1. Splash Screen

2. Section 1: Measuring the Nation’s Output and Income
Chapter Introduction
Section 1: Measuring the Nation’s Output and Income
Section 2: Population and Economic Growth
Section 3: Poverty and the Distribution of Income
Visual Summary
Chapter Menu

3. Have you ever thought about what it means when someone is described as “successful”? Is the person wealthy, happy, or well known? Work with a partner and develop a list of the qualities or characteristics for your definition of successful. Share your list with the class and listen carefully to what the other students think. Is there a consensus among your classmates? Read Chapter 12 to learn more about how economists assess the success of a nation’s economy by measuring its growth and performance.
Chapter Intro 1

4. Economists look at a variety of factors to assess the growth and performance of a nation’s economy.
Chapter Intro 2

5. Chapter Intro-End

6. Section Preview
In this section, you will learn how we measure the output and income of a nation.
Section 1-Preview

7. Content Vocabulary macroeconomics gross domestic product (GDP)
intermediate products
secondhand sales
nonmarket transactions
underground economy
base year
real GDP
current GDP
GDP per capita
gross national product (GNP)
net national product (NNP)
national income (NI)
Section 1-Key Terms

8. Content Vocabulary (cont.)
personal income (PI)
disposable personal income (DPI)
household
unrelated individual
family
output-expenditure model
net exports of goods and services
Academic Vocabulary
excluded
components
Section 1-Key Terms

9. Is it really possible for a factory to keep track of its total output when it produces a variety of product lines?
A. Yes
B. No
C. Not sure A B C
Section 1

10. Measuring the Nation’s Output and Income
Macroeconomics deals with the economy as a whole in determining a nation’s growth rate.
GDP is one of the most important macro measures.
Section 1

11. GDP—The Measure of National Output
GDP measures national output.
Section 1

12. GDP—The Measure of National Output (cont.)
Gross domestic product (GDP)— measures final output each year; is estimated every three months and revised after that.
Estimating Total Annual Output
Section 1

13. GDP—The Measure of National Output (cont.)
Items excluded from GDP
Intermediate products
Secondhand sales
Nonmarket transactions
Underground economy
Estimating Total Annual Output
Section 1

14. GDP—The Measure of National Output (cont.)
GDP must be adjusted for inflation.
Constant prices in a base year are tracked for this purpose.
Real GDP
Current GDP
Current GDP and Real GDP
Section 1

15. GDP—The Measure of National Output (cont.)
Economists calculate GDP per capita to determine how the output of one country compares to another.
Profiles in Economics: John Kenneth Galbraith
Section 1

16. GDP—The Measure of National Output (cont.)
GDP has limitations.
GDP tells us nothing about composition of output.
GDP tells little about the impact of production on quality of life.
Some GDP is produced to control activities with little utility.
Section 1

17. GDP—The Measure of National Output (cont.)
GDP is a measure of voluntary transactions and therefore an indicator of our overall economic health.
The Global Economy & YOU
Section 1

18. Why is GDP the single most important economic statistic compiled?
A. GDP changes can influence national elections.
B. Measures economic health overall
C. Illustrates production’s impact on quality of life
D. Indicates conditions of world economy A B C D
Section 1

19. GNP—The Measure of National Income
National income can be measured in a number of different ways.
Section 1

20. GNP—The Measure of National Income (cont.)
GDP has two sides.
Represents output
Represents equal amount of income
Section 1

21. GNP—The Measure of National Income (cont.)
Measures of national income
Gross national product (GNP) focuses on total income rather than output.
Net national product (NNP)
National income (NI)
Personal income (PI)
Disposable personal income (DPI)
Section 1

22. C. Disposable personal income
Which measure of income shows the actual amount of money consumers are able to spend?
A. Personal income
B. National income
C. Disposable personal income A B C
Section 1

23. Economic Sectors and Circular Flows
The production of output generates income which flows through different sectors of the economy.
Section 1

