Activator – Chapter 23 * Create a chart and predict a figure for each of the following

1. Activator – Chapter 23* Create a chart and predict a figure for each of the following • 47 • 78.37 • $520(5609.15 in today’s dollars) • $48,147 • 15.1% (46.2 million) • 40% • 22% • 92%

2. Included Excluded

3. Microeconomics - How Much Does Coach L Get Paid Per Year? • Around $65,000 per year

4. Macroeconomics - How Much Does Everyone In The US Get Paid Per Year? • 15.68 Trillion Dollars

5. Chapter 23 – Measuring a Nation’s Income Macroeconomics – the study of the “big picture” of the economy; the economy as a whole. i.e. – Federal Reserve and the Federal Government, inflation, unemployment, and economic growth

6. Gross Domestic Product and Growth (Ch. 12) Gross Domestic Product (GDP) – the total market value of all final goods and services produced within a country’s borders in a given period of time.

7. Gross Domestic Product and Growth GDP measures the economy’s total income Total income = total spending

8. Gross Domestic Product Defined “Market dollar value…” – prices of goods and services F150 - $35,000, Apple $1.00

9. Gross Domestic Product Defined “…of all…” – all items produced in the economy and sold legally in commercial markets. Pears, grapefruit, books, movies, etc.

10. Gross Domestic Product Defined “…final…” – only value of final goods and services (excluding intermediate products). Included – Cheeseburger(output) Excluded – Cow parts (inputs)

11. Gross Domestic Product Defined “…goods and services…” – Tangible and intangible products Included - Hair products and haircuts

12. Gross Domestic Product Defined “…produced…” – only includes new goods and services produced currently. GM sells new car vs. used car Included - New car Excluded - used car

13. Gross Domestic Product Defined “…within a country…” – only measures production within a country’s borders. Included - Japanese company in the U.S. Excluded - Am. Company in Japan

14. Gross Domestic Product Defined “… In a given period of time…” – measured within a specific time Usually a year or quarter (three months)

15. 4 Components of GDP • Four components: • GDP = C + I + G + NX • C - Consumption of goods and services by households (Consumer Spending) • Accounts for 70% of GDP • I - Investments by businesses in goods and services (Business Spending) • Accounts for 15% of GDP • G - Government goods and services (Government Spending) • Accounts for 20% of GDP • NX - Net exports or imports of goods and services, (Foreign Spending) *Exports (X) – Imports (M)* • Accounts for -5 of GDP Consumption Net Exports Investment Government

16. GDP Google http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&ctype=l&met_y=ny_gdp_mktp_cd

17. Application - Calculating GDP 4000 2400 5000 300 300 9000 250000 400000 300000 -10000 $961,000

18. Excluded from GDP Intermediate products - inputs used to produce final goods and services; excludes double counting The tires that come with the car are not counted as a final good However if you get a flat and buy the same tire it is counted as a final good

19. Excluded from GDP Second-hand sales - refer to the sales of used goods.

20. Excluded from GDP Nonmarket Transactions/Underground Economy – transactions that do not take place in the legal marketplace (i.e. fixing your car, mowing your lawn, babysitting, etc.)

21. Excluded Products from GDP Black Market– illegal activities, gambling, drugs, prostitution, smuggling, etc.

22. Excluded from GDP Transfer Payments– redistribution of money from one group to another, i.e. Social security, welfare, unemployment checks Purchase Stocks and bonds

23. Included Excluded

24. GDP Google http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&ctype=l&met_y=ny_gdp_mktp_cd

25. GDP Classroom Simulation

26. GDP Video • http://www.youtube.com/watch?v=9m7BzvrPpgY&list=PL8B6092460F418F35&index=24

27. Consumption Investment Government Net Exports Second-Hand Sale Intermediate Products Underground Economy (Black Market) Non-Market Transaction Transfer Payment (Cash Transfer)

28. GDP Simulation

29. GDP Simulation

30. Nominal Versus Real GDP • Nominal GDP – GDP measured in “name only” (current prices), not adjusted for inflation. • Real GDP – GDP expressed in “fixed” (unchanging prices), adjusted for inflation.

