[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

Chapter 22
MEASURING
OUTPUT AND
UNEMPLOYMENT
∂
Every month, when the United States Bureau of Labor Statistics releases
its latest figures on the unemployment rate, newspapers and the radio and
TV news give them significant coverage. The same is true when new data
on economic growth become available. Measures of unemployment and of growth
in the economy are yardsticks that are used to gauge economic performance. Such
yardsticks help analysts judge how successful economies have been in achieving
such policy goals as low unemployment and strong growth. In addition to being frequent
topics in the news, many of the most common economic yardsticks—the gross
domestic product, the unemployment rate, and the consumer price index—figure
prominently in political debates and presidential election campaigns.
In this chapter, we discuss what economists mean by the gross domestic product,
what it measures, and how the government goes about actually measuring it. Then,
we turn to the unemployment rate and examine how it is measured. Without an
understanding of these common yardsticks, we cannot assess their strengths and
weaknesses as measures of economic performance. It is especially important to
understand the weaknesses of our measures so that we do not make errors in assessing
economic conditions. The issues that arise in measuring inflation, another key
indicator of economic performance, are discussed in the following chapter.
Measuring Output and Growth
To gauge the economy’s success in raising living standards, we need to start by
understanding how we measure the total output of the economy. We will learn later
in this chapter that the aggregate income of the economy is equal to the aggregate
output of goods and services that the economy has produced. Measuring output is
our starting point for assessing the economy’s performance.
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