1. A Lesson in Macroeconomics
GDP & You & Me
A Lesson in Macroeconomics

2. A Video

3. Macroeconomics
Macroeconomics, or “macro” like the cool kids say, is the study of economics across an entire nation’s economy
We’re still going to use the economy principles we’ve learned, just on a larger scale

4. GDP GDP is a measure of national output Formula: GDP = C + I + G + NX
C = Consumption
I = Investment
G = Government Spending
NX = Net Exports

5. Consumption Consumption represents the consumer sector
Put simply, it’s people buying stuff
Everything from groceries to new cars to crappy toys for ne’er-do-well children

6. Investment NOT people buying stocks or saving for retirement
Total value of capital goods created in the economy during the year
Think of factories, factory equipment, office buildings, etc.

7. Government Spending This is a giant pot of money.
Includes government expenditures on national defense, income security, interest on the national debt, healthcare, roads, and education.
Does NOT include transfer payments (Welfare, Social Security, etc).

8. Net Exports Easy to calculate: NX = Total Exports – Total Imports
In the US, this number is negative
Thanks, foreign oil dependency

9. Uses of GDP GDP is used to calculate the size of a nation’s economy
Economists always want a nation’s GDP to increase every year
If GDP decreases, the nation could be in a recession
But, inflation factors into this

10. Real GDP vs. Nominal GDP
Nominal GDP in the United States is something like $17 trillion dollars (just a little less than our national debt)
This is more than our GDP in, say, 1930.
But, also, prices have increased, too. You can’t buy a brand new car for $400 anymore, which is probably a good thing.
Real GDP is a measure of GDP that accounts for inflation.

11. Calculating Inflation
To calculate inflation, we use something called the CPI, or Consumer Price Index
Basket of Goods
CPI measures the percent change in price of the basket from year-to-year

12. GDP’s Practical Uses
Politicians, economists, and bankers all care about GDP rising
Why do you care about GDP?
We aren’t the richest country, per person, in the world
Funny, that

13. Disparity
GDP per capita can also be used to track racial disparities

14. Standard of Living
The Standard of Living is the quality of life based on the possession of necessities and luxuries that make people’s lives easier.
Does the United States have a high standard of living?

15. Global Standards of Living

16. Economic Growth
The goal is to have increased GDP without having too much inflation
Sometimes, governments succeed in this task
Sometimes, they don’t.
Stagflation = period of increased inflation with little or no economic growth