Agenda Thurs 3/16 & Fri 3/17

Transcription

1 Agenda Thurs 3/16 & Fri 3/17 Final Project Review (MAD/Stock) QOD # 23: What Counts GDP Homework P. 316 # 1-6 & p 373 #1-6 Team Project Unit #2 DUE: 3/20 Self-Assessment Rubric & Write-up DUE 3/20

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3 QOD #23: What Counts President Trump has given you the task of figuring out how much the American economy produces in a year. How would you go about doing this? Do you count production from foreign firms in America and/or American firms producing in other countries? Do you count every item produced or use a statistically significant sample? Pick a list of things and estimate based off that Would not result in accidental results but truly representative of the population Is the answer for Trump based on the number (#) of goods produced or the dollar ($) amount of these goods? Why is it important to know this information?

4 Measuring Economic Performance Gross Domestic Product (GDP): is the total market value of all final goods and services produced annually in an economy. To calculate the GDP: # of good price, then add dollar amounts (100 $60) + (1,000 $3) + (1,000 $4) = $13,000 (GDP)

5 What Counts? GDP counts only final goods to avoid double counting.

6 Why Final Goods? A final good is a good sold to its final user. Ex: When you buy a hamburger at a restaurant, the hamburger is a final good. You are a final user. Intermediate good is not counted in the GDP. When computing GDP, economists count only final goods and services. When economists count both final and intermediate goods they would be double- counting.

7 What GDP omits: Illegal goods and services Legal goods and services for which there is no record Some non-market goods and services Sales of used goods Stock and other financial transactions Government transfer payments

8 Measuring GDP 4 parts Consumption (households) [Market basket = CPI] Clothes, cars, food Investment (businesses) Tools, machines, factories Government (government) Office supplies, tanks, weapons Export (goods bought by foreigners outside of the country) Cars, wheat Import (goods bought by Americans from other countries) Computers, cars, electronics GDP = C + I + G + EX - IMP

9 Is Every Good That Is Produced Also Sold? Yes, the government statisticians who measure GDP assume that everything that is produced is purchased by someone

10 GDP v. Quality of Life Per capita GDP = GDP population

11 Consumer Price Index The consumer price index (CPI) is a measure of the average price of goods purchased by a household It measures the average market basket of goods of the urban consumer The most widely cited price index.

12 U.S. GDP Gross Domestic Product Past Trend Present Value & Future Projection Billion US Dollars. Annual Rate Seasonally Adjusted.

13 Case Study #1 of GDP in the US The pace of economic activity in the U.S. economy slowed as real gross domestic product (GDP) grew by 2.2 percent in 2007 compared to 2.9 percent a year earlier and 3.1 percent the year before that. Real growth in the economy weakened sharply in the fourth quarter as the economy expanded by only 0.6 percent at an annualized rate.

14 Case study #1 (cont.) At the end of 2008, the CPI fell three months in a row. In January 2009, it increased by.3%. The largest single month jump ever recorded (in 61 years) was in November at -1.7%. This was a concern because deflation was a hallmark of the depression. Normally lower prices, especially gas prices makes us happy. Things the government chose to do at that time: lower the mortgage rates for homes Bail out programs (Fed money to state govt & private business). Government subsidies to get people to work Did it work? Is it still working?

15 American Debt Case Study #2 Americans are at the end of the rope with debt. $13.8 trillion in household debt outstanding in 2008, up $2 Trillion since Of the $13.8 trillion, $10.5 trillion was for mortgages and most of the balance for credit purchases. Will we have as much household debt as our annual GDP? 2008 GDP = $14.3 trillion, estimated GDP is contracting (slowing) so it may be the case that there will be more debt than actual GDP. Household debt decreased for the 1 st time in 3 rd quarter of 2008