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The Macreconomy : Business Cycle and GDP

The Macreconomy : Business Cycle and GDP. American Government and Economics Mr. Miller. What is the Macroeconomy? . It is the “whole” economy A view of our economy when you consider all economic indicators of growth….. Some indicators we will be learning about include: Business Cycles

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The Macreconomy : Business Cycle and GDP

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  1. The Macreconomy: Business Cycle and GDP American Government and Economics Mr. Miller

  2. What is the Macroeconomy? It is the “whole” economy A view of our economy when you consider all economic indicators of growth….. Some indicators we will be learning about include: Business Cycles GDP Unemployment Inflation Poverty Investment Government Consumers

  3. The Business Cycle • The Economy moves from periods of growth to periods of contraction. • This is known as the Business Cycle • The Business Cycle is just like a rollercoaster • Highs, lows, ups, downs, etc…

  4. 4 Parts to the Business Cycle • Expansion – period of economic growth - People have jobs, consumers are spending money • Peak – the height of an economy’s growth. Growth has stopped. • Contraction – also known as a Recession - Following a Peak, a period of economic decline - People are losing jobs, consumers stop spending money 4. Trough – the lowest point of an economic contraction, high unemployment

  5. Related Terms • Depression - When a recession lasts longer than 18 months. • Unemployment rate greater than 12%

  6. Business Cycle illustrated by Poncho The Economic Chihuahua! • Poncho and the business cycle...

  7. Where is the United States on the Business Cycle?

  8. Gross Domestic Product • The total value of ALL FINAL goods and services produced within a country’s borders in one year…. • In 2009, the GDP of the U.S.A. was…. 14.14 Trillion 14,140,000,000,000

  9. What is a Final Good? 1. Final Goods – goods that are produced and sold and eventually consumed in some capacity. Example – Chips Ahoy cookies 2. Intermediate Goods – goods used to make other goods. Example – sugar used to make Chips Ahoy cookies.

  10. GDP-What does it indicate? • GDP indicates the strength of a country’s economy and standard of living…. • Higher GDP means citizens are “doing” well….have jobs, money, in good health, etc…. • Standard of Living – quality of life. How “good” it is to live in a particular country….look at posters on my wall!

  11. Some Terms • 1. GDP per capita – GDP “per person” • this is a measure of one person’s standard of living • Calculated by dividing GDP by the population of a country Example – U.S.A. GDP = 14 trillion • Population of U.S.A. = 300 million • 14 trillion / 300 million = $46,666 • So, the “average” person in the United States produces approximately $46,666 worth of goods/services each year.

  12. What’s not counted in GDP Black Market- buying/selling of goods/services illegally – not paying taxes to the government for the purchase of the good/service - ex. – bootleg movies Non-Market Activities - goods/services that people make/do for themselves - ex. Mowing your lawn

  13. RankCountryGDP (2009) United States14,2 trillion   People's Republic of China 8.8 Trillion   Japan4.1 Trillion India3.5 Trillion   Germany2.8 trillion   UnitedKingdom2.13 trillion  Russia2.12 Trillion France2.11 trillion   Brazil2.0 Trillion   Italy1.76 Trillion Same Countries- GDP Per capita United States - $46,400 China - $6,600 Japan – $32,600 India - $3,100 Germany - $34,100 United Kingdom- $35,200 Russia - $15,100 France - $32,800 Brazil – $10,200 Italy - $30,300

  14. GDP United States of America (14.2 Trillion) GDP per capita Liechtenstein-$122,000 Population – 35,002 Population of Delaware – approximately 900,000 0.9 times the size of Washington, D.C. #1’s – GDP vs. GDP per capita

  15. Is it counted in GDP? 1. Mr. Miller paying a student to mow the lawn at his house 2. Mr. Miller paying a lawn-care business to mow the lawn at his house 3. Mr. Miller cooking a spaghetti dinner for his wife. 4. Mr. Miller taking his wife out to Olive Garden for a fancy Italian dinner 5. Mr. Miller paying a student to baby-sit his five kids while he takes his girlfriends to the movies 6. Buying clothes from Ebay. 7. Buying bootleg movies from “Charlie” ‘round the way. 8. Selling home-grown vegetables to your neighbor • Buying organically grown vegetables from the grocery store • Buying clothes from Target.com

  16. Final or Intermediate Good? • Window glass in new automobiles • Dresses • Bread • Lumber in a new house • Screws used in a cruise missile • New factory • Flour for making bread • Cloth for making dresses • Manicures • Cruise missile • Increase in automobile inventory

  17. Your assignments! • Business Cycle Article/Questions • List 3 Original examples of Final goods • List 3 Original examples of Intermediate goods • Describe 2 original situations where the good/service described WOULD be counted in this year’s GDP. • Describe 2 original situations where the good/service described WOULD NOT be counted in this year’s GDP.

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