GDP 2015.notebook. November 22, Measuring Economic Activity: Gross Domestic Product. What does GDP tell us? How can we use GDP?

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1 Measuring Economic Activity: Defining Gross Domestic Product The dollar value of all final goods and services produced within a country's borders in a given year (or time period) Gross Domestic Product Dollar Value: total selling prices of goods and services What does Gross Domestic Product sound like? Final Goods and Services: products a firm sold to CONSUMERS (no intermediate goods) Produced within a country's borders: within the US - even if the producer is foreign-owned In a given year (or time period): Jan. 1 to Dec NEW OUTPUT produced that year Jan 6 7:31 AM Jan 6 7:34 AM NOT COUNTED in Gross Domestic Product (): Would the following be included in? What would you need to know if you aren't sure? Leisure Time Household Work Used but Valuable Things Illegal Markets PURELY financial transactions Can't account for environmental degradation No measure of human health Why are these NOT included? Are there problems with not including them? Brainstorm with a partner! Jan 6 7:45 AM Jan 6 9:31 AM What does tell us? gives us an idea of how the US is doing financially. How can we use? 1. Compare to previous years (is there growth?) 2. Compare after policy changes (did the policy work?) 3. Compare to other countries Jan 8 3:50 PM Jan 8 3:52 PM 1

2 Included or Excluded in? Jan 8 3:52 PM Jan 10 9:49 AM Closing: Socrative Exit Ticket: Day 2 Teacher Question: Name two items that would NOT be included in. Jan 6 8:53 AM Jan 6 4:49 PM Warm Up: Go to the online classroom. Go to Unit 5, Macroeconomics. Pull up the document: All about. Complete the first 4 problems. Think back to the definition of : The dollar value of all final goods and service produced within a country's borders in a given year (or time period) is then measured and reported in dollar terms. Jan 6 4:53 PM Jan 6 9:11 AM 2

3 Measuring Expenditure approach: = C + I + G + NX C = Consumer goods and services (what we buy) I = Investment by businesses - inventory, factories and NEW HOME PURCHASES G = Government Goods and Services- police, roads, schools, military; EXCLUDES TRANSFER PAYMENTS - SOCIAL SECURITY, WELFARE, UNEMPLOYMENT Which Category of? NX = Net Exports (Exports minus Imports) Jan 6 8:09 AM Jan 6 7:57 AM An issue in comparing : is measured in Dollar Value Gallon of Milk - $ Gallon of Milk - $3.65 Assume that in both years, 4 million gallons of milk were produced. What problem do you see? BECAUSE OF INFLATION (rising prices), we must adjust our data. NOMINAL : in CURRENT dollars REAL : in CONSTANT/BASE YEAR prices Jan 6 5:32 PM Jan 6 9:15 AM Prices and Quantities Units of Cheese Price of Cheese Units of Price of Crackers Crackers Nominal Real Year Price of Hot Dogs Quantity of Hot Dogs Price of Hamburgers Quantity of Hamburgers $1 100 $ $1 150 $ $2 200 $ $1 $2 $ Calculating Nominal $2 50 $3 100 $ ($1 per hot dog x 100 hot dogs) + ($2 per hamburger X 50 hamburgers) = $ ($2 per hot dog x 150 hot dogs) + ($3 per hamburger X 100 hamburgers) = $ ($3 per hot dog X 200 hot dogs) + ($4 per hamburger X 150 hamburgers) = $1200 Jan 13 12:04 PM Jan 10 7:42 AM 3

4 Calculating Real (base year 2008) 2008 ($1 per hot dog X 100 hot dogs) + ($2 per hamburger X 50 hamburgers) = $ ($1 per hot dog X 150 hot dogs) + ($2 per hamburger X 100 hamburgers) = $ ($1 per hot dog X 200 hot dogs) + ($2 per hamburger X 150 hamburgers) = $500 Determine economic growth between 2008 and 2009 Real 2008: $200 Real 2009: $350 Calculating the Real Deflator 2008 ($200 / $200) X 100 = ($600/$350 ) X 100 = ($1,200 / $500) X 100 = 240 To determine economic growth: New Real - Old Real Old Real X 100 = economic growth Jan 10 8:09 AM Jan 10 8:19 AM Determine economic growth between the years 2009 and 2010: Real (base year 2008) for 2009: $350 Closing: Socrative Exit Ticket Real (base year 2008) for 2010: $500 Teacher Question: What is the formula for the expenditure approach to? Jan 10 8:29 AM Jan 10 8:29 AM Warm UP: If I wanted to calcuate economic growth from 2007 to 2008 which data would I use? Why? Socrative Assessment Real 2007 $10 million Nominal 2008 $14 million 880cce2d Real 2008 $12 million Jan 11 4:44 PM Jan 12 3:17 PM 4

