Macroeconomic Performance Ch. 12 Economics Mr. Bennett

Measuring the Nation’s Output & Income Macroeconomics: The branch of Economics that deals with the economy as a whole Gross Domestic Product (GDP): The dollar value of all goods, services, & structures produced within a country’s national borders during a 1 year period. Most important measurement of the country’s overall economic performance. USA is # 1 with $17.9 Trillion in 2015

Computing GDP Multiply all the final goods & services produced in a year by their prices. (6 million cars) x ($25,000) = $150,000,000,000 See Table on page 320 This includes: Goods -Services -Structures But excludes: Intermediate products -Non-market transactions Secondhand sales -Underground Economy

GDP = C + I + G + (X-M) This is the formula for the Output Expenditure Model Macroeconomic model describing aggregate demand by the consumer, investment, government, & foreign sectors. Aggregate demand is the total value of goods & services demanded at all different price levels. Consumer Sector(C) – Disposable Personal Income (after taxes) Investment Sector(I) – purchases by businesses Government Sector (G) - purchases by government Foreign Sector (X-M) – exports minus imports

GDP - abbreviated Current vs. Real GDP: One misleading thing about GDP is it’s lack of accounting for Inflation (Ch. 13) Basically, GDP could appear to increase whenever prices/costs/values increase over time (inflation). So it’s not actually reflecting an increase in production (GDP) but rather an increase in prices (Inflation)

GNP – The Measure of National Income Gross National Product: page 324 The total dollar value of all final goods, services, & structures produced in one year by a country’s residents, REGARDLESS OF WHERE THE PRODUCTION TAKES PLACE. So while GDP measures the value of all final goods & services produced with the U.S. borders, GNP measures the income of all Americans, whether the goods & services are produced in the U.S. or not. GNP is the most comprehensive measure of our nation’s income Net National Product: (NNP) GNP minus depreciation Depreciation is also known as capital consumption It’s how much things lose value over time (like a car loses value when you drive it off a lot)…but we’re talking machinery or other items used in production

Ch. 12 Sect. 2: Geography Review Please open your textbook to page 330 Let’s skim through these terms, I am assuming that you can remember these pretty easily from all your Geography classes If any are new to you, please add them to your notes! Terms to review: Urban v. Rural Census Fertility Rate Life Expectancy

Lorenz Curve (pg. 339) The Lorenz Curve shows how the actual distribution of income varies from an equal distribution of income. An equal distribution of income is shown as a diagonal line. The further away from the diagonal line, the more inequality in income distribution. What’s the big picture: Rich are getting richer & the poor are getting poorer… Income inequality

Reasons for Income Inequality Please open your textbook to page 340 Can you think of reasons why there is such income inequality in America? Let’s discuss Then add the following terms & definitions to your notes Key Terms: Welfare Food Stamps Medicaid Workfare