Warm ups *Why do you think it is important to measure and monitor economic activity?

Transcription

1 Warm ups *Why do you think it is important to measure and monitor economic activity?

2 Lesson Objective: *define GDP (Gross Domestic Product) *describe the economic measures of labor

3 Gross Domestic Product (GDP) Gross Domestic Product (GDP): the total dollar value of all final goods and services produced in a country in one year (by final goods, it means that materials that go into making the final goods are only counted once)

4 4 Major Components of GDP 1) Consumer spending (food, clothing, housing, other spending) 2) Business spending (buildings, equipment, inventory) 3) Government spending (salaries, supplies, other goods and services) 4) Export / Import Ratio (value of exports minus the imports)

5 Comparing GDP *Why might GDP alone not tell the entire story of a country s wealth? *U.S. GDP in 2013 was trillion dollars! *Luxembourg s GDP in 2013 was a mere billion dollars

6 Comparing GDP *Is the U.S. significantly wealthier than Luxembourg? Why or why not?

7 GDP per capita *U.S. GDP per capita in 2013 was $53,041 *Luxembourg GDP per capita in 2013 was $110,697 *Anyone want to move to Luxembourg?

8 Just for Fun

9 Labor Activities *unemployment rate: portion of the labor force who wish to work but can t find a job *Key Note: to be included in the labor force, you must be over 16 and actively seeking work

10 Unemployment *Who are some examples of people that DO NOT count in the labor force? *according to the Federal Reserve, a natural rate of unemployment is around %, due to various reasons

11 Reasons for Natural Unemployment *people seeking new or better jobs, perhaps they moved or another reason (frictional unemployment) *mismatch between what employers are seeking and skills that workers have (structural unemployment) *if wages are set too high, employers will downsize their staff to save money (surplus unemployment)

12 Productivity *productivity: the production output in relation to a unit of input, such as a worker Example: one worker can produce x amount of products in a given amount of time

13 Productivity *Discuss with a partner to create a list of ways that productivity may increase. Improvements in technology, training,equipment, management techniques, worker incentives, etc. all can increase productivity

14 Productivity vs. Wages *Wages usually continually increase, for example, you may get a $0.50 per hour raise every 6 months. What do you think would happen if wages increased at a rate faster than productivity?

15 Productivity vs. Wages *if wages increase faster than productivity, then it costs the company more money to produce their products *What effect would that have on price? *How would that affect the economy as a whole?

16 Motivated Workers=Great Things *a highly motivated workforce causes productivity to go up *this, in turn, can allow prices to go down; meanwhile wages can go up, because productivity is also going up *the end result of all of this is more $ for workers, and cheaper prices for the products they are buying

17 Costco vs. Walmart Example *At Costco, the average hourly worker makes around $20 per hour, compared with the national average retail worker being around $11 an hour *Walmart pays an average of $8.81 per hour, and they consider full time to be 34 hours a week, which means an average worker makes about $16,000 per year (compared with the poverty level for a family of four being $22,000

18 Costco vs. Walmart Example *Think of ways that this example impacts workers, the companies, and the economy as a whole

19 Productivity and Quality of Life *increased productivity has also resulted in working fewer hours *the average number of hours a worker put in in the 1890s was 60 *today, a full-time job is considered 40 hours a week

20 Consumer Spending Personal income: salaries and wages, investment returns, and government payments to individuals *this money is the foundation of buying goods and services