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Warm-up: Get a yellow text

Warm-up: Get a yellow text. What does GDP stand for? How do we calculate GDP? What do we use to measure inflation? How do we measure unemployment?. Begin Unit 3 Macroeconomics. SSEMA1

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Warm-up: Get a yellow text

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  1. Warm-up: Get a yellow text • What does GDP stand for? • How do we calculate GDP? • What do we use to measure inflation? • How do we measure unemployment?

  2. Begin Unit 3 Macroeconomics SSEMA1 b. Define Gross Domestic Product (GDP), economic growth, unemployment, Consumer Price Index (CPI), inflation, stagflation, and aggregate supply and aggregate demand. c. Explain how economic growth, inflation, and unemployment are calculated.

  3. N.B. #22- Business Cycle and Economic Indicators You should be able to answer the following at the end of this lesson: • What is GDP, inflation, and unemployment? How is each calculated? • What are the characteristics of the four types of unemployment?

  4. The Business Cycle The ups and downs of the economic activity The good times and bad times P. 310

  5. The Business Cycle 4 phases Expansion- increasing GDP and growth Peak- the top of the expansionary period- lowest unemployment Contraction- decreasing GDP-increasing unemployment Trough- “the bottom” of the contraction

  6. The Business Cycle Peak contraction Expansion Trough

  7. Economic Indicators GDP Inflation Unemployment

  8. MEASURES OF ECONOMIC PERFORMANCE • GROSS DOMESTIC PRODUCT (GDP):total amount (and value) of goods that a country makes • Real GDP – adjusted for inflation • Per capita GDP – (per person)

  9. How it’s measured… GDP = sum of Consumption (consumer spending), Investment (business spending), Government Spending and Net Exports (exports – imports) C + I + G + (ex-im)

  10. GDP a) Consumer spending –what people decide to spend their money on. (movie tickets, TV, go to the mall and shop) b) Investments-spending by businesses

  11. c) National Government Spending • National Defense • Social Security: payments to aged, disabled, and retired persons • National Debt • Medicare: health care program available to all senior citizens regardless of income • Health: medicaid – medical insurance program for low income persons

  12. National Government Spending

  13. d) Net Export • Exports – Imports • Export: goods that are sent out of the country (results in money coming into the country) • Imports: goods that are coming in from outside sources (other countries) – results in money being sent out by home country

  14. Gross Domestic Product • Per Capita GDP • GDP of a Country / Population

  15. Inflation • Rise in the prices of goods and services in an economy over a period of time • Results in less purchasing power • How is it calculated: Consumer Price Index (CPI) CPI is a market basket of goods and services that are compared every year

  16. CPI (Consumer Price Index) • Prices of market basket items are compared each month-has categories! • Food and drinks-cereals, coffee, milk, restaurant meals • Housing-rent, homeowner’s costs, fuel oil • Transportation-airfares, new/used cars

  17. CPI continued • Medical Care-prescription medicines, eye care, physician’s services • Entertainment-newspapers, toys, musical instruments • Education-tuition, postage, telephone services, computers • Other goods and services-haircuts, cosmetics, bank fees

  18. Inflation Calculator http://data.bls.gov/cgi-bin/cpicalc.pl

  19. Types of Unemployment

  20. Frictional Unemployment • People are temporarily unemployed • Usually when people are moving in between jobs (ex. graduates or people changing jobs) • There will always be some frictional unemployment

  21. Structural Unemployment • Unemployment caused when your talents do not meet the requirements for the job • Not enough jobs to support all the people who are trained in a certain field • Technology causes less demand for human labor • Another example: a decline in coal mines leads to less demand for coal miners

  22. Cyclical Unemployment • Due to the economic climate and state of the job market • Rises and falls with the economy • During times of economic growth, more jobs are available. Conversely, during a recession, less jobs are available.

  23. Seasonal Unemployment • Unemployment due to the time of season • For example, during Christmas, there are more retail job opportunities due to the increase in shopping • Another example, a resort town along the coast will have fewer jobs available during the colder months

  24. Question 1What type of unemployment? • Construction workers are laid off for the winter, but plan to return to work when the weather is better.

  25. Question 2What type of unemployment? • Workers are laid off at a Pog factory. A downturn in the economy has lowered demand for luxury items.

  26. Question 3What type of unemployment? • The United States has lost manufacturing jobs as a result of a change to a service-oriented economy.

  27. Question 4What type of unemployment? • A fast-food worker graduates from college and quits his job to look for a better career.

  28. Question 5 True or False? Unemployment in the U. S. has recently been higher than 8 percent.

  29. Quiz!! • In your own words, describe what GDP attempts to measure. • Explain the formula for calculating GDP.

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