So, How do you fix the US debt? n Increase Taxes. n Cut government spending. u Cut jobs u Cut programs

OR… n Both McCain and Obama have talked about CUTTING taxes. u Cutting taxes means there is more money in our pocket. u We’ll spend or invest that money and make more jobs for the economy.

How would these plans work? n According to the Tax Payers Institute and the Brookings Institute in Washington – how would the Obama and McCain “plans” work for the economy?

Barack Obama n Increasing taxes for corporations and people who make more than $2- million a year. n More spending on programs to educate people. n And what about the debt? u INCREASE THE DEBT by 2.8 Trillion.

John McCain n Cut taxes for all economic classes. n Cut government spending. n And the debt? u INCREASE THE DEBT BY $5-Trillion!

Three Terms to know about the US Economy in 2008 n Recession n Depression n Inflation

Recession n People HAVE money, but are afraid to spend it! n What happens when people don’t spend money??

Recession n People get scared about their futures and don’t spend money. n That leads to unemployment. n That leads to less spending. n That leads to more unemployment. n That leads to more news that scares people into not spending their money.

Recession vs. DEPRESSION n Depression – There is NO money. n 1929 – 1940 in the US economy.

Can there be a depression again? n Probably not. n More globalization helps keep money flowing. n There are government regulations and agencies that in 1929 didn’t exist to stop the Depression from happening.

Inflation n The price of goods goes up faster than our wages! n Our money doesn’t buy as much. n Choices? u Work harder to “keep up” u Not being able to buy as much.

So, how do we know where we are in the US economy? n Perceptions of people n Statistics

Gross Domestic Product How Big is the Economy?

GDP = C+I+G+X-M n Consumption n Investment n Govt. spending n Exports n Imports

Gross Domestic Product n GDP is the total market value of all final goods and services that are produced within the borders of a nation in a year.

What are final goods and services? n Things that are produced and services that are performed that are not used to create other goods and services.

Final Goods: n Hair cuts. n Clothes. n Cupcakes n Anything consumed.

Final Goods vs. Intermediate Goods and GDP n Intermediate goods are used to produce another good. n Intermediate goods are left out of GDP.

Juan’s FINAL GOOD. n Juan bought a digital camera for $700. He used the camera to take pictures for his family and friends. He is the end user of the camera - so it is a final good and added to GDP.

Helga’s INTERMEDIATE GOOD. n Helga is a part-time photographer. She is hired to take pictures of a wedding. She bought the same camera for $700 and then sold the pictures for $900. The cost of camera is not added to GDP.

What do you think? n Mort is a CPA. He is paid $125 by Pat to fill out his income tax forms. n Mort fills out income tax forms for Pines Funeral Home. The fee is $380.

GDP is determined by MARKET VALUE. n Whatever is actually paid. n GDP includes total money paid for final goods.

Difference between GNP and GDP? n Lowell is a comedian and U.S. citizen. He works in Canada and the U.S. He made $22,000 in the U.S. and $15,000 in Canada. n GNP for U.S. = $37,000; GNP for Canada = $0. n GDP U.S. = $22,000; GDP Canada $15,000.

Three Sectors Make up GDP... Manufacture Sector Service Sector Construction

How large is the GDP? n In 2006 GDP was $13.13 TRILLION!

So, what does that mean for YOU? n GDP per capita u $45,845

What country in the world has the highest GDP per capita? n GUESS???

Luxembourg n GDP per capita: $104,673 n A False Correlation! u Only a population of 480,000 people!

#2? n NORWAY! n GDP per capita: u $83,922

#3 in GDP per Capita? n Qatar u $72,849

#4? n Iceland u GDP per capita F $63,830

#5 n Brunei u GDP per capita: F $51,005

#6??? n THE USA!

Comparison of GDP in the world

The Poorest in GDP

The Poorest Countries GDP n Out of the 179 countries that do submit data, 36% of the world’s countries have people earning LESS than $1000 a year.

The poorest? n Zimbabwe u GDP per capita F $55 per year.

Why is Zimbabwe so poor? n Corruption of the government. u Rigged Presidential elections. u Anyone who has wealth is accused of crimes and wealth taken. n A devastating inflation rate. u US inflation rate: 6% u Zimbabwe inflation rate: 66,000% or 100,500% F Loaf of bread costs $148 F 40 lbs of Zimbabwe money = $100 US

Also near the bottom: n Liberia u $195 n Democratic Republic of Congo u $166 n Burundi u $128

What do you think will be the questions for the test? n What is the equation for the GDP? n What are two ways you could solve the national debt? n What would McCain and Obama do about the debt? n What are the three top things govt. spends money on? n Depression, Recession, Inflation definitions: n What is the national debt within.1 ? n What is the GDP for the US?