Warm-Up What are some measures you might use to evaluate the health of the economy?

Circular Flow Model and Gross Domestic Product Chapter 23: Tracking the Macroeconomy (pages 590-603)

The Early Show – Little Known Signs Can Gauge the Economy

Coupon Redemption Index Weaker economies = more coupon usage Coupon Redemption Index The Concept: When the economy slips, consumers turn to coupons in their Sunday circulars to try to cut costs on things like toothpaste, laundry detergent and groceries. In 2009, coupon redemption soared to 3.3 billion uses as consumers looked to save more at the market.

Hemline Index Hemlines move with stock prices Hemline Index The Hemline Index is a theory presented by economist George Taylor in 1926.Recent research suggests it is valid. The theory suggests that hemlines on women's dresses rise along with stock prices. In good economies, we get such results as miniskirts (as seen in the 1960s),or in poor economic times, as shown by the 1929 Wall Street Crash, hems can drop almost overnight. Hemlines move with stock prices

Men’s Underwear Index Sales drop with bad economy The Concept: Men will forgo purchasing new underwear to save money during hard times. The Proof: True. Even Alan Greenspan is on the bandwagon. Research firm Mintel estimated men's underwear sales fell 2.3% in 2009, the first time since 2003.

Circular Flow Goods and Services Consumer Spending Wages, Rent, Dividends Factors of Production

Circular Flow Diagram

More Complex Circular Flow…

Gross Domestic Product (GDP) Value of FINAL goods & services Final = used by end users (laptop) Intermediate = used to make final (steel to make cars) GDP = C + I + G + (X – M)

Calculating GDP GDP = C + I + G + (X-M) C  Consumers I  Investment G  Government X-M  Net Exports

Check for Understanding Is This Counted as Part of GDP? GDP: Is It Counted and Where?

Does an increase in GDP mean a growing economy?

Real vs. Nominal GDP Nominal  Value in today’s $$ Real  Value compared to base Year Tons of Corn $ per Ton Tons of Soybeans Nominal GDP Real GDP 2012 100 $100 80 $50 $14,000 2013 110 $110 $20,100 $15,000 2014 90 $120 $19,600 $13,000

Real vs. Nominal GDP Find nominal and real GDP Year Nominal GDP Widgets Price Gizmos Thingamagigs 2013 1 $100 8 $10 4 $5 2014 10 $11 5 $4 Year Nominal GDP Real GDP 2013 $200 2014 $230 $225

Drawbacks to GDP? Some good activities hurt GDP Volunteerism Leisure Work around the house GDP doesn’t always = happiness Putting bars on windows for safety Cleaning up from hurricanes Buying tax prep software