Macro Economics

1. Macro Economics . Nancy K. Ware, Instructor Gainesville High School Domain #3 EOCT Text p. 55 – 72 Complete all questions at the end of each section & end of the chapter.

2. Unit 3 Coursework Required throughout the Unit • Read EOCT Text p. 55 - 72 • Complete all questions at the end of each section & end of the chapter. • Vocabulary strategy sheet • All activities, fill in the blanks, and questions in the GPS packet. • Macro Crossword puzzle • Take home vocab quiz • This list is subject to change.

3. The Big Picture: What You Will Learn EMA2: The Student will explain the roles of the Federal Reserve System EMA1: The student will illustrate the means by which economic activity is measured EMA3: The students will explain how the government uses fiscal policy to promote price stability, full employment, and economic growth

4. Macro GPS 1 Specifics • SSEMA1 The student will illustrate the means by which economic activity is measured. • a. Explain that overall levels of income, employment, and prices are determined by the spending and production decisions of households, businesses, government, and net exports. • 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. • d. Identify structural, cyclical, and frictional unemployment. • e. Define the stages of the business cycle, as well as recession and depression. • f. Describe the difference between the national debt and government deficits.

5. Macro GPS 1 Essential Questions • How is economic activity measured? • How is income, employment, and prices determined by the spending and production decisions of households, businesses, government, and net exports? • What is Gross Domestic Product (GDP), • economic growth, • unemployment, • Consumer Price Index (CPI), • inflation, • stagflation, • and aggregate supply and aggregate demand? • How are economic growth, inflation, and unemployment calculated? (give formulas also) • What is structural, cyclical, and frictional unemployment? What are the characteristics of each type of unemployment and when they occur? • What are the stages of the business cycle? What are recession, depression, and recovery? • What is the difference between the national debt and government deficits? How can these be harmful and beneficial to the economy?

6. Vocab Grab Unit 3!! • Pick your vocab word out of the hat • Act – Draw – Speak your unit 3 vocab word • Act: role play, broadcast, TV show, TV interview, Internet pod cast, (you may video yourself using your phone if you don’t want to do it live) • Draw: draw a scenario that depicts your vocab word on the board or on a poster • Speak: Sing, dramatically interpret, make up an poem or a rap about your vocab word

7. What is Macroeconomics?Watch VE4 Video clip Economic Growth • Find a news article that covers a topic from the macroeconomy (there are tons every day) and from unit 1 -3, and apply your economic knowledge. • Summarize this article using the space provided. Include the main idea, why you chose this article, and how it pertains to YOUR life. Be prepared to share with the class and EXPLAIN why you think as you do.

8. EMA1: The student will illustrate the means by which economic activity is measured. • How do you measure something? Describe how you would measure how much you have grown from age 5 to now. • How do economists gauge what is happening in the economy? In other words, how do they measure it? • What is macroeconomics? • What is the difference between Micro and Macro?

9. Intro into Measuring The Big Mac!! Stop, Collaborate & Listen!! Why do we want to predict the weather? What if the weatherperson predicted snow for tomorrow? How would you change your behavior? Would you want to know if a snowstorm was coming? Why? How is the weather measured? (instruments?) Is the weather forecast ALWAYS correct? Now think about the economy. Why do we measure/predict the economy? If an economist predicted high levels of unemployment coming, would you want to know? How would you change your financial/economic behavior? How is the economy measured? (instruments?) Is the economic forecast ALWAYS correct?

10. Circular Flow of Economic Interdependence: Fill in the squares

11. MA1a. Explain that overall levels of income, employment, and prices are determined by the spending and production decisions of households, businesses, government, and net exports. • Look at your CFEE diagram & answer the questions: • What do households provide to businesses and for what? • What do businesses provide and for what? • Who purchases products from businesses? • What is used to facilitate the exchange? • What do households and businesses give to the gov’t? • What actions do the gov’t perform in the diagram? • What determines prices? • Who purchases in the economy?

12. MA1a. Explain that overall levels of income, employment, and prices are determined by the spending and production decisions of households, businesses, government, and net exports. • Look at your diagram & answer the questions: • What do households provide to businesses and for what? • Labor for wages, money for products • What do businesses provide and for what? • Products for profit, income for households • Who purchases products from businesses? • Consumers, gov’t & other businesses • What is used to facilitate the exchange? • Money!! • What do households and businesses give to the gov’t? • Taxes (money!!) • What actions do the gov’t perform in the diagram? • Collect taxes, make purchases, buy LLC, own factors • What determines prices? • Interaction of buyers & sellers (supply & demand) • Who purchases in the economy? • Households, businesses, governments

13. The Business Cycle Watch VE4 Video Clip: The Business Cycle

14. EMA1e: Define the stages of the business cycle, as well as recession and depression.

15. EMA1e: Define the stages of the business cycle, as well as recession and depression. In this model, what is the different term used for expansion? What does the tilt suggest about the economy?