5 tiered practice Warm UP: Units of Widgets Price of Widgets Units of Price of Thneeds Thneeds $1 100 $ $1 150 $ $2 200 $3 Nominal Real 1. Calculate nominal for each year. 2. Calculate real for each year using 2008 as the base year. Jan 12 3:18 PM Jan 13 12:04 PM Real in Mordor Real 2011 $4000 Real 2012 $5000 By what percent did Mordor's economy grow? To determine economic growth: New Real - Old Real Old Real X 100 = economic growth Jan 13 2:25 PM Jan 13 2:27 PM The Shire's Real 2012 $5000 Real 2013 $6000 Rohan's 2007 Real - $ Real - $2000 Jan 13 2:28 PM Jan 13 2:28 PM 5

6 Per Capita - Real divided by a country's population (real per capita) Countries by Nominal 1 United States 16,768,100 2 China 9,181,204 3 Japan 4,898,532 4 Germany 3,730,261 5 France 2,806,432 6 United Kingdom 2,678,455 Countries by per Capita 1 Qatar 145,894 2 Luxembourg 90,333 3 Singapore 78,762 4 Brunei 73,823 5 Kuwait 70,785 6 Norway 64,363 7 Brazil 2,243,854 7 United Arab Emirates63,181 8 Italy 2,149,485 8 San Marino[6][7] 62,766 9 Russia 2,096,774 9 Switzerland 53, India 1,937, United States 53,001 Data from United Nations (2013) Jan 13 2:29 PM Jan 13 2:31 PM Analyzing and Economic Growth... So what? Jan 6 9:09 AM Jan 6 9:25 AM Per Capita Human Poverty Jan 6 9:26 AM Jan 6 9:34 AM 6

7 2015.notebook Undernourishment Jan 6 9:34 AM Poor Sanitation Jan 6 9:35 AM Public Health Spending Jan 6 9:36 AM November 22, 2015 Underweight Children Jan 6 9:34 AM Secondary Education Spending Jan 6 9:35 AM Physicians Working Jan 6 9:36 AM 7

8 2015.notebook Malaria Cases Jan 6 9:36 AM November 22, 2015 Mortality 1-4 Year Olds Jan 6 9:37 AM Internet Users... So what? Now that you have viewed the maps, answer this question in your notes in 3-5 sentences. Jan 6 9:37 AM Jan 6 9:25 AM Jan 12 7:39 AM Jan 12 7:38 AM 8

9 Jan 12 7:50 AM Jan 12 7:53 AM Closing: Today, our main topic was This is It is significant because Jan 12 7:49 AM Jan 6 9:39 AM : Day 3 Warm Up: Reading: Recent reports from the Bureau of Labor and Statistcs Jan 12 7:53 AM Jan 12 8:28 AM 9

10 Describe the long-run trend of real as shown below: Overtime, usually grows. So how do we explain the SHORT-RUN ups and downs of the business cycle? Aggregate Demand Model Aggregate Supply Model Both of these INFLUENCE or LEVEL OF OUTPUT! Jan 12 7:54 AM Jan 12 7:56 AM Aggregate Demand Curve - shows the quantity of goods and services that households, businesses, government, and customers in other countries want to buy at each price level. Price Level Read the definition: Does it remind you of something? AD Price Level average price of all goods and services Output/ Real Jan 12 7:57 AM Jan 12 8:00 AM What can make Aggregate Demand change? (shift) - Changes in Consumer spending - Changes in Business Investment spending - Changes in Government Spending - Changes in Net Export Spending What do you see? Changes in these factors influence overall levels of income, employment and prices in the economy. Aggregate Demand Practice Capstone Unit 6, Lesson 38 Activity 1 Jan 12 8:01 AM Jan 12 8:03 AM 10

11 Aggregate Supply Curve - Shows the quantity of goods and services that firms choose to produce and sell at each price level. Price Level AS What causes Aggregate Supply to Change? (Shift) - Changes in prices of inputs - Changes in productivity - Changes in taxes/regulations - Changes in labor supply - Changes in capital goods Real Jan 12 8:06 AM Jan 12 8:15 AM Aggregate Supply Practice Putting the Curves Together: Price Level AS Capstone Unit 6 Lesson 38 Activity 2 AD Real / Output Jan 12 8:16 AM Jan 12 8:17 AM PL AS Option 1: PL AS Option 2: Aggregate Demand AD Real Real : Price Level: AD Real Real : Price Level: and Aggregate Supply PL AS PL AS Practice Option 3: Option 4: AD Real Real : Price Level: AD Real Real : Price Level: Capstone Unit 6, Lesson 38 Activities 3 and 4 Jan 12 8:21 AM Jan 12 8:24 AM 11

12 Closing: Today our main topics were These models are These models are significant because Jan 12 8:26 AM Jan 12 8:07 AM Jan 11 4:46 PM 12