Page 481 - The Principle of Economics

MEASURING A NATION’S INCOME
When you finish school and start looking for a full-time job, your experience will, to a large extent, be shaped by prevailing economic conditions. In some years, firms throughout the economy are expanding their production of goods and ser- vices, employment is rising, and jobs are easy to find. In other years, firms are cut- ting back on production, employment is declining, and finding a good job takes a long time. Not surprisingly, any college graduate would rather enter the labor force in a year of economic expansion than in a year of economic contraction.
Because the condition of the overall economy profoundly affects all of us, changes in economic conditions are widely reported by the media. Indeed, it is hard to pick up a newspaper without seeing some newly reported statistic about the economy. The statistic might measure the total income of everyone in the economy (GDP), the rate at which average prices are rising (inflation), the percentage of the labor force that is out of work (unemployment), total spending at stores (retail
493
IN THIS CHAPTER YOU WILL . . .
Consider why an
economy’s total income equals its total expenditure
Learn how gross domestic product (GDP) is defined and calculated
See the breakdown of GDP into its four major components
Learn the distinction between real GDP and nominal GDP
Consider whether GDP is a good measure of economic well-being