sales
the alternating phases of the business cycle are expansions and contractions

$recession:$ a significant, widespread decline in real GDP and unemployment
- ex: global recession of the 2008 financial crisis
the average length of recessions going all the way back to 1857 is less than 17.5 months
three things that happen in a recession:

the number 1 cause of a recession is a stock market crash
- as stock prices go down, investors often have less capital to invest in businesses
- if businesses can’t raise money for growth an operating costs, that can lead to layoffs or hiring freezes
prices tend to fall during a recession