Ch. 13.1: National Income Accounting Economics Ch. 13.1: National Income Accounting p. 335-340 Learning Target: Understand how economists measure the economy’s performance; GDP, NDP, NI, PI, DPI, transfer payments, net exports

2. Explain what Transfer Payments are and give an example ECONOMICS Ch. 13.1: National Income Accounting Learning Target: Understand how economists measure the economy’s performance; GDP, NDP, NI, PI, DPI, transfer payments, net exports Success Criteria You should be able to… 1. Explain how a nation’s economy is measured using GDP, NDP, NI, PI and DPI 2. Explain what Transfer Payments are and give an example 3. Show how to calculate Net Exports

How do we usually measure the economic performance of a nation?   National Income Accounting. Deals with the economy’s overall output and income. A measurement of the national economy’s performance.

What are the five major statistics used to measure the nation’s economy?   1. Gross Domestic Product (GDP) 2. Net Domestic Product 3. National Income Personal Income Disposable Personal Income

What is GDP and how is it measured?   The total dollar value of all final goods and services produced in a nation in a single year.

What is the measuring value (unit) used for GDP?   The total value of the items produced using the dollar ($). GDP is expressed in dollar terms.

How do we measure GDP?   Only the value of the final good or service is used for measuring GDP. Parts of a product are not counted, only the final product. Ex.: We count the cell phone, not any of the parts (battery, etc.) Used items are NOT counted, only new production.

Let’s Review Discuss at your table. What would happen if a nation counted the sales of used items in its GDP? Why are only new and final goods counted in GDP? Are you on target (white, black, blue, red or yellow)? Did you hit the bullseye? Learning Target: Understand how economists measure the economy’s performance; GDP, NDP, NI, PI, DPI, transfer payments, net exports

2. Explain what Transfer Payments are and give an example ECONOMICS Ch. 13.1: National Income Accounting Learning Target: Understand how economists measure the economy’s performance; GDP, NDP, NI, PI, DPI, transfer payments, net exports Success Criteria You should be able to… 1. Explain how a nation’s economy is measured using GDP, NDP, NI, PI and DPI 2. Explain what Transfer Payments are and give an example 3. Show how to calculate Net Exports

Imports   Products bought from other countries (brought in to the U.S.). Exports Products sold to other countries (shipped out of the U.S.).

How do we compute GDP?   Add the expenditures in 4 categories: GDP = Consumer sector + Investment sector + Government sector +/– Net exports See Figure 13.2, page 338

Exports – Imports = Net Exports How do we compute Net Exports?   The difference between a nation’s exports and imports. Exports – Imports = Net Exports Can be negative.

Let’s Review Consumer Sector Investment Sector Government Sector Discuss at your table. List the four categories economists use to derive GDP and two examples of each. Are you on target (white, black, blue, red or yellow)? Did you hit the bullseye? Consumer Sector Investment Sector Government Sector Net Exports Learning Target: Understand how economists measure the economy’s performance; GDP, NDP, NI, PI, DPI, transfer payments, net exports

2. Explain what Transfer Payments are and give an example ECONOMICS Ch. 13.1: National Income Accounting Learning Target: Understand how economists measure the economy’s performance; GDP, NDP, NI, PI, DPI, transfer payments, net exports Success Criteria You should be able to… 1. Explain how a nation’s economy is measured using GDP, NDP, NI, PI and DPI 2. Explain what Transfer Payments are and give an example 3. Show how to calculate Net Exports

The loss of value of a good due to wear and tear or age. What is Depreciation?   The loss of value of a good due to wear and tear or age. Examples:

What is the Net Domestic Product (NDP)?   The value of the nation’s total output (GDP) minus the total value lost through depreciation on equipment. NDP is a better measure than GDP because it accounts for depreciation. NDP = GDP – Depreciation

What is National Income (NI)?   Total income earned by everyone in the economy.

What five sources of income make up the national income?   Wages and salaries Income of the self-employed Rental income Corporate profits Interest on savings and investments

Personal Income (PI)   Total income that individuals receive before paying taxes. Disposable Personal Income (DPI) Income remaining for people to spend or save after all taxes have been paid.

What are Transfer payments?   Welfare and other supplementary payments that a state or the federal government makes to individuals.

Let’s Review What is the difference between GDP and NDP? Discuss at your table. What is the difference between GDP and NDP? What are some of the sources of income that make up National Income? What is the difference between PI and DPI? What is a transfer payment? Are you on target (white, black, blue, red or yellow)? Did you hit the bullseye? Learning Target: Understand how economists measure the economy’s performance; GDP, NDP, NI, PI, DPI, transfer payments, net exports

2. Explain what Transfer Payments are and give an example ECONOMICS Ch. 13.1: National Income Accounting Learning Target: Understand how economists measure the economy’s performance; GDP, NDP, NI, PI, DPI, transfer payments, net exports Success Criteria You should be able to… 1. Explain how a nation’s economy is measured using GDP, NDP, NI, PI and DPI 2. Explain what Transfer Payments are and give an example 3. Show how to calculate Net Exports

Figure 13.1, page 336 According to the graph, what is the difference in dollars between gross domestic product and disposable personal income?  Pair Share  

Pair Share GDP – DPI 14.0 – 10.1 = 3.9 $3.9 trillion Figure 13.1, page 336 According to the graph, what is the difference in dollars between gross domestic product and disposable personal income?  Pair Share GDP – DPI 14.0 – 10.1 = 3.9 $3.9 trillion  

Economic Concepts Student Activity 13 GDP View the pictures on the following slides. Answer the questions on the handout with a partner and discuss them at your table.

SUCCESS CRITERIA #WeLoveToLearn

2. Explain what Transfer Payments are and give an example ECONOMICS Ch. 13.1: National Income Accounting Learning Target: Understand how economists measure the economy’s performance; GDP, NDP, NI, PI, DPI, transfer payments, net exports Success Criteria You should be able to… 1. Explain how a nation’s economy is measured using GDP, NDP, NI, PI and DPI 2. Explain what Transfer Payments are and give an example 3. Show how to calculate Net Exports

Proof of Success / Success Criteria (review your Learning Target(s)) 1) I now know that… a. ______________________________________________________________ ______________________________________________________________ b. ______________________________________________________________ c. ______________________________________________________________ 2) ONE word that might summarize today’s topic(s) is 3) My question is ______________________________________________ Did you hit the Learning Target? Circle a color. White Black Blue Red Yellow or Bullseye