Download Activator – GDP Chapter 12

Activator – GDP Chapter 12
* Create a chart and predict a figure for each of the following
Trend
1900-1920
Prediction
Average Life Expectancy
(years)
2011
Actual Figure
Prediction
Actual Figure
47
78.37
$520
(5609.15 in
today’s dollars)
$48,147
Poverty Rate (percent of US
Households)
40%
15.1%
(46.2 million)
High School Completion
(percent of adults)
22%
92%
Per Capita Income
Chapter 12 – Gross Domestic Product and Growth
•Macroeconomics – the study of the behavior and decision making of the
economy as a whole.
•i.e. – inflation, unemployment, and economic growth
•Gross Domestic Product (GDP) – the total market value of all final goods
and services produced within a country’s borders in a given period of
time.
•Measures the economy’s total income
•Total income = total expenditure
Gross Domestic Product Defined
•“Market Dollar Value…” – prices of goods and services
• F150 - $35,000, Apple $1.00
Gross Domestic Product Defined
•“…Of All…” – all items produced in the economy and sold
legally in commercial markets.
• Pears, grapefruit, books, movies, etc.
Gross Domestic Product Defined
•“…Final…” – only value of final goods and services
(excluding intermediate products).
• Included – Cheeseburger(output)
• Excluded – Cow parts (inputs)
Gross Domestic Product Defined
•“…Goods and Services…” – Tangible and intangible
products
• Hair products and haircuts
Gross Domestic Product Defined
• “…Produced…” – only includes new goods and services
produced currently.
• Included - New car
• Excluded - used car
Gross Domestic Product Defined
•“…Within a country…” – only measures production within a
country’s borders.
• Counted - Japanese company in the U.S.
•Not Counted - Am. Company in Japan
Gross Domestic Product Defined
•“… In a given period of time…” – measured within a specific
interval of time,
• Usually a year or quarter (three months)
Components of GDP

Four components:

GDP (Y) = C + I + G + NX
1.
C - Consumption of goods and services by households (Consumer Spending)
◦ Accounts for 70% of GDP
2.
I - Investments by businesses in goods and services (Business Spending)
◦ Accounts for 15% of GDP *New-home construction considered I*
3.
G - Government goods and services (Government Spending)
◦ Accounts for 20% of GDP
4.
NX - Net exports or imports of goods and services, (Foreign Spending)
*Exports (X) – Imports (M)*
◦ Accounts for -5 of GDP
2011 GDP was approximately 15 Trillion
Consumption
Investment
Government
Net Exports
Application - Calculating GDP
Product
Quantity
Consumption Car Sales
10
Fast Food Sales
12
Personal Computers
50
Price (per 1 unit)
Dollar Value
4000
$400 ____________________________
2400
$200 ____________________________
$100 ____________________________
5000
Business Computers
Telecommunications
15
10
45
300
$20 ____________________________
300
$30 ____________________________
$200 ___________________________
9000
Government
Military Personnel
Helicopters
Roads
5
2
1
Net Exports
*Figure this
amount by taking
Exports minus
Imports*
Total
Exports
Total
Imports
Investment
Tractors
250000
$50,000 __________________________
400000
$200,000 __________________________
300000
$300,000 __________________________
$10,000
$20,000
-10000
__________________________
$961,000
Total Gross Domestic Product = _______________________________
Excluded from GDP
• Intermediate
products - inputs used to produce final goods and
services; excludes double counting
•The tires that come with the car is not counted as a final good
•However if you get a flat and buy the same tire it is counted as a final
good
Excluded from GDP
•Second-hand sales - refer to the sales of used goods.
Excluded from GDP
• Nonmarket Transactions/Underground Economy
– transactions that do not
take place in the legal marketplace (i.e. fixing your car, mowing your lawn,
babysitting, etc.)
Excluded Products from GDP
•Black Market– illegal activities, gambling, drugs, prostitution,
smuggling, etc.
Excluded from GDP
•Transfer Payments– redistribution of money from tax-payers to some
entitled group, i.e. Social Security, welfare, unemployment checks, etc.
GDP Poster Project
Poster Requirements:
1. Title - Gross Domestic Product
2. Definition of GDP
3. At least 1 picture to represent each
of the components of GDP.
4. At least 1 picture to represent each
of the excluded components of GDP
5. Label, describe and summarize each
picture
Components of GDP:
1. Consumption
2. Government
3. Investment
4. Net Exports (export and import)
Excluded:
1. Intermediate products
2. Second-hand sales
3. Nonmarket Transactions
4. Underground Economy
5. Cash Transfers
Daily Assignment Questions – Page 302
Housing Market – GDP