24. Economic Sectors and Circular Flows (cont.)
Income generated by production flows to businesses, government, and consumer sectors.
Circular Flow of Economic Activity
Section 1

25. Economic Sectors and Circular Flows (cont.)
The largest sector in the economy is the household or consumer.
Unrelated individual
Family
Section 1

26. Economic Sectors and Circular Flows (cont.)
Business or investment sector
Proprietorships, partnerships, and corporations
Section 1

27. Economic Sectors and Circular Flows (cont.)
Government or public sector
Foreign sector
Section 1

28. Which of the following sectors does not have a specific source of income?
A. Consumers
B. Government
C. Foreign
D. Business A B C D
Section 1

29. The Output—Expenditure Model
The output-expenditure model is used to explain aggregate economic activity.
Section 1

30. The Output—Expenditure Model (cont.)
The circular flow can be represented by the output-expenditure model.
GDP = C + I + G + (X – M)
Section 1

31. The Output—Expenditure Model (cont.)
Consumers spend income on goods and services used by households.
Income that is not spent appears as personal saving and borrowed by the business and government sectors.
Section 1

32. The Output—Expenditure Model (cont.)
Investment sector spends income on labor, factories, equipment, inventories, and other investment goods.
Government sector spends income on national defense, income security, roads, etc.
Foreign sector buys U.S. goods that make up our GDP.
Foreign sector purchases are called net exports of goods and services.
Section 1

33. What effect do you think the health-care industry has on GDP?
A. Positive effect
B. Negative effect
C. Balances out A B C
Section 1

34. Section 1-End

35. Section Preview
We are interested in population because it makes up the economy’s largest sector, the consumer sector, and affects the economic performance of a nation.
Section 2-Preview

36. Content Vocabulary Academic Vocabulary census urban population
rural population
center of population
infrastructure
baby boom
population pyramid
dependency ratio
demographers
fertility rate
life expectancy
net immigration
Academic Vocabulary
residence
projected
Section 2-Key Terms

37. Do you know how often the United States conducts a census? A. Yes
B. No A B
Section 2

38. Population and Economic Growth
The U.S. Constitution requires the government to take a census that includes place of residence.
Official census
Taken every 10 years
Used to apportion number of representative that each state elects to Congress
Section 2

39. Population in the United States
The country’s population has shifted from a fast-growing, mostly rural population to a slower-growing, mostly urban one.
Section 2

40. Population in the United States (cont.)
Congress permanently established the U.S. Census Bureau in 1902.
Census data are presented in a number of ways:
Urban population
Rural population
Household trends
Section 2

41. Population in the United States (cont.)
Regional changes
Population shift is indicated by the center of population.
GDP per capita and GNP per capita for comparisons with other countries
Center of Population, 1790–2000
Section 2

42. Population in the United States (cont.)
If population grows faster than its output, a country could end up with more mouths than it can feed.
If population grows too slowly there, may not be enough workers to sustain economic growth with more demand on resources.
Modest shifts in the population can cause major infrastructure problems in the future.
Section 2

43. What is the most significant impact that population changes have brought about in your area?
A. Housing prices have increased/decreased.
B. Traffic congestion has increased/decreased.
C. Recreation areas have been lost/gained.
D. Cost of living has increased/decreased. A B C D
Section 2

44. Projected Population Trends
Fertility, life expectancy, and net immigration influence population trends.
Section 2

45. Projected Population Trends (cont.)
Political, community, and business leaders are all interested in population trends.
Age and gender
Baby boom
Population pyramid
Dependency ratio
Projected Distribution of the Population by Age and Gender, 2010
Section 2

46. Projected Population Trends (cont.)
Race and ethnicity
Population growth as determined by demographers
Changes in fertility rates
Life expectancy
Immigration and net immigration
Projected Change in U.S. Population by Race and Ethnic Origin, 2000–2050
Section 2

