1. Economic Performance

2. Tuesday 5.17, Economic Performance SWBAT describe how and why the GDP changes over time. Agenda 1.Announce new students of the month 2.Go over unit 3 test 3.UNIT 4 Warm Up #1 4.Notes: Economic Performance 5.Measure your household GDP 6.Begin Homework Homework Quiz Friday 1.Key Terms pgs 335-348 2.Outline section 11.3 3.Answer q’s 1-4 on pg 341

3. Warm Up #1 1.What is macroeconomics? 2.How can we measure wealth using the Big Mac Price Index?

4. Gross Domestic Product Gross meaning total, not gross like “ewwww gross” Domestic- in the United States Product- the market value (retail price) of final goods So a GM plant in Mexico doesn’t count

5. GDP Is the market value of all final goods and services produced in the United States during a given period

6. How to study GDP One person’s spending is another person’s income Spending – Consumption – Investment – Government purchases – Net exports

7. 1. Consumption Final goods and services purchased by households Makes up 2/3 of our spending

8. 2. Investments The purchase of new capital resources is an investment toward producing goods and services

9. 3. Government Purchases Paying for public utilities and state employees

10. 4. Net Exports It is the balance of trade between the U.S. and other countries – If we export more than we import, it’s a trade surplus – If we import more than we export, it’s a trade deficit

11. Aggregate expenditure Aggregate means total Expenditure means our spending So, in economics, aggregate expenditure is the sum of all our spending- consumption, investment, government purchases, and net exports

12. Aggregate Income The sum of income earned by all resource suppliers in the economy

13. But GDP isn’t a perfect way to measure our economy’s wealth It ignores – self-sufficient households – “underground economy” – Depreciating (the value of inventory that diminishes throughout the year) value of capital resources – The “green” cost

14. Nominal GDP vs. Real GDP GDP changes over time but inflation has to account for some of that change – Nominal GDP is about hard numbers – Real GDP takes inflation into account

15. So how do we measure real GDP? You need a point of reference to compare price levels over time The Big Mac for example, rises in price over the years to account for the inflation of the dollar – We can use it as a point of reference to measure inflation and thus the real GDP

16. Measure your household GDP Calculate the $ amount your household (not just you) spends on goods and services on an annual basis Calculate the percentage of your household spending into nation’s GDP (14.7 trillion dollars)

17. Begin Homework Assignment Chapter 12-1 Reteaching Activity Pages 350-355 CHAPTER 12 QUIZ WEDNESDAY MAY 15