Gross Domestic Product (GDP) is the sum of income coming into a country during the economic period in which it is measured.  GDP can me measured by a country’s income (also called gross domestic income (GDI), or by the total cost of all finished goods and services produced within the country.  It is called “gross” domestic product as the “gross” means that depreciation is not taken into account for investment.  If depreciation were taken into account and net investment was calculated then it would be net domestic product.

GDP can be calculated from the follow equation:

GDP = CONSUMPTION + GROSS INVESTMENT + GOVERNMENT SPENDING + (EXPORTS - IMPORTS)

The participation rate is the number of people who are in the labor force divided by the population that is of working age.  Working age is considered to be sixteen years of age to sixty-five years of age.  This is an interesting statistic in that it describes the number of people who could be working choose to do so.  For instance, in recent history the participation rate of women has increased dramatically as it has become more common place for women to leave the role of homemaker and enter the work force.  As the participation rate increases this is usually a sign of increased economic growth

The pariticpation rate is calculated as follows:

Participation Rate = Labor Force / Population of Working Age

The unemployment rate in an economy is the number of people who are unemployed as a ratio to the number of people in the labor force of the economy.  Unemployment has a direct effect on the welfare of the unemployed and invariably the economy in which they live.  The Current Population Survey (CPS), which is a monthly statistical survey of about 60,000 households, is used by the Bureau of Labor Statistics (BLS) uses the survey to provide a monthly report of the employment situation in the United States.  The survey is based on responses to a series of questions on work and job search activities, each person sixteen years and over in a sample household is classified as employed, unemployed, or not in the labor force.  A higher unemployment rate provides a signal that the economy may not be using some of its resources efficiently.

The unemployment rate is calculated as follows:

Unemployment Rate = Unemployed / Labor Force

The labor force is the number of people in a population who are of working age and are willing or wanting to work.  Working age is usually above sixteen years old and below sixty-five.  If someone is not looking for work, such as a homeless peddler on the street or a full time student, then they are not considered unemployed because they are not willing or wanting to look for employment.  Also if someone has not been able to find a job and gives up looking then they are considered a discourage worker, but they no longer count as part of the labor force or the unemployed becuase they are no longer seeking employment.

The following equation calculates the labor force:

Labor Force = Employed + Unemployed

The gross domestic product (GDP) growth rate tells much about whether an economy is getting larger, which creates more jobs and will bring up the standard of living, or if it is getting smaller, jobs are being lost and the standard of living is going down.  Periods of positive growth rates are called expansions and periods of negative growth rates are called recessions.

The equation to derive the GDP growth rate (in real GDP) is:

Where:

Y = real GDP

t = the time period being assesed