47. Projected Population Trends (cont.)
Demographics examined here point to a population that is likely to grow more slowly in the future.
Increases in productivity can offset the negative effects of a declining population growth.
A larger concern is age composition—as the population matures, there is a greater demand for health-care related products and services along with retirement funds.
Section 2

48. What is the life expectancy at birth today? A. 82.1 years
B years
C years
D. 79 years A B C D
Section 2

49. Section 2-End

50. Section Preview
In this section, you will learn about the factors that contribute to income inequality and the programs that have been implemented to reduce poverty.
Section 3-Preview

51. Content Vocabulary Academic Vocabulary poverty threshold
poverty guidelines
Lorenz curve
welfare
food stamps
Medicaid
Earned Income Tax Credit (EITC)
enterprise zone
workfare
negative income tax
Academic Vocabulary
impact
uniform
Section 3-Key Terms

52. Are you familiar with the term “working poor”? A. Yes B. No
Section 3

53. Poverty
A portion of the U.S. population lives in poverty, and the gap in the distribution of income is widening every year.
Section 3

54. Poverty (cont.)
Individuals classified as living in poverty have incomes that fall below the poverty threshold.
Simplified poverty thresholds appear as poverty guidelines and are used to determine eligibility for federal programs.
Poverty Guidelines
Section 3

55. Poverty (cont.)
Economists are interested in how income is distributed among households.
Lorenz curve—shows how the actual distribution of income varies from an equal distribution.
The Distributed Income
Section 3

56. In 2006, a household of four with an annual income under what amount would be eligible for certain federal programs?
A. $23,400
B. $20,000
C. $18,500 A B C
Section 3

57. Reasons for Income Inequality
Lack of education and uneven distribution of wealth are among the reasons for poverty.
Section 3

58. Reasons for Income Inequality (cont.)
Reasons for varied income
Education
Wealth
Tax law changes
Decline of unions
Section 3

59. Reasons for Income Inequality (cont.)
More service jobs
Monopoly power
Discrimination
Changing family structure
Section 3

60. Is income inequality specific to the United States? A. Yes B. No
C. Applies only to industrialized nations
D. Affects all nations A B C D
Section 3

61. Antipoverty Programs
Since the 1960s, the government has experienced modest success with a number of anti-poverty programs.
Section 3

62. Antipoverty Programs (cont.)
Welfare programs designed to help the needy
Income assistance
General assistance
Food stamps
Medicaid
Poverty in the United States: Total Number and Rate
Section 3

63. Antipoverty Programs (cont.)
Social service programs
Tax credits
Earned Income Tax Credit (EITC)
Enterprise zones
Workfare programs
Negative income tax
Section 3

64. Antipoverty Programs (cont.)
Economic growth by itself is not sufficient to reduce poverty.
Section 3

65. What can you do to help yourself stay out of poverty?
A. Get an education
B. Make wise choices and investments
C. Work hard
D. All of the above A B C D
Section 3

66. Section 3-End

67. National Output and Income Gross domestic product (GDP) measures the nation’s output, while gross national product (GNP) measures the nation’s income.
VS 1

68. Population Governments count the population and project population trends to plan the use of resources and to prepare infrastructure.
VS 2

69. Poverty People are described as living in poverty if they live below an income level called the poverty threshold. Poverty has a number of causes, and governments have established some programs to reduce it.
VS 3

70. VS-End

71. Figure 1

72. Figure 2

73. Figure 3

74. Figure 4

75. Figure 5

76. Figure 6

77. Figure 7

78. Figure 8

79. Figure 9

80. Figure 10

81. John Kenneth Galbraith (1908–2006)
advocated public works funding in The Affluent Society
served as economic adviser to five presidents
Profile

82. Concepts Trans

83. DFS Trans 1

84. DFS Trans 2

85. DFS Trans 3

86. macroeconomics
part of economics that deals with the economy as a whole and uses aggregate measures of output, income, prices, and employment
Vocab1

87. gross domestic product (GDP)
the dollar value of all final goods, services, and structures produced within a country’s national borders during a one-year period
Vocab2