Important Point: Housing is
listed under the Investment
category, not Consumption
1.
When was the house counted
towards GDP?
2.
Why was it not counted when
it was sold this year?
3.
What can be counted towards
GDP that was a service
provided as a result of the sale
of the house?
4.
What were the lumber, nails,
shingles, windows and other
items used to build your
neighbors newly built house
categorized as?
5.
What would be added to GDP?
Review – Components of GDP
Indicate the components of GDP that each of
the following transactions falls under.
1. A family buys a new refrigerator.
2. Ford opens a new plant in Detroit,
Michigan.
3. Glynn County builds a new middle
school.
4. China imports commodities from the
United States.
What exclusionary components are affected
by the following transactions?
5. A garage sale in your neighborhood.
6. The tires, bolts, and engine for a new
automobile.
7. The illegal sale of imitation purses.
8. Mowing your lawn every other
Saturday and being paid an
allowance.
9. Checks sent to Social Security
recipients
GDP Simulation
Year
Price
Quantity Sold
Total GDP
Nominal Versus Real GDP

Nominal GDP – GDP measured in name only (current prices), not adjusted for inflation.

Real GDP – GDP expressed in fixed (unchanging prices), adjusted for inflation.
Year 1 Nominal GDP
1.
Suppose an economy’s entire
output is cars and trucks.
2. This year the economy
produces:
10 cars at $15,000 each =
+ 10 trucks at $20,000 each =
Total =
Year 2 Nominal GDP
Year 2 Real GDP
Nominal Versus Real GDP

Nominal GDP – GDP measured in name only (current prices), not adjusted for inflation.

Real GDP – GDP expressed in fixed (unchanging prices), adjusted for inflation.
Year 1 Nominal GDP
1.
Suppose an economy’s entire
output is cars and trucks.
2. This year the economy
produces:
10 cars at $15,000 each =
$150,000
+ 10 trucks at $20,000 each =
$200,000
Total = $350,000
Year 2 Nominal GDP
Year 2 Real GDP
Nominal Versus Real GDP

Nominal GDP – GDP measured in name only (current prices), not adjusted for inflation.

Real GDP – GDP expressed in fixed (unchanging prices), adjusted for inflation.
Year 1 Nominal GDP
Year 2 Nominal GDP
1.
1.
Suppose an economy’s entire
output is cars and trucks.
2. This year the economy
produces:
10 cars at $15,000 each =
$150,000
+ 10 trucks at $20,000 each =
$200,000
Total = $350,000
In the second year, the
economy’s output does not
increase, but the prices of cars
and trucks do:
10 cars at $16,000 each =
+ 10 trucks at $21,000 each =
Total =
Year 2 Real GDP
Nominal Versus Real GDP

Nominal GDP – GDP measured in name only (current prices), not adjusted for inflation.

Real GDP – GDP expressed in fixed (unchanging prices), adjusted for inflation.
Year 1 Nominal GDP
Year 2 Nominal GDP
1.
Suppose an economy’s entire
output is cars and trucks.
2. This year the economy
produces:
10 cars at $15,000 each =
$150,000
+ 10 trucks at $20,000 each =
$200,000
1.
Total = $350,000
Total = $370,000
In the second year, the
economy’s output does not
increase, but the prices of cars
and trucks do:
10 cars at $16,000 each =
$160,000
+ 10 trucks at $21,000 each =
$210,000
Year 2 Real GDP
Nominal Versus Real GDP

Nominal GDP – GDP measured in name only (current prices), not adjusted for inflation.

Real GDP – GDP expressed in fixed (unchanging prices), adjusted for inflation.
Year 1 Nominal GDP
Year 2 Nominal GDP
Year 2 Real GDP
1.
Suppose an economy’s entire
output is cars and trucks.
2. This year the economy
produces:
10 cars at $15,000 each =
$150,000
+ 10 trucks at $20,000 each =
$200,000
1.
1.
Total = $350,000
Total = $370,000
In the second year, the
economy’s output does not
increase, but the prices of cars
and trucks do:
10 cars at $16,000 each =
$160,000
+ 10 trucks at $21,000 each =
$210,000
To correct for an increase in
prices, economists establish a
set of constant prices by
choosing one year as a base
year. :
10 cars at $15,000 each =
+ 10 trucks at $20,000 each =
Total =
Nominal Versus Real GDP

Nominal GDP – GDP measured in name only (current prices), not adjusted for inflation.

