1. Coming Soon…
Extended Bellringer

2. Stock Project Due today I have only received a few via email
Please submit by midnight. You will lose 2 points every day late.

3. Extended Bellringer – Part I
Identify the four types of unemployment
Seasonal, Frictional, Structural, Cyclical
Between what percentage rates is unemployment still “ok” for our economy?
4-6%
Between what percentage rates is inflation still “ok” for our economy?
1-3%
What three factors do economists look at to predict economic shifts?
Unemployment, inflation, GDP
Identify the three phases of the business cycle
Recession, depression, recovery

4. Extended Bellringer – part II (Mod 9)
In your notes, fill in the below chart:
Structural Unemployment
Frictional Unemployment
Cyclical Unemployment

5. Extended Bellringer – part II (Mod 8)
In your notes, fill in the below chart:
Quantity theory of inflation
Demand Pull theory of inflation
Cost push theory of inflation

6. Review Q’s What is inflation?
General increase in prices/decrease in purchase power
Describe the quantity theory of inflation
Too much money in economy
Describe the cost-push theory of inflation
Cost of production increases, higher prices for consumers
Describe the demand-pull theory of inflation
Demand exceeds supply creating a shortage so producers increase prices to reduce demand
At what percent inflation is our economy deemed “unstable”? 5%

7. Agenda
Extended Bellringer
Video clip: GDP
Notes: GDP

8. Video Clip - GDP

9. Gross Domestic Product (GDP)
Essential Learning: Economic Indicators

10. What is an economic Indicator?
Economic indicator: A gauge used to predict future trends in a Nation’s economy
After the Great Depression and the Great Collapse of the stock market; economists searched for a way to determine if this would ever happen again
What factors are involved in our economy that might give us insight into whether our economy is doing good or bad?

11. GDP
Gross Domestic Product (GDP): dollar value of all final goods and services produced within a countries borders in a given year
Dollar value: total selling prices of all goods/services produced in a country in one calendar year (Jan-Jan)
Final Goods and services: products in the form sold to consumers (as opposed to intermediate goods)
Produced within borders: Must be made within US. A US owned company in Japan does NOT count, but a Japanese company in Detroit DOES

12. Types of Goods
Final goods: Goods that are in their final shape when sold to consumers. This IS calculated in GDP
Intermediate goods: All the pieces that go into final goods (NOT counted in GDP)
Durable goods: Last a long time (refrigerator, car)
Nondurable goods: last a short time (food, sneakers)

13. Intermediate goods: cornbread example
All of these are intermediate goods
They don’t count in GDP because
Then they would count multiple times
This is final good:

14. Items economists consider for GDP:
Consumer Consumption
How much $ are we spending?
What are we spending $ on?
Business investments
How many businesses have showed profit?
How many have purchased new equipment/expanded?
How many have hired more employees?
Government investments
Has the government made investments in domestic businesses? Bonds? Research?
Exports
Stuff we make within our country and sell to others
Imports
Stuff we buy from other countries

15. Calculating GDP
The US Department of Commerce calculates based on National Income and Product Accounts (NIPA)
Collect statistics on production, income, investment, savings, etc….
These statistics are then used to calculate the nations GDP

16. GDP GDP = Gross Domestic Product
GDP: Total output produced within the country
Economists use all the economic factors to determine our countries GDP. That GDP annually helps them predict if our economy is good or bad

17. GDP = C + Inv + G + (eX - iM) Calculating GDP Or:
GDP = private consumption + gross investment + government spending + (exports - imports)

18. Practice
Let’s try to categorize the following: Consumer spending, exports, imports, business investment, government investment
Purchasing a TV
A bottle of French Wine sold in NY
US Air purchases Al Italia (Italian airline)
A new Airforce 1 is commissioned
Nike builds a new factory in Michigan
Cell phone built in Florida but sold in Spain
Louisville Slugger baseball bats sold in Japan
Government subsidies increase 15%
Home sales have increased 30%
IPhones are produced exclusively in China

19. Let’s try to calculate GDP
Consumer spending: 6 billion
Government investments: 20 billion
Business investments: 75 billion
Exports: 10 billion
Imports: 20 billion
GDP = C + Inv + G + (eX - iM)
GDP = 6B + 95B + 20B + (10B-20B)
GDP=

20. Nominal GDP This is when GDP is calculated in current prices
Use the current year’s prices on goods/services sold in/from the US to calculate the value of our total output

21. Problem….
Nominal GDP is ok short term, but prices generally increase over time right? What’s that called?
Inflation!
Nominal GDP calculations year after year do not give a realistic picture of our countries output in real dollars, because the value of our dollar changes every year
OK for 1 year calculations, but multiple years not so much

22. Solution: Real GDP Real GDP: this is expressed in constant dollars.
Using real GDP helps economists to be sure that our economy is growing because we are in fact producing more goods and services rather than rising because of prices

23. Nominal V. Real GDP Year 1 (Nominal) Year 2 (Nominal) Year 2 (Real)
This year economy produces:
10 $15k each=$150,000
10 $20k each = $200,000
This year output stays the same but prices rise (inflation)
10 16k each = 160,000
10 trucks at $21k each= $370,000
Using Year 1 as base year:
10 cars at $15k each= $150,000
Nominal GDP = $350k
Nominal GDP: $370k
This makes people think our economy has grown, but really its just inflation
Real GDP = $350k
Economy output is the same as year one

24. Limitations
Black market, underground economy

25. Textbook work Read pages 155-158 Answer questions 1-5 p. 158
Turn in for credit!