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Unit 1
MEASURING ECONOMIC GROWTH
facts & To know whether the economy is growing at a desirable rate, statistics must
figures be gathered. The federal government collects vast amounts of information
and uses a variety of figures to keep track of the economy. The gross domestic
product (GDP) that was discussed in Chapter 1 is an extremely valuable sta-
tistic. Another is the Consumer Price Index.
The Consumer Price Index (CPI) indicates what is happening in general to
The Great Depression of the
prices in the country. It is a measure of the average change in prices of consumer
1930s resulted in tremendous
goods and services typically purchased by people living in urban areas. To calcu-
economic difficulties around the
late the CPI, the government tracks price changes for hundreds of items, includ-
world. In the United States, the
ing food, gasoline, housing, and even cellular phones. With the CPI, comparisons
prices of stock fell 40 percent;
can be made in the cost of living from month to month or from year to year, as
9,000 banks went out of busi-
shown in Figure 3-4.
ness; 9 million savings accounts
Some commonly used indicators for tracking the economy are shown in
were wiped out; 86,000 busi-
Figure 3-5. Government economists and business leaders examine the CPI,
nesses failed; and wages were
GDP, and other statistics each month to evaluate the condition of the econ-
decreased by an average of
omy. If the growth rate appears to be undesirable, the government can take
60 percent. The unemployment
corrective action.
rate went from 9 percent to
25 percent—about 15 million
jobless people.
CHECKPOINT
List the basic ways of encouraging economic growth.
FIGURE 3-4 The cost of living doubled between 1983 and 2006.
Consumer Price Index (1983 = 100)
200
$200
179.9
180
163
160
148.2
140
130.7
120
100
0
1983 1990 1994 1998 2002 2006
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