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1-8 Business and Economic Environments [CH 1

Figure 1.5 TRACKING THE ECONOMY

A sampling of the major economic indicators released by the government

Consumer Price Gross domestic
Index product
Released monthly by the Released quarterly by the
Labor Department. It Commerce Department, it MADE IN
measures inflation on the tallies the goods and U.S.A.
retail level. services produced in the
United States.
Index of leading
economic Employment
indicators Released monthly by the
Released monthly by the labor Department, it
Commerce Department, measures both the jobless
it is a basket of forward- rate and the number of jobs
looking indicators available.
designed to predict the
economy's strength six to nine months in Personal income and
advance. consumption
Released monthly by
Retail Sales the Commerce
Released monthly by the Department, it
Commerce Department, It measures growth in
is a measure of personal income and
Consumer spending. consumer spending.

Devalued currency. Putting Tracking GDP allows year-to-year comparisons that check the current status of the
more currency (money) into economy.
an economy causes the
already currency to not be as Some comparisons are not easily accomplished as inflation, which is reflected in
valuable—it will not purchase increased prices, complicates the measurement process. Accurate comparisons of
the same quantity of goods annual gross revenue must allow for inflation. Inflation is caused by government
and services. printing more unsupported dollars for the market place to support its borrowing.

Consumer Price Index Those unsupported dollars devalue the purchasing strength of the nation’s currency,
Released monthly by the with the result that the consumer prices rise to compensate for the devalued currency.
Labor Department. It The Consumer Price Index (CPI) is an indicator and measurement of inflation.
measures inflation on the Economists use the term real gross domestic product to describe inflation-
retail level. discounted GDP figures. This is an adjusted measure that reflects the value of all

Real gross domestic goods and services produced by an economy in a given year.
product (GDP) is an inflation Economic assessments being concerned with changes in GDP lead to the concept of
-adjusted measure that productivity. Productivity is a measure of efficiency of production. It relates to the
reflects the value of all goods amount of goods or services produced in a given period.
and services produced by an
economy in a given year Productivity gains are important because they result in higher living standards and
(expressed in base-year improved international competitiveness. United States Labor Productivity Growth data is
prices) and is often referred updated quarterly, available from March 1949 to the most recent recorded quarter.
to as constant-price GDP, Productivity does experience fluctuation, up and down, and is a dynamic value. The third
inflation-corrected GDP, or quarter productivity of 2020 averaged 1.51%. For the period of 2012 to 2016 the
constant dollar GDP.
productivity rate average was 1.1%. The changes measured are linked to the consumer
consumer price index price index (CPI) which is periodically reset to 100, a factor of inflation and for public
an index of the variation in confidence, with the base year currently using 2012 prices. Political analysts will use
prices paid by typical Presidential years to evaluate the nations productivity. The CPI rises annually as a
consumers for retail goods reflection of inflation and periodically reset to 100% for public consumption and
and other items.
confidence in their currency even though the price of bread and beans is higher today than
productivity five years ago; a technique to hide inflation. Inflation only occurs as government prints
A measure of the efficiency more dollars and infuses those dollars into the marketplace.
of production.

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