1. GDP and the Overall Health of the Economy
Macroeconomics
GDP and the Overall Health of the Economy

2. Macro vs. Micro Macroeconomics Overall economy GDP Inflation
Unemployment
Recessions
Expansion, Growth
Aggregate Supply/Demand
Microeconomics
Individual topics
Business types
Market structures
Cost, revenue, profit
Specific products
Supply/Demand
Pricing

3. Macro or Micro? Jobless Rate Actually Stands at 11.5%
US Fiscal Path Unsustainable
AIG in $15.5 billion unit sale to MetLife
GM offers 661 dealers a second chance
New credit card rules' double standard
IPhone credit card swipe war heats up
Economist: No Risk for Inflation

4. Macroeconomic Measurements
How do we know how healthy a country’s economy is? MEASURE IT
Major measurements:
GDP: Gross Domestic Product (output)
CPI: Consumer Price Index (inflation)
Unemployment rate

5. GDP Primary measurement of economy’s health
DOLLAR AMOUNT of all FINAL goods and services produced in a country’s BORDERS in a YEAR
Used to identify growth, recessions, depressions
Calculated by US Commerce Department

6. What’s not included? Intermediate products Secondhand sales
The steel, tires, etc. in a new car
(Counted: You buy new tires for your car)
Secondhand sales
A used car
(Counted: The commission earned by salesman)
Nonmarket transactions
The chores you don’t get paid for at home
Underground economy
A sale of a stolen car

7. What’s included? Consumer sector (C) purchases
Government sector (G) purchases
Business investment (I) purchases
Foreign sector (Exports-Imports) (X-M)
GDP= C + G + I + (X-M)

8. Problems with Using Prices?
What about inflation?
Need for a Price Index
Base Year (starting point) = 100%
Market basket
If year two is 150, then inflation rate is 50%

9. Important Price Indices
Consumer Price Index (CPI)
80,000 items in 362 categories
Bureau of Labor Statistics
Producer Price Index (PPI)
100,000 input commodities
Implicit GDP Price Deflator
Turns Current GDP into Real GDP
Real (adjusted for inflation)