Economic Indicators and the Business Cycle!

This is my second reflective post!  I hope it proves to be a good review of the week.

This week in Economics, we learned about Economic Indicators and the Business Cycle (see title of post).  Economic indicators give economists an idea of the well-being of an economy, and the business cycle shows the different stages economies go through and repeat over time.Economic Indicators:

One of the most important indicators of a country's economic well-being is GDP, or Gross Domestic Product.  This is the market value of all goods and services produced in a country within a given period.  Economists measure GDP using the following equation:

C + I + G + X = GDP

C = Consumption  (the measure of what households consume)

I  = Investment  (investments of businesses)

G = Government spending  (what the government spends)

X = Net exports  (the difference between a country's imports and exports)

Some other economic indicators:

• Standard of Living
• "the level of material comfort as measured by the goods and services that are available" (taken from notes)
• Unemployment Rate
• percentage of the population who are willing and able to work but cannot find a job
• Rate of Inflation
• Steady inflation is good for an economy; rapid inflation and deflation are not.
• Consumer Price Index (CPI)
• commonly used to measure price-level changes
• can compare prices in one period with prices from earlier or later periods
• National Debt
• the amount of money a government owes to other entities
• the current debt of the U.S. is over $17 trillion  ($17,000,000,000,000 +)

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Business Cycles:

The economy periodically experiences four different stages:

• Prosperity
• a peak of economic activity
• low unemployment, high production
• :)
• Recession
• economic activity slows down
• higher unemployment, lower production
• Depression
• a decline in GDP higher than 10%, OR:
• a recession lasting 2 or more years
• Recovery
• an increase in economic activity following a decline (recession / depression)

The Great Depression was marked by high unemployment and deflation (rare but bad for the economy).  During the 1920s, people bought things using credit, but this sort of economic growth was unsustainable.  The Great Depression was caused in part by a weak banking system and decreasing prices for agricultural goods.