1. Agenda- 11/17 Ch. 12 Lecture Unit 3 Quiz – Wed. Nov. 29th
(Ch. 9 note handout to put in your notebook)
Unit 3 Quiz – Wed. Nov. 29th
HW: GDP Tri-Fold
Reminder: Community Service Fri., 12/1

2. Warm-up
List the last five times you paid a tax to the government in the past week.

3. Measuring the Nation’s Output & Income
Ch. 12, Sec. 1

4. GROSS DOMESTIC PRODUCT (GDP)
The total dollar value of all final goods and services produced by resources located in the United States (regardless of who owns them) during one year’s time.
The single most important measurement of the economy’s overall performance.

5. COMPUTING GDP
Conceptually, you simply multiply all the final goods & services produced in a year by their prices.
(skip a line after each of the following)
Goods
Services
Structures

6. CONSUMER GOODS Goods Services Structures (Investment Goods)
Products purchased for final consumption
Services
Items consumed instantaneously
Structures (Investment Goods)
Single Family
Multifamily
Commercial

7. THINGS THAT ARE EXCLUDED FROM GDP
Intermediate Products –pieces of an item i.e. a bottle-label-cap-juice-box, etc.
Non-market Transactions –items that are not paid for such as barter or unpaid household duties.
Secondhand Sales -items that have already been counted.
Transfer Payments – when money is simply transferred back & forth between the Govt. & individuals & businesses.
Financial Transactions – Stock market / investments

8. COMPOSITION OF GDP
Consumer Goods (C) - items made for final consumption
Investment Goods (I) -increase in productive (physical) capital
The Government Sector (G) -purchases by government
Foreign Sector (NX) – exports minus imports

9. GDP (cont.) GDP = C + I + G + NX
GDP = Personal Consumption + Investments + Government Purchases + Foreign Transactions
GDP = C + I + G + NX
NX = Net Exports (Exports – Imports)
Generally a negative #

10. “C” (Consumers)
The Consumer Sector or households account for over 2/3 of the economy.
The Consumer Sector receives its income from disposal personal income (after taxes) (DPI)
GDP

11. WHITEBOARDS!!! 1 board & dry erase pen per pair!
Which of the following are included and which are excluded in calculating this year’s GDP? - Discuss with your partner, and be prepared to show your decisions on your whiteboard. - If YES, tell me which Sector. - If NO, tell me why.

12. GDP?
A monthly check received by an economics student who has been granted a government scholarship that does not need to be paid back. (PELL Grant)

13. Answer
No, transfer payment

14. GDP?
A farmer’s purchase of a new tractor.

15. Answer
Yes, investment (I)

16. GDP?
A plumber’s purchase of a used truck.

17. Answer
No, second hand sale

18. GDP?
The cashing of a Savings Bond at the bank.

19. Answer
No, financial transaction

20. GDP?
The services of a mechanic in fixing the radiator on his own car.

21. Answer
No, non-market activity

22. GDP?
A Social Security check paid by the government to a retired store clerk.

23. Answer
No, transfer payment

24. GDP?
The King of Dubai purchasing Napa, CA wines for a dinner he is hosting in Dubai for members of the US Government.

25. Answer
Yes, NX (the wine is an export)

26. GDP?
The government’s purchase of a new submarine for the Navy.

27. Answer
Yes, government expenditure (G)

28. GDP?
A barber cutting other people’s hair.

29. Answer
Yes, a consumer service (C)

30. GDP?
Income received from the sale of Nike stock.

31. Answer
No, purely financial transaction

32. GDP? A barber cutting his own hair. w/ a Flowbee ; )

33. Answer
No, Non-Market transaction

34. THE FIVE INCOME MEASURERS (Chart p
THE FIVE INCOME MEASURERS (Chart p. 325 of the “flow”) { This is INCOME measure, not PRODUCTION }
Gross National Product (GNP) – dollar value produced by US citizens & corporations
Net National Product (NNP) – which is GNP less depreciation
Depreciation represents the capital equipment that has worn out or become obsolete over the year.

35. THE FIVE INCOME MEASURERS (cont.)
National Income (NI) –income left over after all taxes have been taken out of the corporations.
Personal Income (PI) –the total amount of the nation’s income going to consumers before individual income taxes are subtracted. (salary)

36. THE FIVE INCOME MEASURERS (cont.)
Disposal Personal Income (DPI) –
the total income the Consumer sector has at its disposal after personal income taxes.
Disposable Income is the amount of money that consumers have to spend.

37. Most “focused # to use for comparison to previous years.
Measurers of Income
GNP
NNP NI PI
DPI
- depreciation
- Corporate taxes
- Salaries (pre-tax)
- Salary (post-tax / “take home pay”)
Most “focused # to use for comparison to previous years.