Agenda- 11/17 Ch. 12 Lecture Unit 3 Quiz – Wed. Nov. 29th (Ch. 9 note handout to put in your notebook) Unit 3 Quiz – Wed. Nov. 29th HW: GDP Tri-Fold Reminder: Community Service Fri., 12/1

Warm-up List the last five times you paid a tax to the government in the past week.

Measuring the Nation’s Output & Income Ch. 12, Sec. 1

GROSS DOMESTIC PRODUCT (GDP) The total dollar value of all final goods and services produced by resources located in the United States (regardless of who owns them) during one year’s time. The single most important measurement of the economy’s overall performance.

COMPUTING GDP Conceptually, you simply multiply all the final goods & services produced in a year by their prices. (skip a line after each of the following) Goods Services Structures

CONSUMER GOODS Goods Services Structures (Investment Goods) Products purchased for final consumption Services Items consumed instantaneously Structures (Investment Goods) Single Family Multifamily Commercial

THINGS THAT ARE EXCLUDED FROM GDP Intermediate Products –pieces of an item i.e. a bottle-label-cap-juice-box, etc. Non-market Transactions –items that are not paid for such as barter or unpaid household duties. Secondhand Sales -items that have already been counted. Transfer Payments – when money is simply transferred back & forth between the Govt. & individuals & businesses. Financial Transactions – Stock market / investments

COMPOSITION OF GDP Consumer Goods (C) - items made for final consumption Investment Goods (I) -increase in productive (physical) capital The Government Sector (G) -purchases by government Foreign Sector (NX) – exports minus imports

GDP (cont.) GDP = C + I + G + NX GDP = Personal Consumption + Investments + Government Purchases + Foreign Transactions GDP = C + I + G + NX NX = Net Exports (Exports – Imports) Generally a negative #

“C” (Consumers) The Consumer Sector or households account for over 2/3 of the economy. The Consumer Sector receives its income from disposal personal income (after taxes) (DPI) GDP

WHITEBOARDS!!! 1 board & dry erase pen per pair! Which of the following are included and which are excluded in calculating this year’s GDP? - Discuss with your partner, and be prepared to show your decisions on your whiteboard. - If YES, tell me which Sector. - If NO, tell me why.

GDP? A monthly check received by an economics student who has been granted a government scholarship that does not need to be paid back. (PELL Grant)

Answer No, transfer payment

GDP? A farmer’s purchase of a new tractor.

Answer Yes, investment (I)

GDP? A plumber’s purchase of a used truck.

Answer No, second hand sale

GDP? The cashing of a Savings Bond at the bank.

Answer No, financial transaction

GDP? The services of a mechanic in fixing the radiator on his own car.

Answer No, non-market activity

GDP? A Social Security check paid by the government to a retired store clerk.

Answer No, transfer payment

GDP? The King of Dubai purchasing Napa, CA wines for a dinner he is hosting in Dubai for members of the US Government.

Answer Yes, NX (the wine is an export)

GDP? The government’s purchase of a new submarine for the Navy.

Answer Yes, government expenditure (G)

GDP? A barber cutting other people’s hair.

Answer Yes, a consumer service (C)

GDP? Income received from the sale of Nike stock.

Answer No, purely financial transaction

GDP? A barber cutting his own hair. w/ a Flowbee ; ) https://www.youtube.com/watch?v=LEuoiKNUfdI

Answer No, Non-Market transaction

THE FIVE INCOME MEASURERS (Chart p THE FIVE INCOME MEASURERS (Chart p. 325 of the “flow”) { This is INCOME measure, not PRODUCTION } Gross National Product (GNP) – dollar value produced by US citizens & corporations Net National Product (NNP) – which is GNP less depreciation Depreciation represents the capital equipment that has worn out or become obsolete over the year.

THE FIVE INCOME MEASURERS (cont.) National Income (NI) –income left over after all taxes have been taken out of the corporations. Personal Income (PI) –the total amount of the nation’s income going to consumers before individual income taxes are subtracted. (salary)

THE FIVE INCOME MEASURERS (cont.) Disposal Personal Income (DPI) – the total income the Consumer sector has at its disposal after personal income taxes. Disposable Income is the amount of money that consumers have to spend.

Most “focused # to use for comparison to previous years. Measurers of Income GNP NNP NI PI DPI - depreciation - Corporate taxes - Salaries (pre-tax) - Salary (post-tax / “take home pay”) Most “focused # to use for comparison to previous years.