Monday, October 27 Word Wall Vocab Matrix GDP Presentation & Notes Announcements Agenda See tutorials on board ECON Lowdown lessons due Wednesday by 10pm Stock Market Project has begun! 9 weeks ends today Ch. 12 & 13 Quiz next MONDAY Word Wall Vocab Matrix GDP Presentation & Notes What counts in GDP? Worksheet- turn in

Business Cycle Depression Durable Goods Final Goods Gross Domestic Product Intermediate Goods Nominal GDP Nondurable Goods Real GDP Recession Stagflation Consumer Price Index Deflation Full Employment Income Distribution Inflation Inflation Rate Poverty Rate Poverty Threshold Underemployed Unemployment Unemployment Rate

Gross Domestic Product Measuring the Economy Gross Domestic Product

Gross Domestic Product GDP is the dollar value of all final goods & services produced within a country during a given year Dollar value: total of the selling prices of all goods & services Final goods- products in the form sold to consumers, as opposed to intermediate goods, which are used in the production of final goods. U.S. GDP includes all products made in the U.S., regardless of who owns the company.

Calculating GDP

Calculating GDP Consumption (C)- purchases made by households Investment (I)- business purchase of equipment, construction, inventories Government Expenditure (G)- government purchases & investments (such as libraries) but NOT Social Security or welfare (those are counted when consumers spend them) Exports (X)- goods made in the U.S. & sent to other countries. Imports (M)- goods made elsewhere and brought in to the U.S.

Nominal GDP GDP that is measured in current prices Simply use the current year’s prices to calculate output. An increase in prices makes it appear that GDP has risen, when in reality, output has not. Creates distortion when comparing GDP from year to year.

Real GDP GDP expressed in constant or unchanging prices (base year) When calculating real GDP, a base year prices is used so you can compare output

Limitations of GDP GDP does NOT include: Non-market activities (things people do themselves- caring for children, mowing their own lawn, etc.) Underground economy (black market transactions, “under the table” wages, other legal, informal transactions such as paying someone in cash to babysit every now and then) Negative externalities (unintended economic side effects- if a power plant spends money to reduce damage caused by pollution, those expenses are added to GDP, but the value of a clean environment cannot be calculated) Quality of life (a rising GDP does not necessarily mean people’s standard of living is increasing)

Factors That Affect GDP Aggregate Supply- total amount of all goods and services available at all possible price levels Aggregate Demand- amount of goods & services in the economy that will be purchased at all possible price levels

GDP v. GNP GNP is the annual income earned by U.S. owned firms & U.S. citizens ONLY