GDP 2015.notebook. December 04, 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 What is NOT included in? 1. Intermediate Goods -No double counting; final goods only -EX: Final car only, not tires, radio, etc. 2. Non-production Transactions -Financial Transactions (nothing produced) - Used goods 3. Non-market and Illegal activities -Illegal drugs, unpaid work NOT COUNTED in Gross Domestic Product (): 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 9:31 AM Jan 6 7:45 AM Would the following be included in? What would you need to know if you aren't sure? 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 6 9:31 AM Jan 8 3:50 PM 1

2 Jan 8 3:52 PM Jan 8 3:52 PM Included or Excluded in? Closing: Socrative Exit Ticket: Teacher Question: Name two items that would NOT be included in. Jan 10 9:49 AM Jan 6 8:53 AM Day 2 Warm Up: Go to the online classroom. Go to Unit 5, Macroeconomics. Pull up the document: All about. Complete the first 4 problems. Jan 6 4:49 PM Jan 6 4:53 PM 2

3 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) Measuring Expenditure approach: = C + I + G + NX C = Consumer goods and services (what we buy) is then measured and reported in dollar terms. 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 NX = Net Exports (Exports minus Imports) Jan 6 9:11 AM Jan 6 8:09 AM An issue in comparing : Which Category of? 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? Jan 6 7:57 AM Jan 6 5:32 PM BECAUSE OF INFLATION (rising prices), we must adjust our data. NOMINAL : in CURRENT dollars REAL : in CONSTANT/BASE YEAR prices Units of Cheese Price of Cheese Units of Price of Crackers Crackers $1 100 $ $1 150 $ $2 200 $3 Nominal Real Jan 6 9:15 AM Jan 13 12:04 PM 3

4 Year Price of Hot Dogs $1 $2 $3 Prices and Quantities Quantity of Hot Dogs Price of Hamburgers Calculating Nominal Quantity of Hamburgers $2 50 $3 100 $4 150 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 Calculating the Real Deflator 2008 ($200 / $200) X 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) = $ ($600/$350 ) X 100 = ($1,200 / $500) X 100 = 240 Jan 10 7:42 AM Jan 10 8:09 AM Determine economic growth between 2008 and 2009 Real 2008: $200 Real 2009: $350 Determine economic growth between the years 2009 and 2010: Real (base year 2008) for 2009: $350 Real (base year 2008) for 2010: $500 To determine economic growth: New Real - Old Real Old Real X 100 = economic growth Jan 10 8:19 AM Jan 10 8:29 AM Closing: Socrative Exit Ticket Warm UP: If I wanted to calcuate economic growth from 2007 to 2008 which data would I use? Why? Real 2007 $10 million Teacher Question: What is the formula for the expenditure approach to? Nominal 2008 Real 2008 $14 million $12 million Jan 10 8:29 AM Jan 11 4:44 PM 4

5 Socrative Assessment tiered practice 880cce2d Jan 12 3:17 PM Jan 12 3:18 PM Warm UP: Units of Widgets Price of Widgets Units of Price of Thneeds Thneeds Nominal Real Real in Mordor $1 100 $ $1 150 $ $2 200 $3 1. Calculate nominal for each year. 2. Calculate real for each year using 2008 as the base year. Real 2011 $4000 Real 2012 $5000 By what percent did Mordor's economy grow? Jan 13 12:04 PM Jan 13 2:25 PM The Shire's To determine economic growth: New Real - Old Real Old Real X 100 = economic growth Real 2012 $5000 Real 2013 $6000 Jan 13 2:27 PM Jan 13 2:28 PM 5

6 Rohan's 2007 Real - $ Real - $2000 Per Capita - Real divided by a country's population (real per capita) Jan 13 2:28 PM Jan 13 2:29 PM 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 7 Brazil 2,243,854 8 Italy 2,149,485 9 Russia 2,096,774 Countries by per Capita 1 Qatar 145,894 2 Luxembourg 90, ,762 Singapore 4 Brunei 73,823 5 Kuwait 70,785 6 Norway 64,363 7 United Arab Emirates 63,181 8 San Marino[6][7] 62,766 9 Switzerland 53,977 Analyzing and Economic Growth 10 India 1,937, United States 53,001 Data from United Nations (2013) Jan 13 2:31 PM Jan 6 9:09 AM Per Capita... So what? Jan 6 9:25 AM Jan 6 9:26 AM 6

7 2015.notebook Human Poverty Undernourishment Jan 6 9:34 AM Jan 6 9:34 AM Underweight Children Poor Sanitation Jan 6 9:34 AM Jan 6 9:35 AM Secondary Education Spending Public Health Spending Jan 6 9:35 AM Jan 6 9:36 AM 7

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

9 Jan 12 7:38 AM Jan 12 7:50 AM Jan 12 7:53 AM Jan 12 7:49 AM Closing: Today, our main topic was This is : Day 3 It is significant because Jan 6 9:39 AM Jan 12 7:53 AM 9

10 Describe the long-run trend of real as shown below: Warm Up: Reading: Recent reports from the Bureau of Labor and Statistcs Jan 12 8:28 AM Jan 12 7:54 AM Overtime, usually grows. So how do we explain the SHORT-RUN ups and downs of the business cycle? 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. Aggregate Demand Model Read the definition: Does it remind you of something? Aggregate Supply Model Price Level average price of all goods and services Both of these INFLUENCE or LEVEL OF OUTPUT! Jan 12 7:56 AM Jan 12 7:57 AM Price Level 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? AD Output/ Real Changes in these factors influence overall levels of income, employment and prices in the economy. Jan 12 8:00 AM Jan 12 8:01 AM 10

11 Aggregate Demand Practice Aggregate Supply Curve - Shows the quantity of goods and services that firms choose to produce and sell at each price level. Price Level AS Capstone Unit 6, Lesson 38 Activity 1 Real Jan 12 8:03 AM Jan 12 8:06 AM 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 Aggregate Supply Practice Capstone Unit 6 Lesson 38 Activity 2 Jan 12 8:15 AM Jan 12 8:16 AM Putting the Curves Together: PL AS Option 1: PL AS Option 2: Price Level AS AD Real Real : Price Level: AD Real Real : Price Level: PL AS PL AS Option 3: Option 4: AD AD Real Real : Price Level: AD Real Real : Price Level: Real / Output Jan 12 8:17 AM Jan 12 8:21 AM 11

12 Aggregate Demand and Aggregate Supply Practice Capstone Unit 6, Lesson 38 Activities 3 and 4 Closing: Today our main topics were These models are These models are significant because Jan 12 8:24 AM Jan 12 8:26 AM Stuff you gots to know for the quiz Expenditure vs. Income Approach to What is included or excluded from Categories of in the Expenditure approach Nominal and Real / Definition and how to calculate Per Capita and Economic Growth/ Definition and how to calculate Business cycle Gross Domestic Product: Total dollar value of all goods produced and sold in a country in a given year. Included Excluded Jan 12 8:07 AM Dec 8 8:06 AM Per Capita Real / Nominal /Economic Growth Real divided by the Population Real : $1000 Population: 100 Dec 8 8:07 AM Dec 8 8:08 AM 12

13 =C+I+G+NX Business Cycle Expansion: Peak: Contraction: Trough: Recovery: Dec 8 8:10 AM Dec 8 8:10 AM Jan 11 4:46 PM 13