Chapter 11, Section 2

 Know the four “sectors” into which our economy is divided, and how those sectors are used to determine GDP  Understand the concept of per capita GDP, and how economists use that data

 Household  Business  Government  Foreign  Each sector buys goods and services. The things they buy are given different names:  Household— consumption (C)  Business— investment (I)  Government— government purchases (G)  Foreign— export spending (EX)  To get an accurate measure of F, we must also take out any spending by Americans for foreign-produced goods (import spending) ( IM)

 GDP = C + I + G + EX – IM  Consumption plus  Investment plus  Government purchases plus  Export spending minus  Import spending  EX – IM is sometimes called net exports  Is the figure for U.S. net exports positive or negative?

 GDP/population  Gives a better measure of how “wealthy” a country is relative to another country  What else should be considered to get the “best” measure of economic prosperity among different countries?  Purchasing Power Parity (PPP)—allows for “apples to apples” GDP comparisons  “Big Mac Index”