Entrance Ticket Explain the tree/forest metaphor for Micro vs Macro

Agenda 1) Go Over GDP Comparisons 2) Types of Goods 3) Class Quiz 4) Calculating GDP 5) HW

Go Over In-Class Research

Economics Graphic Analysis Use the GDP maps provided and the GDP rankings available from the world bank (google: “world bank gdp ranking”) to answer the assigned questions Goal: To train you to read graphics/charts and to allow you to see how GDP numbers are useful for making comparisons

Types of Goods

Final Goods vs Intermediate Goods Final Goods = Finished goods and services produced for the ultimate (last) user Intermediate Goods = Goods and services used as inputs for the production of final goods Note: Only Final Goods are counted in GDP –- Why? Wood chunks are used to make wooden tables

Durable vs Nondurable Goods Durable Goods = Last longer than 3 years. Exs) Cars, appliances, furniture Nondurable Goods = Considered “used up” or consumed in less than 3 years. Exs) Food, clothing, gasoline

Class Quiz!

Final or Intermediate? GLASS

Final or Intermediate? PHONE CASES

Final or Intermediate? BATH TOWELS

Final or Intermediate? COTTON

Final or Intermediate? COTTON CANDY

Durable or Nondurable? TELEVISION

Durable or Nondurable? WASHING MACHINE

Durable or Nondurable? PIZZA

Durable or Nondurable? IPOD

Durable or Nondurable? POWERADE

CALCULATING GDP

What is and isn’t included in GDP? Final goods only, NOT intermediate goods Secondhand Transactions are not counted (ex. the resale of a used car is not an example of a new production so it is not included) Nonproductive Financial Transactions are not counted (ex. buying/selling stocks, giving private gifts, any kind of government benefits)

The Formula for GDP GDP = C + I + G + (X – M)*** Consumption Investment Government Spending Net Exports ***Each Term Will Be Explained

Consumption (C)*** Represents total household spending Includes money spent on durable goods, nondurable goods, and services ***largest component of GDP

Investment (I) Represents total business spending by businesses for investment in assets (property, machinery, equipment, tools, etc.)

Government Spending (G) Represents total value of goods/services (ex. government workers) purchased by the government as well as the total value of government investments (tanks, schools, highways, bridges, government buildings)

Net Exports (X – M)*** X represents the total value of foreign purchases of American products (exports) M represents the total value of American purchases of foreign products (imports) So X – M = exports minus imports ***Is most likely variable in GDP equation to be negative --- Why?

(HW if not finished in class) Practice (HW if not finished in class)

HW 1 : Calculate the 2008 GDP

HW 2 Label the 5 goods you have as either Finished/Intermediate and Durable/Nondurable THAT’S IT!