3.1.1 Macroeconomic Goals

How is real GDP helpful for economists?

- It more accurately shows the value of goods and services being produced - It can show how much an economy is growing year to year

What actions might the government take to address this problem: Economic growth has slowed, and GDP is falling?

- Lower interest rates to allow businesses to borrow more money - Reexamine laws that may limit economic freedom and growth

What actions might the government take to address this problem: Unemployment levels are rising?

- Lower taxes on businesses - Invest in programs like unemployment benefits - Create jobs by investing in projects (ex: construction)

What actions might the government take to address this problem: Prices on goods and services are rising too sharply?

- Reduce the amount of money they put into circulation

How do economists use per capita GDP to check an economy's health?

- To better understand how different economies compare, no matter the size of the country. - A good measure of a country's standard of living because it provides insight into the economic well-being of individual citizens

What are the three primary macroeconomic goals countries have?

1. Ensure economic growth 2. Keep prices stable 3. Reach full employment

What are the four most important measures economists use to evaluate an economy?

1. Gross domestic product (GDP) 2. Per capita GDP 3. Unemployment rate 4. Rate of Inflation

Real GDP

A measure of a country's gross domestic product, adjusted for inflation

Consumer Price Index (CPI)

A measure of the overall collection of the change in prices paid by consumers for goods and services/The average prices that consumers must pay for goods and services

Desired Effect of Keep Prices Stable

Allow people to plan for their expenses

Inflation

An increase in prices combined with a fall in the value of money

Desired Effect of Ensure Economic Growth

Create more jobs, grow businesses, and increase production

Desired Effect of Reach Full Employment

Ensure anyone who wants work can find it

How do economists use gross domestic product to check an economy's health?

GDP provides a snapshot of a country's economy and is used to estimate an economy's size and growth rate

The higher the GDP, the (healthier/sicker) the economy

Healthier

If aggregate demand is higher than aggregate supply, prices could (rise/fall)

Rise

If prices rise or fall too quickly, the economy is (growing/shrinking)

Shrinking

If aggregate demand falls, economic growth could (quicken/slow)

Slow

The higher a country's per capita GDP, the (stronger/weaker) its economy

Stronger

Interest Rates

The amount of interest, or additional money, that borrowers pay for the money that they borrow. It is usually expressed as a percentage of the original loan

Macroeconomics

The branch of economics that studies the entire economy of a nation

Per Capita GDP

The gross domestic product of a country divided by its population

Unemployment Rate

The percentage of a country's workforce that is without employment

Cost of Living

The price people need to pay to get the goods and services they need

Aggregate Demand

The total demand for goods and services within an economy

Aggregate Supply

The total output of all goods and services produced by an economy

Gross Domestic Product (GDP)

The total value of all goods and services produced in a country in a year

How do economists use macroeconomics?

They use macroeconomics to assess the health of a nation's economy

The higher a country's unemployment rate, the (stronger/weaker) its economy is

Weaker