Bell Ringer What is macroeconomics? The branch of economics that deal with human behavior and choices as they relate to the entire economy

News Articles What is GDP? How is it used as a measure of the economy? What sectors of the economy are used to calculate GDP?

GDP The total market value of all final goods and services produced annually in a country. Double counting – counting a good more than once in computing GDP

Mini $1,500 each $25,000 each $50 each = ?

Bell Ringer What is the equation for a 3 sector GDP? GDP = C + I + G

How is GDP Calculated? GDP = C + I + G Consumption – expenditures made by the household sector Investment – expenditures made by the business sector Government purchases – expenditures made by the government sector (do not include transfer payments) Does everything we buy get made in the US?

How is GDP Calculated? GDP = C + I + G + (Ex-Im) or C + I + G + (NX) Export spending – the amount spent by the residents of other countries for goods produced in the US (injections into the economy) Import spending – the amount spent by Americans for foreign-produced goods (withdrawals from the economy)

National Income and Product Accounts Gross Domestic Product: Fourth Quarter and Annual 2014 (Third Estimate) Real gross domestic product -- the value of the production of goods and services in the United States, adjusted for price changes -- increased at an annual rate of 2.2 percent in the fourth quarter of 2014 US GDP in Current Dollars - $17,703.7 billion In the third quarter, real GDP increased 5 percent.

Bell Ringer What is the equation for GDP in a 4 sector economy? GDP = C + I + G + NX

GDP GDP = C + I + G + NX Consumption = Household expenditures Investment = Business expenditures Government Spending = Government expenditures Net Exports = Foreign Sector expenditures (Exports – Imports)

What isn’t counted? Illegal Goods and Services Transactions of Legal Goods that aren’t Recorded Nonmarket Goods and Services Sales of Used Goods Stock and Financial Transactions Government Transfer Payments

Homework Assignment For Friday, 4/10 (Chapter 11, Sections 1 & 2 p. 288 – 296) All About GDP packet

Standard of Living Definition according to Investopedia: The level of wealth, comfort, material goods and necessities available to a certain socioeconomic class in a certain geographic area. The standard of living is closely related to quality of life.

Different Ways to Calculate Standard of Living Gross Domestic Product – total market value of all final goods and services produced within the borders of the US, by both citizens and noncitizens. Gross National Product – total market value of all final goods and services produced by US citizens, wherever they live. Per capita GDP = GDP/population The average value of the goods and services each person has access to within a country.

Bell Ringer In ABC, the business sector invests $300,000 in new equipment, consumers buy $400,000 worth of merchandise, government buys $250,000 worth of goods and services, there are $150,000 worth of imports and $125,000 worth of exports. What is the GDP for ABC?

Quick Review What is GDP? total market value of final goods and services produced within the borders of the US, by both citizens and noncitizens. What is GNP? total market value of final goods and services produced by US citizens, wherever they live. What is per capita GDP? = GDP/population Number of goods and services each person has access to on average.

Standard of Living Comparison 18 different countries United States, China, Norway, Mexico, South Africa, Germany, Brazil, Russia, Egypt, Chile, Vietnam, India, Indonesia, Luxembourg, Kenya, Canada, Turkey, Honduras Rank biggest to smallest GDP Rank biggest to smallest GNP Rank biggest to smallest GDP per capita

Human Development Index People First Video Why was the Human Development Report (HDR) formed? What is one of the central points of the HDR? The Human Development Index investigates 3 basic human needs. Which three are they and why are they used?

GDP and HDI What picture of standard of living do we get when we use GDP, GNP/capita, GDP/capita, and HDI to evaluate a nation? Write a response, be ready to discuss and turn-in.

Bell Ringer What type of goods aren’t counted in GDP? Illegal Goods and Services Transactions of Legal Goods that aren’t Recorded Nonmarket Goods and Services Sales of Used Goods Stock and Financial Transactions Government Transfer Payments

GDP and Standard of Living What picture of standard of living do we get when we use GDP, GNP/capita, GDP/capita, and HDI to evaluate a nation?

Bell Ringer How is GDP calculated?

Mini $1,500 each $25,000 each $50 each = ?

GDP GDP = C + I + G + NX Consumption = Household expenditures Investment = Business expenditures Government Spending = Government expenditures Net Exports = Foreign Sector expenditures (Exports – Imports)

Real GDP GDP measures the increase in both prices and quantity. To measure growth in GDP, governments want to know the increase of the quantity of goods and services produced. Real GDP – GDP that has been adjusted for price changes; measured in base-year prices Base year – a benchmark year – a year chosen as a point of reference for comparison

Computing Real GDP YearPriceQuantityGDP 1 $102$20 2 $152$30 3 $103$30 Base-year is year 1

Computing Real GDP Product X, in ,000 units were produced at $5. What was the GDP? In 1994, 950 units of Product X were produced at $5.50. What was the GDP? In 1999, 1,100 units of Product X were produced at $4.50. What was the GDP? If 1987 was the base year, calculate the real GDP for all three years

Computing Real GDP Price and quantity needs to be isolated. US GDP = $17,418,900,000,000 Nominal – An unadjusted rate, value or change in value How do you isolate changes in price from changes in quantity? US Real GDP (in 2009 $) = $16,085,600,000,000 Real – A rate adjusted for inflation (changes in price) Real GDP = (nominal GDP/Price Index) x100

Comparing Changes in Price Price Index – a measure of the price level Create a market basket for Morris County, NJ to compare changes in the price level and use that information to answer the questions.