Gross Domestic Product GDP

Gross Domestic Product GDP = the total market value of all final goods and services produced in a country in a year. Measurement The expenditure approach everything bought in the country. Real GDP = adjusted for inflation

Y = C + I + G + X -M National GDP Is composed of Consumption by households Investment purchases of business and households Government Spending Total Exports minus Total Imports

Not Counted Raw materials Intermediate goods Anything for resale Car parts, etc Anything for resale Purchase of stocks and bonds (transfer of money nothing is bought) Money put in savings Leisure activities reading, listening to music, etc. Household activities: cleaning, cooking, mowing lawn, etc.

Not included Retirement Days off Vacations Child care Housework Gardening DIY

Economic Growth Economic growth = Rise in real GDP = economic growth Decline in real GDP = contraction Decline for 2 quarters = recession Decline for longer than 2 quarters = depression

Aggregate Supply Aggregate = Total Aggregate Supply = total supply for everything Short run = aggregate supply curve (SRAS) positive slope Shows direct relationship between price level and real GDP. Long run = prices completely flexible Full employment supply curve (LRAS) is vertical

Aggregate Demand Aggregate Demand = Everything bought in the country GDP negative-sloping shows inverse relationship of price level and real GDP.

The national economy goes up and down like a roller coaster over time The Business Cycle The national economy goes up and down like a roller coaster over time Real GDP Inflationary Gap Recessionary Gap Peak Real GDP Trough Full Employment Recession (Contraction) Recovery (Expansion) Time A recession is 6 month period of decline in Real GDP. (If really bad…then depression) 10 Copyright ACDC Leadership 2018

Recession Contraction for 2 consecutive quarters unemployment rises Begins at peak Ends at the trough Depression = severe recession

Depression severe recession Has large unemployment, acute shortages excess capacity in manufacturing.

The Cycles Boom = period of prosperity If there is a contraction Expansion follows If there is a Recession Recovery follows Boom = period of prosperity New cycle expands further than previous peak

Expansion production increases resources are being utilized. GDP increases, unemployment decreases inflationary pressure rises.

Question #1 In the formula, C + I + G + Nx, what does the C stand for? Consumption

Question #2 What do we call the total market value of all goods and services produced in a year? GDP

Question #3 Real GDP is adjusted for what? Inflation

Question #4 In the formula, C + I + G + Nx, what does the G stand for? Government Spending

Question #5 A period of economic decline (1 Quarter or less) is called? Contraction

Question #6 What is the lowest point of the business cycle? Trough

Question #7 In the formula, C + I + G + Nx, what does the I stand for? Investment Spending

Question #8 A period of economic growth following a contraction is called? Expansion

Question #9 The highest point of the business cycle is called? Peak

Question #10 What do we call a severe recession? Depression

Summarizer What I thought you taught: Students will brainstorm 4-6 new vocabulary from today’s lesson and write them in a list. The students will write a paragraph of 5-7 sentences explaining each of the new vocabulary and how they relate to each other.