How Economists Measure The U.s. Economy Essay

1051 Words May 20th, 2015 5 Pages
Review Content Vocabulary
1. Write a paragraph or two explaining how economists measure the U.S. economy. Use all of the following terms. The way economist usually measure the national economy’s performance is by using national income accounting (PG. 336), This area of economics deals with the overall economy’s output, or production, and its income. Five major statistics measure the national economy. These are gross domestic product (PG. 337), net domestic product (PG. 338), national income, personal income, and disposable personal income. When thinking about GDP, economists need to take inflation into account. Inflation (PG. 342) is a prolonged rise in the general price level of goods and services. Every month, the government measures the prices of a specific group of goods and services that the average household uses. This measurement is the consumer price index (PG. 343). Another important measure of inflation is the producer price index (PG. 344). The PPI is actually a group of indexes that measures the average change in prices that United States producers charge their customers. Government economists account for inflation by issuing another measure of price changes in GDP, called the GDP price deflator (PG. 344). This index removes the effects of inflation from GDP so that the overall economy in one year can be compared to the overall economy in another year. When the price deflator is applied to GDP in any year, the new figure is called real GDP (PG. 344). When we…

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