Measuring_Economic_Health

Measuring Economic Health Tonya Preas ECO/212 February 7, 2011 Joe Timmerman Measuring Economic Health Measurement of economic growth is done through the Gross Domestic Product (GDP) (QuickMBA, 1999-2010). Services produced and the market value of the goods produced defines the Gross Domestic Product (QuickMBA, 1999-2010). The output of an economy measures the size of that economy (QuickMBA, 1999-2010). When the growth of Gross Domestic Product is a result of inflation or population increases then there is no increase in purchasing power (QuickMBA, 1999-2010). Phases make up the business cycle (Holt, Rinehart, & Winston, pp. 7-8). These phases are expansion, peak, contraction, and trough (Holt, Rinehart, & Winston, pp. 7-8). The business cycle influence comes from the availability of money, business investments, changes in political climate, or the world’s economy (Holt, Rinehart, & Winston, pp. 7-8). The Gross Domestic Product fluctuates and these fluctuations are what make up the business cycle (Holt, Rinehart, & Winston, pp. 7-8). The Gross Domestic Product measures the business cycle through the cyclical fluctuations (Rummery, 2002, p. 2). The Gross Domestic Product measures the economies production through monetary values (Rummery, 2002, p. 2). Historical data shows the business cycle moving through each phase makes up the cyclical fluctuations measured by the Gross Domestic Product (Rummery, 2002, p. 2). One key component of Gross Domestic Product is consumer expenditure (Rummery, 2002, p. 2). The Treasury Department is the government body that determines national fiscal policy (U.S. Department of the Treasury, 2010). They monitor the economy, spending, and fluctuating interest rates (U.S. Department of the Treasury, 2010). The Treasury Department uses this information to develop and manage fiscal policy (U.S. Department of the Treasury, 2010). Ensuring financial security and economic prosperity of the United States are also the responsibility of the Treasury Department (U.S. Department of the Treasury, 2010). Fiscal policies determine public expenditure and revenue (n.d.). The government uses these reports to help achieve desirable effects on employment and production (n.d.). Fiscal policy maintains ideal price levels by removing fluctuations (n.d.). Living standards are also maintained by using fiscal policy to maintain an efficient employment level (n.d.). Fiscal policy uses public expenditure, taxes, and public debt to achieve the desired goals that have the most positive effect on the nation (n.d.). The government can negatively affect the economy’s production and employment if they do not balance income distribution as equally as possible (n.d.). Also unbalanced tax increases will negatively affect the economy’s production and employment (n.d.). Government spending without balance can also negatively affect the economy’s production and employment (n.d.). The government’s fiscal policy is meant to help balance spending and taxes and the effect they will have on the economy’s production and employment, thus creating a positive effect (n.d.). References Holt, ., Rinehart, ., & Winston, . (). Holt Economics. : .  (n.d.). InformationBible. Retrieved from http://www.informationbible.com  QuickMBA. (1999-2010). Gross Domestic Product (GDP). Retrieved from http://www.quickmba.com/econ/macro/gdp/  U.S. Department of the Treasury. (2010). U.S. Department of the Treasury. Retrieved from http://www.treasury.gov