Unit 2: Economic Indicators and the Business Cycle

Unit 2 is about how economists measure the economy. Know the circular flow (households and firms in the product and factor markets), the expenditure approach to GDP (C + I + G + Xn), and what GDP leaves out: used goods, financial transactions, intermediate goods, and non-market activity. Calculate unemployment (unemployed ÷ labor force) and tell frictional, structural, and cyclical unemployment apart. Use the CPI and GDP deflator to measure inflation, convert nominal to real values, and know who wins and loses from unexpected inflation. Finish with the phases of the business cycle.