1. Copyright © 2004 South-Western Measuring a Nation’s Income Microeconomics Microeconomics is the study of how individual households make decisions and how they interact with one another in markets. Macroeconomics Macroeconomics is the study of the economy as a whole.

2. Copyright © 2004 South-Western THE MEASUREMENT OF GROSS DOMESTIC PRODUCT Gross domestic product (GDP) It is the total market value of all final goods and services produced within a country in a given period of time.

3. Copyright © 2004 South-Western THE COMPONENTS OF GDP What Is Not Counted in GDP? GDP excludes most items that are produced and consumed at home and that never enter the marketplace. It excludes items produced and sold illicitly, such as illegal drugs.

4. Copyright © 2004 South-Western THE COMPONENTS OF GDP GDP (Y) is the sum of the following: Consumption (C) Investment (I) Government Purchases (G) Net Exports (NX) Y = C + I + G + NX

5. Copyright © 2004 South-Western THE COMPONENTS OF GDP Net Exports (NX): Exports minus imports.

6. Copyright © 2004 South-Western GDP per capita GDP per capita is determined by taking the GDP of a country and dividing it by the number of citizens in the country.

7. Copyright © 2004 South-Western Eminent Domain The power of the U.S. Government to take property from a private individual and use it for public purposes In order for Eminent Domain to be considered legal, owners must be paid just compensation and must be used for public use.

8. Copyright © 2004 South-Western Supply and Demand Law of Demand – As prices rise, demand falls Law of Supply – As prices rise, quantity rises. As prices drop, quantity drops. Equilibrium – Quantity demanded equals quantity supplied

9. Copyright © 2004 South-Western Supply and Demand Shortage –When quantity demanded is more than the supply Surplus – When quantity supplied is more than the demand

10. Copyright © 2004 South-Western Welfare Programs Medical Aid Medicaid - Social health care program for families and individuals with low income and limited resources. Medicare - Provides health insurance for Americans aged 65 and older who have worked and paid into the system.

11. Copyright © 2004 South-Western Welfare Housing Aid Section 8 – Provides very low rent for low – income families HOPWA – Provides very low rent for those with AIDS

12. Copyright © 2004 South-Western Education Pell Grants – Government assistance for low income college students.

13. Copyright © 2004 South-Western Public vs Private Sector Public sector – A service provided by the government. Paid for by taxpayer money Private sector – A private service provided by a private business Companies provide goods and services for those who pay for them

14. Copyright © 2004 South-Western Public vs Private sector Advantages of Public sector Can provide some services more efficiently than an individual ( for example dams and roads) Advantages of Private Sector Has more control in terms of wages and cost of service

15. Copyright © 2004 South-Western Black Market Black Market – Sector of economic activity in jurisdiction involving illegal activites Reasons why you would buy/sell on the Black Market 1.Avoid tax payments 2.Profit from narcotic trafficking 3.Profit from theft

16. Copyright © 2004 South-Western Black Markets Three reasons why black markets exist ] 1.Restrictive selling practices (alcohol and tobacco can’t be sold to minors) 2. High tax rates (alcohol, weed, tobacco) 3. Banned products (Narcotics, prostitution)

17. Copyright © 2004 South-Western Black Market Reasons why people don’t buy on the black market 1.The consumer may feel that the black market supplier conducts business immorally 2.The consumer may trust legal suppliers more because they are easier to contact and easier to get a refund 3.It may be a criminal offense to handle stolen goods

18. Copyright © 2004 South-Western Black Market Examples of items sold on the black market 1.Netflix accounts 2.Cigarettes 3.Marijuana 4.Guns 5.Prostitution 6.Human organs

19. Copyright © 2004 South-Western ECONOMICS Economics can be described as social science that describes the factors that determine the production, distribution and consumption of goods and services.

20. Copyright © 2004 South-Western FOUR ECONOMIC SYSTEMS Market economy is an economy run totally by business, without any government intervention.

21. Copyright © 2004 South-Western Laissez - Faire This phrase represents a Market Economy, because it means “hands off”. There is zero government intervention in this type of economy.

22. Copyright © 2004 South-Western INDUSTRIAL REVOLUTION During the industrial revolutions in America and Great Britain, they was a very close representation of a market economy.

23. Copyright © 2004 South-Western SUPPLY AND DEMAND The determining factor in a market economy is supply and demand.

24. Copyright © 2004 South-Western ADAM SMITH Adam Smith was a huge supporter of the market economy and hated government intervention in the economy.

25. Copyright © 2004 South-Western COMMAND ECONOMY In a command economy, the government makes all of the decisions of the economy.

26. Copyright © 2004 South-Western TRADITIONAL ECONOMY Traditional economies are very rare. They have a very simply economy. The two best examples of traditional economy are Native Americans and Amish.

27. Copyright © 2004 South-Western OPPORTUNITY COSTS Opportunity costs is the best alternative foregone when giving up something for something else.

28. Copyright © 2004 South-Western SCARCITY The fundamental economic problem of having seemingly unlimited human wants in a world of limited resources

29. Copyright © 2004 South-Western PHYSICAL CAPITAL Some examples of physical capital as used in the economy are buildings, machinery, computers and equipment

30. Copyright © 2004 South-Western GOODS VS SERVICE A good is something that you can use or consume, like food or CDs or books or a car or clothes. You buy a good with the idea that you will use it, either just once or over and over again. A service is something that someone does for you, like give you a haircut or fix you dinner or even teach you social studies. You don't really get something solid, like a book or a CD, but you do get something that you need.

31. Copyright © 2004 South-Western NEEDS VS WANTS Needs would be defined as goods or services that are required. This would include the needs for food, clothing, shelter and health care. Wants are goods or services that are not necessary but that we desire or wish for. For example, one needs clothes, but one may not need designer clothes.

32. Copyright © 2004 South-Western LAND IN FACOTRS OF PRODUCTION This resource includes timber, land, fisheries, farms and other similar natural resources. Land is usually a limited resource for many economies

33. Copyright © 2004 South-Western HUMAN CAPITAL Stock of knowledge, habits, social and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value.