31. Nominal Versus Real GDP • Nominal GDP – GDP measured in “name only” (current prices), not adjusted for inflation. • Real GDP – GDP expressed in “fixed” (unchanging prices), adjusted for inflation.

32. Nominal Versus Real GDP • Nominal GDP – GDP measured in “name only” (current prices), not adjusted for inflation. • Real GDP – GDP expressed in “fixed” (unchanging prices), adjusted for inflation.

33. Nominal Versus Real GDP • Nominal GDP – GDP measured in “name only” (current prices), not adjusted for inflation. • Real GDP – GDP expressed in “fixed” (unchanging prices), adjusted for inflation.

34. Nominal Versus Real GDP • Nominal GDP – GDP measured in name only (current prices), not adjusted for inflation. • Real GDP – GDP expressed in “fixed” (unchanging prices), adjusted for inflation.

35. Nominal Versus Real GDP • Nominal GDP – GDP measured in “name only” (current prices), not adjusted for inflation. • Real GDP – GDP expressed in “fixed” (unchanging prices), adjusted for inflation.

36. GDP Deflator • Year 2 Nominal GDP – $370,000 • Year 2 Real GDP - $350,000 370,000 106 350,000 6%

37. Inflation and Inflation Rate • Inflation – inflation is a rise in the general level of prices of goods and services in an economy over a period of time. • Inflation Rate - percentage change in some measure of the price level from one period to the next. • Inflation Rate = GDP Deflator in year 2 – GDP Deflator in year 1 GDP Deflator in year 1 • GDP Deflator – an index that converts output measured at current prices into constant-dollar GDP. • The GDP deflator shows inflation, how much a change in the base year's GDP relies upon changes in the price level.

38. Nominal GDP Versus Real GDP (RGDP) $11 $8 $10 $9 1990 1995 2000 2012 • Nominal GDP is the Price • RGDP is the Pizza Pie (physical units sold)

39. Nominal GDP Versus Real GDP (RGDP) $11 $8 $10 $9 1990 1995 2000 2012 • Nominal GDP is the Price • RGDP is the Pizza Pie (physical units sold)

40. Nominal vs. Real GDP Practice Problem

43. Economic Growth

44. Per Capita GDP Real GDP per capita – real GDP divided by the total population Considered the best measure of a nation’s standard of living. Per Capita – “for each person”

46. GDP and Quality of Life Nations with higher per capita GDP enjoy higher quality of life, such as: Better Nutrition Comfortable housing Longer life spans Better education Infrastructure/Telecommunications (roads, bridges, cable, internet, phone lines, etc.)

47. Review Components of GDP • Indicate the components of GDP that each of the following transactions falls under. • A family buys a new refrigerator. • Ford opens a new plant in Detroit, Michigan. • Glynn County builds a new middle school. • China imports commodities from the United States. • What exclusionary components are affected by the following transactions? • A garage sale in your neighborhood. • The tires, bolts, and engine for a new automobile. • The illegal sale of imitation purses. • Mowing your lawn every other Saturday and being paid an allowance.

48. Calculating GDP 1.065 106.5 __14.6 = _______X 100 = _____ 13.7 Calculate the GDP deflator using the following figures: Real GDP 2008 ($13.7 trillion) Nominal GDP 2008 ($14.6 trillion) using the following formula: Nominal GDP X 100 = Real GDP 2. Calculate the nominal GDP for year 2, then calculate the GDP deflator for year 2 using year 1 as a base year. Year 2Nominal: Apricots - $550 Broccoli - $300 Carrots - $270 Total GDP - $1120 Year 2 Real GDP: Apricots - $500 Broccoli - $300 Carrots - $225 Total GDP - $1025 __1120 = _______X 100 = _____1025 1.09 109 = 9% inflation Nominal GDP X 100 = Real GDP

49. Business Cycles • Business Cycle – economy-wide fluctuations in a market or economy over several months or years. Contraction Recovery