The ultimate objective of economic activity’ amount is to provide the good~ and services that the population desires, What could be more important for: an economy than to-produce ample shelter, food, education arid recreation for its people?

The most comprehensive measure of the total output [n an economy is’ the gross domestic product CDP). GDP is the measure of the market value of final goods and services her, cars, rock con- certs, donkey’ rides care, arid so on produced in a country during a year/There are two . ways to measure GDP. Nominal GDP is measured in actual market prices. Real GDP is calculated in constant or invariant prices (where we measure the number of cars times the prices of. cars in. a given year such as 1996).

Real GDP is the most closely.watched measure of output; it serves as the carefully monitored pulse of a nation’s economy. Figure 20-1 shows the history of real GD the United States since 1929. Note the economic ‘decline during the Great Depression of the 1930s, the boom during World War II, the recessions in 1975 and 1982, and the steady growth in the long expansion from 1992 to 2000. Despite the short-term fluctuations seen in cycles, advanced economies generally exhibit steady long-term growth in real GDP and an government in living standards; this process is know as economic. growth. The American economy has proved itself a powerful engine of progress over a period of more than a century, as shown by the growth in potential output.

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