Competency 38 Demonstrate knowledge of a nation’s economic goals, including full employment, stable prices, and economic growth Do Now: 1)List some vital signs that doctors and nurses use to measure overall healthiness 2)What kind of vital signs can we use to measure the health of the economy? 3)If you heard a television newscaster say that the economy grew by 1 percent last quarter, what would you think they meant?

What is Gross Domestic Product? Definition: the dollar value of all final goods and services produced within a country’s borders in a given year  Dollar value – total selling price  Final G & S – sold to final user  Produced in a country – made IN that country only  Given year – takes into account when it was produced

Included or not included? 1)Restaurant meal 2)Haircut 3)Mechanic fixes car in exchange for computer repair 4)Childcare provided by parent 5)Bicycle made in the US by a British company 6)Sale of bootleg DVDs 7)Sale of a used computer 8)Item made this year but not sold

Nominal GDP Vs Real GDP Nominal GDP – GDP measured in current prices Real GDP – GDP adjusted for price change Why would we need to adjust for price change?  Inflation can cause numbers to be misleading from year to year YearCarsPrice per carTrucksPrice per TruckNominal GDP Year 110$15,00010$20,000$350,000 Year 210$16,00010$210,000$370,000

Limitations of GDP Does not include: Illegal goods and services Trading goods and services Things produced but never sold  Fixing your own car  Caring for your children Health and happiness

Gross National Product Definition – The annual income earned by US firms and people  Add up yearly income  Or, add up market value of all goods and services produced by Americans in 1 year Does not account for depreciation  Depreciation – loss of value of capital equipment from normal wear and tear

Video Clip

Get to Work!!! Page 378 – Chart Skills Page 381 – Chart Skills Page 382 – Section 1 Assessment Questions 3-6

Business Cycle Four main factors affecting the cycle: 1)Business investment 2)Interest rates and credit 3)Consumer expectations 4)External shocks

Real GDP Purr Capita Real GDP Per Capita – real GDP divided by the total population of a country Why is this better than Real GDP? It tells you how the average citizen is doing Real GDP can be misleading because larger countries could produce more but still not have a higher standard of living

More Stuff To Do Page 384 – Chart Skills Page 391 – Section 2 Assessment Questions 1, 2, 3, 4, and 6 (S2 Grade) Draw the business cycle on a piece of construction paper  Make each phase a different color and label  Include definitions for the following words: peak, contraction, trough, recession, depression, and stagflation

Do Now Finish business cycle drawing  Label the four phases  Color code the phases  Define: peak, contraction, trough, recession, depression, and stagflation Taco Tuesday 2013: 4 tacos for $4 Taco Tuesday 2014: 3 tacos for $4 1)How does this demonstrate reduced purchasing power? 2)What could cause the prices to increase? 3)How does the price change affect you?

Unemployment People who are actively seeking work but cannot find a job are considered unemployed There will always be unemployment even when the economy is growing There are four types of unemployment 1)Frictional Unemployment 2)Seasonal Unemployment 3)Structural Unemployment 4)Cyclical Unemployment

Frictional Unemployment Occurs when people take time to find a job Can you think of any examples?  Quitting your job to seek another  Taking time to find the right job after college  Taking time off to care for family and then returning to the workforce

Seasonal Unemployment Happens when industries slow or shut down for a season It can result from harvest schedules, holiday demand, or vacations Examples?  Tax preparer  Lawn care

Structural Unemployment Occurs when workers don’t have the skills needed for jobs that are available There are 5 causes of structural unemployment 1)Development of new technology 2)Discovery of new resources 3)Changes in consumer demand 4)Globalization 5)Lack of education

Cyclical Unemployment Results from the fluctuations of the economy Unemployment goes up during recessions and depressions  Demand for goods and services goes down, so firms cut back on production Examples?  25% of the labor force was unemployed during the Great Depression

What Type of Unemployment? 1)Alyssa lost her job when the company outsourced her work 2)Larry the landscaper was laid off over the winter 3)Shane quit his engineering job to look for a position teaching science 4)Casey lost his job at the coffee shop due to a recession

Measuring Unemployment Unemployment Rate – percentage of the labor force that is unemployed ((Unemployed/labor force) x 100) Civilian labor force is made up of people that are:  16 and older  Not institutionalized  Not in the military  Employed or seeking employment

Book… Page 457 – Chart Skills Page 458 – Chart Skills Page 459 – Section 1 Assessment questions 2-7

Inflation and You Definition: increase in prices over time Inflation affects your purchasing power (ability to buy goods and services)  Each dollar becomes less valuable so you have to spend more money at-is-inflation/ at-is-inflation/

Measuring Inflation Economists use the Consumer Price Index (CPI) to calculate inflation  CPI – measurement that shows how much the prices of necessary items are changing CPI uses a market basket that a typical urban consumer might buy  Includes food, housing, clothing, transportation, medical care, personal care, and entertainment

Effects of Inflation Loss of purchasing power  Hits fixed income families the hardest Inflation also affects interest rates  True return on investments depends on inflation  When a bank’s interest rate matches the inflation rate, savers break even Low unemployment usually leads to higher inflation  Why?

Deflation – The Opposite of Inflation Definition: a general drop in price levels

Case Study: Avatar What do these two movies have in common? We will read through the Forbes article together Answer the attached questions on 1 sheet of paper for the entire group: 1, 3, 4, 5, 6, and 8

Do Now: Book! Book! Book! Page 461 – Chart Skills Page 465 – Section 2 Assessment 1, 2, 3, and 6

Achieving Economic Goals Economic goals include: Full Employment – a situation when no cyclical unemployment exists Stable Prices – characterized by low inflation rate Economic Growth – steady, long rise in GDP Mini Book Work Guiding Question chart on page 530

Which Economic Goal?

Page 533 Silent reading and writing 5-7 sentence summary of the section