Gross Domestic Product USA and the Rest

Objectives Review GDP concepts Examine US economic primacy Examine the Rise of the European Union Explore OECD and WTO effects Analyze the economic position of LDN’s C3 PO1, PO6

GDP Calc Total Market Value of all final goods and services produced in a country during a given year. GDP = C + I + G + (X-M) GDP = consumption + investment + (government spending) + (exports − imports),consumptioninvestmentgovernment spendingexportsimports GDP weakness – Consumption drops (recession/depression) – Investment drops (Interest rises) – Gov Spending cut (too much debt) – Imports exceed exports (negative trade balance) – The USA has ALL of these problems! Yikes!

Map Analysis The Following Map depicts 2005 Nominal GDP Using the scale, identify 3 patterns of GDP. Analyze those patterns and prepare to share. If you need help with countries-Ask!

Possible patterns that influence maximum GDP possible Land matters (US, Russia, India, China) Population matters (USA, Brazil,India) Education matters (USA, Germany, Japan) Nodality matters (USA,Mongolia,Laos) Trade Matters (NAFTA, EU) Neighborhood -Africa only has 2 “green” countries Primary Resource Countries generally have low GDP – Saudi Arabia, Subsaharan Africa

GDP Leaders 2004 v World trillion USA 13.2 trillion (5% of people generate 26% of world’s wealth) European Union trillion First year at 25 nations Japan3.5 trillion Germany (EU)2.2 trillion PR China 1.8 trillion UK (EU)1.6 trillion #13 Mex942 Billion 2009 World Tr EU Tr USA14.2 Tr – 24% of World GDP JPN5.1 Tr PR China4.9 Tr Germany3.3 Tr UK2.1 Tr Mex #14874 Billion

Disparity 32.6 billion GDP produced by top 10 countries European Union produced 14.5 Billion Mexico # billion! – Why is Mexico so high? (key is in GDP definition!) Lowest tended to be – Island nations – African nations with corrupt governments – ominal) ominal)

Developing GDP The World Bank and International Monetary Fund and World Trade Organization work with governments to improve GDP World Bank loans create capital for investment, IMF provides experts, WTO helps standardize and facilitate trade

Why USA is still #1 (for now) Massive productivity efficiency – Americans get more done in less time, working longer hours (France=35 hour work week) Massive market for consumer goods – Black Friday! (day after Thanksgiving) Massive Gov Spending – $8000 toilet (for Space Shuttle) Massive Exports of High Value G&S – Exporting Chevys, Importing Chickens

Projected 2050 GDP PR China44.4 Tr EU Tr USA35.1 Tr India27.8 Tr Mexico16.5 Tr JPN6.2 Tr Brazil6.1 Tr Russia5.8 Tr

3GDP has problems with… What three things make GDP a shaky measure of economic progress? – Real versus nominal GDP Inflation infects numbers from year to year and country to country – Purchasing Power Parity Cost of living varies from country to country – Omitted Productions/Problems Volunteer labor, black market, unsustainable policies like extreme spending.