16. EMA1e: Stage 1 ~ Expansion • Expansion: • R______ GDP • P________ jobs • unemployment rate is _____ • Businesses are making a ________ • Business investment aka W_______S_______ is sustainable • Consumer confidence is ______ • Consumers are spending ___________ income

17. EMA1e: Stage 1 ~ Expansion • Expansion: • Rising GDP • plentiful jobs • unemployment rate is low • businesses are making a profit • business investment is sustainable (Wall Street) • Consumer confidence is high • Consumers are spending disposable income

18. EMA1e: Stage 2 ~ Peak • Peak: • The ___________ point of the economic expansion • Real GDP stops ________ • Businesses & consumers are s___________ money & i___________ • Unemployment is _______ • Inflation may or may not be present

19. EMA1e: Stage 2 ~ Peak • Peak: • The highest point of the economic expansion • Real GDP stops rising • Businesses & consumers are spending money & investing • Unemployment is low • Inflation may or may not be present

20. EMA1e: Stage 3 ~ Contraction • Contraction: • Period of economic _________ • GDP begins to _____ or lessen (actual production of products ___________) • Business profits ___________ • Demand ___________ & consumer ____________slows • Unemployment _____________ • Business investment ________ (falling stock market on W____ S________

21. EMA1e: Stage 3 ~ Contraction • Contraction: • Period of economic decline • GDP begins to fall or lessen (actual production of products decreases) • Business profits decrease • Demand decreases & consumer spending slows • Unemployment increases • Business investment slows (falling stock market Wall Street)

22. EMA1e: Stage 4 ~ Trough • Trough: • ____________point in an economic contraction or slow down • Production is extremely _______ • GDP stops ________but does not increase enough to make a difference • Extremely ________unemployment (over 6%) • Poverty rate ____________ • Consumer confidence is ______ • Business ______________ & consumer ____________is extremely low • Stock __________ are extremely low

23. EMA1e: Stage 4 ~ Trough • Trough: • Lowest point in an economic contraction or slow down • Production is extremely low • GDP stops falling but does not increase enough to make a difference • Extremely high unemployment (over 6%) • Poverty rate increases • Consumer confidence is low • Business investment & consumer spending is extremely low • Stock prices are extremely low • http://www.youtube.com/watch?v=afBw6FyPf34&feature=pyv&ad=2577783516&kw=economic%20breakdown%20song

24. EMA1e: SUMMARY: Define the stages of the business cycle, as well as recession and depression. Fill in the blank of the business cycle below. Describe Peak in these terms: Price Levels: Aggregate Demand: Unemployment: Real GDP: Describe Expansion in these terms: Price Levels: Aggregate Demand: Unemployment: Real GDP: Describe contraction in these terms: Price Levels: Aggregate Demand: Unemployment: Real GDP: Describe Trough in these terms: Price Levels: Unemployment: Real GDP: Aggregate Demand:

25. Homework  • Answer essential GPS 1 questions 1-2 and #12 • Answer EOCT questions p. 65, 1-3 • Complete all notes and activities not finished in class • Fill in your Vocab sheet • Read your notes • Don’t ever quit!

26. Gross Domestic Product VE4 Video Clips: Economic Growth & Gross Domestic Product or GDP

27. EMA1b: Define Gross Domestic Product (GDP), • If you have a flower or plant, how can you tell if it is growing? • What causes it to grow? • How can you do to help it grow? • What is economic growth? • How can you tell if the economy is growing? • What causes economic growth? • Is the US economy growing currently? • Why or why not?

28. EMA1b: Define Gross Domestic Product (GDP), • If you have a flower or plant, how can you tell if it is growing? It gets larger in size, may bear fruit, beautiful green leaves • What causes it to grow? Soil, water, sunshine, nutrients • How can you do to help it grow? Provide the things it needs to grow • What is economic growth? When the economic output gets larger in size • How can you tell if the economy is growing? Businesses make a profit, People have jobs, spend money, new technologic advances in medicine, infrastructure, recreational technology • What causes economic growth? Technology, innovation, productivity, investment in human & physical capital • Is the US economy growing currently? YES, slowly according to the Bureau of Labor and Statistics • Why or why not?

29. 3 Tools to Measure Economic Growth • GDP • Unemployment • Inflation

30. Why is Measuring GDP Important?Who Cares?? Econ Buddy! • Look deeper at GDP. What does it REALLY represent? • How does productivity fit into the GDP picture? (hint: define productivity) • Should GDP be a high number or low number? • How should the numbers be interpreted?

31. 3 ways to Calculate GDP • Valueof _______________of Final G________& S________ • Spending on Domestically Produced Final G________ & S_________ • F_________ Income Earned from Businesses in the economy

32. 3 ways to Calculate GDP • Value of Productionof Final Goods & Services • Spending on Domestically Produced Final Goods & Services • Factor Income Earned from Businesses in the economy

33. Gross Domestic Product as a Value of Production (what is all the stuff produced in the USA worth?)

34. EMA1b: Define Gross Domestic Product (GDP), 1. Total v_____ of selling prices What method is this? ________________ GDP: total market value1of all final2 goods and services produced within a country3 for 1 year4 2. Not i__________ goods 3. M_____ within the country, even if the producer is F_______owned 4. One (1) calendar Year from J_____1 to D_____ 31

35. EMA1b: Define Gross Domestic Product (GDP), 1. Total value of selling prices GDP: total market value1of all final2 goods and services produced within a country3 for 1 year4 2. Not intermediate goods 3. Made within the country, even if the producer is foreign owned 4. One (1) calendar Year from Jan. 1 to Dec. 31

36. 1. Measuring GDP as the Value of Production of Final Goods & Services • In which month did the Coffee Shop have a better month?

