Chapter-4 extra

Chapter-4 extra - CHAPTER 4 Macroeconomic Measurements This...

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Macroeconomic Measurements This chapter explains how economists measure prices, the unemployment rate, and the market value of the goods and services the economy produces. Prices are measured using the CPI or the GDP implicit price deflator and unemployment is measured using the unemployment rate. This chapter shows how the CPI, the GDP implicit price deflator, the inflation rate, the unemployment and employment rates, the labor force participation rate, and the natural unemployment rate are defined, constructed, and used. Output is measured using GDP or real GDP. This chapter shows how GDP and real GDP are defined, computed, and used, and defines economic growth and business cycles. KEY IDEAS 1. Economists take measurements of the economy to find out how the economy is doing. 2. We measure prices in order to determine whether we are achieving price level stability. 3. The CPI is a major price index. 4. We measure unemployment in order to determine whether we are achieving low unemployment. 5. Full employment exists when the economy is operating at its natural unemployment rate. 6. GDP is the total market value of all final goods and services produced annually within a country’s borders. 7. We measure real GDP in order to determine whether we are achieving high and sustained economic growth. 8. Economists study two major macroeconomic topics that have to do with Real GDP: economic growth and business cycles. CHAPTER OUTLINE I. MACROECONOMIC MEASUREMENTS Economists want to take measurements of the economy to find out how the economy is doing. II. MEASURING PRICES Price in macroeconomics usually refers to an aggregate price, a price level, a price index, or an average price. When they talk about price stability, they are referring to the average price, price level, or price index remaining constant. A. Measuring Prices Using the CPI The price level is a weighted average of the prices of all goods and services, and it is measured by constructing a price index. One major price index is the consumer price index (CPI). The CPI is based on a market basket of goods and services purchased by a typical household. 52
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This note was uploaded on 11/28/2010 for the course ECON 201 taught by Professor Dr.sharma during the Spring '08 term at Ohio State.

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Chapter-4 extra - CHAPTER 4 Macroeconomic Measurements This...

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