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MAROECONOMIC GOALS

MAROECONOMIC GOALS. WHAT ARE THE COMPONENTS OF GROSS DOMESTIC PRODUCT? HOW DO WE MEASURE THE ECONOMY TO SEE IF WE ARE MEETING ECONOMIC GOALS?. FULL EMPLOYMENT PRICE STABILITY ECONOMIC GROWTH. HOW DO I KNOW. TWO LAWS OF THE LAND. EMPLOYMENT ACT OF 1947.

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MAROECONOMIC GOALS

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  1. MAROECONOMICGOALS WHAT ARE THE COMPONENTS OF GROSS DOMESTIC PRODUCT? HOW DO WE MEASURE THE ECONOMY TO SEE IF WE ARE MEETING ECONOMIC GOALS?

  2. FULL EMPLOYMENTPRICE STABILITYECONOMIC GROWTH

  3. HOW DO I KNOW TWO LAWS OF THE LAND

  4. EMPLOYMENT ACT OF 1947 • COMMITTED THE FEDERAL GOVERNMENT TO MAXIMIZE EMPLOYMENT AND ECONOMIC GROWTH, AND MAINTAIN A STABLE PRICE LEVEL

  5. THE FULL EMPLOYMENT AND BALANCED GROWTH ACT OF 1978 • REACH AN UNEMPLOYMENT RATE OF 4% • STABILIZE THE PRICE LEVEL WITH A TARGET INFLATION RATE OF ZERO % • MAINTAIN STEADY ECONOMIC GROWTH

  6. FULL EMPLOYMENT • WHY IS IT IMPORTANT?

  7. ZERO INFLATION • WHY IS IT IMPORTANT?

  8. STEADY ECONOMIC GROWTH • WHY IS IT IMPORTANT?

  9. IN GENERAL,THE GOALS CONFLICT SOCIETY IS FACED WITH TRADE-OFFS

  10. OUR JOB IS • TO UNDERSTAND THE VALIDITY OF THE MEASUREMENT OF ECONOMIC VARIABLES IN ORDER TO UNDERSTAND THE IMPLICATIONS OF THE TRADE-OFFS AMONG GOALS

  11. Read activity 11

  12. THE UNEMPLOYMENT RATE IS A BROAD MEASURE OF ECONOMIC ACTIVITY • TO EMPLEMENT PROGRAMS TO HELP THE UNEMPLOYED, WE NEED TO KNOW MORE ABOUT THEM • SKILL LEVEL • ETHNIC & RACIAL GROUPS • AGE GROUPS

  13. The unemployed does not include • The military* • The too old (over 65) • The too young (under 16) • The unable (institutionalized) • The unwilling

  14. The unemployment rate number of unemployed • UR = ---------------------------------- * 100 labor force

  15. The labor force participation rate number in labor force • LFPR = ------------------------------ * 100 adult population

  16. CPI – THE CONSUMER PRICE INDEX current year price • CPI = --------------------------------- * 100 base year price

  17. Base year index is always 100 • Subtract the base year index from any year’s index to determine the percent change in prices from the base year

  18. Year to year price change new cpi – old cpi • Price change = ------------------------ * 100 old cpi

  19. The cpi • Measures the price level • And from this the inflation rate can be calculated • Includes items people may not buy every year, ie; house, car – thus may overstate actual change in cost of living

  20. Real vs Nominal GDP • The growth rate of Real GDP is a better measure of macroeconomic conditions than growth rate of Nominal GDP because nominal GDP includes effects of inflation • The growth rate of real GDP per capita captures a measure of changes in the standard of living

  21. The GDP Deflator • Real GDP = nominal GDP/the index

  22. Short-run economic growth • Measures changes in real output because of more or less labor applied to the existing level of technology and capital stock • Measured quarter to quarter or year to year

  23. The real interest rate Real rate = nominal rate – rate of inflation

  24. Long-run growth • Changes in productive capability through changes in the amount of • Plant, equipment and resources • Technology • Labor force: size • And Quality • Education and skill level

  25. For economists and the AP exam! • Short-run growth refers to fluctuations in real output • Economic growth refers to Long-Run growth, changes in the economies ability to produce

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