37. 1. Measuring GDP as the Value of Production of Final Goods & Services • In which month did the Coffee Shop have a better month?

38. Criteria for Measuring GDP • Final Goods = ready for c_____________ ~ give an example: _________________ • Intermediate Goods: needs further ________________ before being counted as a final good • Only ____________Goods & Services are used in calculating __________to avoid double or multiple counting (no _______________ goods) • Example: • $5.00 overstates the value of the $3.00 ketchup. The $3.00 includes all the other transactions so this is the only transaction that is counted toward GDP

39. Criteria for Measuring GDP • Final Goods = ready for consumption~ ex. Bottle of ketchup • Intermediate Goods: needs further processingbefore being counted as a final good • Only Final Goods & Services are used in calculating GDP to avoid double or multiple counting (no intermediate goods) • Example: • $5.00 overstates the value of the $3.00 ketchup. The $3.00 includes all the other transactions so this is the only transaction that is counted toward GDP

40. Criteria for Measuring GDP • GDP is calculated as the production is done within the b___________ of a given n_______ • Produced in USA = belongs to USA’s _______ • Where it is consumed is ___________ • Where the company is headquartered is ______________ • General Motors, an American Company, has a factory in South Africa producing trucks. The value of the trucks are counted in whose GDP?

41. Criteria for Measuring GDP • GDP is calculated as the production is done within the boundaries of a given nation • Produced in USA = belongs to USA’s GDP • Where it is consumed is irrelevant • Where the company is headquartered is irrelevant Ex: General Motors, an American Company, has a factory in South Africa producing trucks. The value of the trucks are counted in whose GDP? South Africa

42. 1. Measuring GDP as the Value of Production of Final Goods & Services • GDP counts the dollar value of what has been produced in the economy over the year, not what was actually sold. • Example: A Honda Civic produced in Kentucky in 2009, but not sold until 2010 is counted in which year’s production and GDP? • USA’s production for 2009 GDP

43. Gross Domestic Product as Measured by Spending on Domestically Produced Goods (how much money was spend on products made in the US?)

44. 2. Measuring GDP as Spending on Domestically Produced Final Goods & Services Are you ready for the GDP Challenge? • C (C_________s_________) + • I (I__________) + • G (G___________ S___________+ • Net Exports (E_______ – I________) = GDP +I C +G = GDP +(X-M) HOTS Question: What happens when one of these variables in this equation ceases to operate normally?

45. 2. Measuring GDP as Spending on Domestically Produced Final Goods & Services Are you ready for the GDP Challenge? • C (Consumer spending) + • I (Investments) + • G (Government Spending) + • Net Exports (Exports – Imports) = GDP +I C +G = GDP +(X-M) Critical Thinking Question: What happens when one of these variables in this equation ceases to operate normally?

46. HOTS Question: GDPBar Graph Interpretation Look at the bar graph. It shows 2 methods of calculating GDP. The value of production method and the spending equal one another. Why?

47. HOTS Question About GDPBar Graph Interpretation Look at the bar graph. It shows 2 methods of calculating GDP. The value of production method and the spending equal one another. Why? The circular flow diagram of Economic Interdependence – the income made in the economy is spent in the economy!!!

48. Behind the GDP Formula • Personal Consumption: includes durable goods (insert an ex:_______________) and non-durable goods (insert an ex:_____________) & services (insert an ex:___________) • Domestic Investment: final purchases in m____________, e_______________, & tools; all construction (including r_________________); & changes in business i____________y • Government Purchases: includes spending by all 3 levels of gov’t (f_______, s_____, l_____), & all direct purchases of resources (l_______r) • Net Exports (X-M): all spending on goods produced in USA and sold in another country (__________) & goods purchased in the USA but made elsewhere (__________); • The difference (X-M) can be _____________ or __________ number

49. Behind the GDP Formula • Personal Consumption: includes durable (new dishwasher) and non-durable goods (lettuce) & services (pedicure) • Domestic Investment: final purchases in machinery, equipment, & tools; all construction (including residential); & changes in business inventory • Government Purchases: includes spending by all levels of gov’t (fed, state, local). & all direct purchases of resources (labor) • Net Exports (X-M): all spending on goods produced in USA and sold in another country (exports) & goods purchased in the USA but made elsewhere (imports); • The difference (X-M) can be positive or negative number

50. GDP: What to Count or Not to Count? COUNTED: NOT COUNTED: QUIZ: What is made in America?