Economic Indicators And Measurements Chapter 12 Economic Indicators And Measurements

Bell Ringer 12/7 Do you favor (support) a flat tax that is an equal percentage of taxes for all classes or a progressive tax that taxes a greater percentage as you make more money? Why?

How can we tell how our economy is doing? income levels and the poverty rate the stock market unemployment rate inflation rate and CPI GDP So……what is GDP?

Gross Domestic Product How we measure economic growth

Gross Domestic Product The United States is the wealthiest country in the world But how do people decide which country is wealthier or poorer? Which of these places would you like to call home?

1. What is Gross Domestic Product? GDP is the measure of all final goods and services produced in the United States.

Gross Domestic Product GDP: tells the value of the goods and services that a country produces each year: A country’s “Income” GDP: is a way to compare the strength of countries economies A country takes the total amount of everything made and serviced from January to December and get one number GDP (2010) United States: 14 trillion China: 8 trillion Japan: 3 trillion

Idea Behind a High GDP What could be said of a country that makes a lot of goods and provides a lot services? Hint: How are things made or service? That county has: Many factories and stores Many people employed that work Have people smart and healthy enough to work at factories or stores Have people that start businesses

Idea Behind a low GDP What could be said of a country that doesn’t produce a lot of goods and provides a lot services? Hint: What will be missing? That county lacks: Factories that are expensive to build Many unemployed people Many children and adults lacking healthcare and education Very few people starting a business

Standard of Living Standard of Living: A measurement of income, health, education and other factors for the average person in a country It’s a quick way to compare how “good” life is in one country compared to another Countries with a higher GDP usually have a higher standard of living (type of life) Countries with a lower GDP usually have a lower standard of living (type of life)

2. How is GDP figured out? This number is figured out by figuring out each good’s market value and adding them all together.

What patterns do you notice about this world look at GDP? Regions Continents Large Countries Small Countries

Patterns Identified Countries with Low GDPs Countries with bad geography Small countries Many African and some Middle Eastern Countries Countries with High GDPs Large Countries: have a lot of natural resources Small countries like UK, France and Japan that specialize in services and technology

Factors the affect GDP Human Capital Spending money on education, training, skills and health of the workers in a business or country. Physical Capital Investing money into factories, Machines, technology and buildings. Natural Resources A country makes more money with the more natural resources they have. Entrepreneurship A Country needs people to start businesses that create jobs and income for its workers

Gross Domestic Product Human and Physical Capital Investing in education and workers’ training: If the human capital (workers) are better educated and having better training, most likely, there will be an increase in GDP Investing in factories, machines and technology: Investing in factories, machines and technology will help a country produce more products quicker.

Gross Domestic Product If a country has little investment in factories, machines, and technology we can assume that country's GDP is going to be what? If a country invest heavily in factories, machines and technology we can assume that country's GDP is going to be what?

Gross Domestic Product If a country has low levels of education and training, we can assume that country's GDP is going to be what? If a country has high levels of education and training we can assume that country's GDP is going to be what?

Gross Domestic Product Natural Resources Russia, Brazil, Canada and Australia are large countries (area) which increase its chances of having a lot of natural resources These countries can sell (export) a lot of their natural resources and make money ( this adds to a country’s GDP) Smaller countries like (the UK and Belgium) spend a lot of money importing natural resources from other countries. ( this takes away from a country’s GDP)

Gross Domestic Product Entrepreneurship Entrepreneurs help the economy and GDP by doing…. Hiring workers …make more goods Tax money on goods sold Produce goods: May sell goods to other countries If a country doesn’t have an abundance of entrepreneurs then the economy suffers Investing in human capital like schools and training helps a country to develop entrepreneurs

What is the Difference Between a Final Good and Intermediate Good? Intermediate goods are goods that have not reached their final user. These are NOT counted by GDP. Final goods are counted in GDP. These are goods that are sold to their final users. Intermediate Goods Final Good

What is Double Counting? If we counted both intermediate AND final goods, we would count some goods twice. This is double counting and something we want to avoid. Intermediate Goods Final Good

What is NOT counted by GDP? Illegal Goods and Services Transactions with no record Nonmarket Goods and Services Sales of Used Goods Stock and Other Financial Transactions Government Transfer Payments

What is the Difference Between GDP and GNP? Gross Domestic Product is all goods and services counted within the borders of the U.S. Gross National Product is all goods and services made by U.S. citizens, no matter where they are.

What are the 4 Sectors of the Economy? Household spending is called consumption. Business spending is called investment. Government spending is called government purchases. Foreign spending is called exports and imports.

What is Per-Capita GDP? This is GDP per person. GDP divided by Population. This may be a more accurate way of looking at which countries have the largest economies.