88. intermediate products
products that are components of other final products included in GDP
Vocab3

89. secondhand sales
sales of used goods not included in GDP
Vocab4

90. nonmarket transaction
economic activity not taking place in the market and, therefore, not included in GDP
Vocab5

91. underground economy
unreported legal and illegal activities that do not show up in GDP statistics
Vocab6

92. base year
year serving as point of comparison for other years in a price index or other statistical measure
Vocab7

93. real GDP
gross domestic product after adjustments for inflation
Vocab8

94. current GDP
gross domestic product measured in current prices, unadjusted for inflation
Vocab9

95. GDP per capita
gross domestic product on a per person basis; can be expressed in current or constant dollars
Vocab10

96. gross national product (GNP)
total dollar value of all final goods, services, and structures produced in one year with labor and property supplied by a country’s residents, regardless of where the production take place
Vocab11

97. net national product (NNP)
GNP less depreciation charges for wear and tear on capital equipment
Vocab12

98. national income (NI) net national product less indirect business taxes
Vocab13

99. personal income (PI)
total amount of income going to the consumer sector before individual income taxes are paid
Vocab14

100. disposable personal income (DPI)
personal income less individual income taxes
Vocab15

101. household
basic unit of consumer sector consisting of all persons who occupy a house, apartment, or separate living quarters
Vocab16

102. unrelated individual
person living alone even though that person may have relatives living elsewhere
Vocab17

103. family
two of more persons living together who are related by blood, marriage, or adoption
Vocab18

104. output-expenditure model
macroeconomic model describing aggregate demand by the consumer, investment, government, and foreign sectors
Vocab19

105. net exports of goods and services
net expenditures by the foreign sector; equal to total exports less total imports
Vocab20

106. excluded 
not counted or included
Vocab21

107. components 
parts of something
Vocab22

108. census complete count of population, including place of residence
Vocab23

109. urban population
those persons living in incorporated cities, towns, and villages with 2,500 or more inhabitants
Vocab24

110. rural population
those persons not living in urban areas
Vocab25

111. center of population
point where the country would balance if it were flat and everyone weighed the same
Vocab26

112. infrastructure
the highways, mass transit, communications, power, water, sewerage, and other public goods needed to support a population
Vocab27

113. baby boom
historically high birthrate years in the United States from 1946 to 1964
Vocab28

114. population pyramid
diagram showing the breakdown of population by age and gender
Vocab29

115. dependency ratio
number of children and elderly people in the population for every 100 persons in the 18 to 64 working-age bracket
Vocab30

116. demographer
person who studies growth, density, and other characteristics of the population
Vocab31

117. fertility rate
number of births that 1,000 women are expected to undergo in their lifetime
Vocab32

118. life expectancy
average remaining life span in years for persons who attain a given age
Vocab33

119. net immigration
net population change after accounting for those who leave as well as enter a country
Vocab34

120. residence 
the place where a person lives
Vocab35

121. projected 
calculated as a future outcome
Vocab36

122. poverty threshold 
annual dollar income used to determine the number of people in poverty
Vocab37

123. poverty guidelines 
administrative guidelines used to determine eligibility for certain federal programs
Vocab38

124. Lorenz Curve 
graph showing how the actual distribution of income differs from an equal distribution
Vocab39

125. welfare 
government or private agency programs that provide general economic and social assistance to needy individuals
Vocab40

126. food stamps government-issued coupons that can be exchanged for food
Vocab41

127. Medicaid 
joint federal-state medical insurance program for low-income people
Vocab42

128. Earned Income Tax Credit (EITC)
federal tax credits and cash payments for low-income workers
Vocab43

129. enterprise zone area free of tax laws and other operating restrictions
Vocab44

130. workfare 
program requiring welfare recipients to work in exchange for benefits
Vocab45

131. negative income tax 
tax system that would make cash payments to individuals with incomes below certain levels
Vocab46

132. impact 
effect
Vocab47

133. uniform 
even or consistent
Vocab48

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