Real GDP – GDP expressed in fixed (unchanging prices), adjusted for inflation.
Year 1 Nominal GDP
Year 2 Nominal GDP
Year 2 Real GDP
1.
Suppose an economy’s entire
output is cars and trucks.
2. This year the economy
produces:
10 cars at $15,000 each =
$150,000
+ 10 trucks at $20,000 each =
$200,000
1.
1.
Total = $350,000
Total = $370,000
In the second year, the
economy’s output does not
increase, but the prices of cars
and trucks do:
10 cars at $16,000 each =
$160,000
+ 10 trucks at $21,000 each =
$210,000
To correct for an increase in
prices, economists establish a
set of constant prices by
choosing one year as a base
year. :
10 cars at $15,000 each =
$150,000
+ 10 trucks at $20,000 each =
$200,000
Total = $350,000
GDP Deflator
Year 2 Nominal GDP – $370,000
 Year 2 Real GDP - $350,000

•Calculate the increase in prices based on the
GDP
•Deflator formula
•GDP deflator = Nominal GDP/Real GDP × 100
370,000
_____________× 100 = 106
350,000
6%
_____rise
in inflation
Nominal GDP Versus Real GDP (RGDP)
$8
$9
1990
1995
$11
$10
2000
2012
•Nominal GDP is the Price
Year
Price
•RGDP is the Pizza Pie
(physical units sold)
Units
Sold
Nomina Real
l GDP
GDP
1990
$8
10
$80
$80
2012
$11
10
$110
$80
Nominal GDP Versus Real GDP (RGDP)
$8
$9
1990
1995
$10
2000
•Nominal GDP is the Price
Year
Price
•RGDP is the Pizza Pie
(physical units sold)
Units
Sold
1990
$8
10
2012
$11
10
$11
2012
Nomina Real
l GDP
GDP

Inflation
and
Inflation
Rate
Inflation – inflation is a rise in the general level of prices of goods and services in
an economy over a period of time.

Inflation Rate - percentage change in some measure of the price level from one
period to the next.

GDP Deflator – an index that converts output measured at current prices into
constant-dollar GDP.
◦ The GDP deflator shows inflation, how much a change in the base year's GDP relies upon changes in
the price level.

Inflation Rate = GDP Deflator in year 2 – GDP Deflator in year 1
GDP Deflator in year 1
GDP
Prices and Quantities
Price of Hamburgers
Year
Price of Hot Dogs
Quantity of Hot Dogs
2005
2006
2007
$1
$2
$3
100
150
200
2005
2006
2007
Calculating Nominal GDP
$1
100 hot dogs = ____
$100
$2 per hamburger ×____
50 hamburger = ____
$100
________
per hot dog ×________
_____
$2
150 hot dogs = ____
$300
$3 per hamburger ×____
100 hamburger = ____
$300
________
per hot dog ×________
_____
$3
200 hot dogs = ____
$600
$4 per hamburger ×____
150 hamburger = ____
$600
________
per hot dog ×________
_____
2005
2006
2007
$100 + Total Market Value for Hamburgers _______
$100 = __________
$200
Total Market Value for Hot Dogs _______
$300
$300
$600
Total Market Value for Hot Dogs _______ + Total Market Value for Hamburgers _______ = __________
$600 + Total Market Value for Hamburgers _______
$600 = __________
$1200
Total Market Value for Hot Dogs _______
2005
2006
2007
Calculating Real GDP (base year 2005)
$1 per hot dog ×______
100 hot dogs = _______
$100
$2
50 hamburger = $100
______
______
per hamburger ×______
____
$200
$1 per hot dog ×_______
150 hot dogs = ______
$150
$2
100 hamburger = ____
______
______
per hamburger ×_____
$300
______
______
per hamburger ×_____
$1 per hot dog ×_______
200 hot dogs = ______
$200
$2
150 hamburger = ____
2005
2006
2007
$100
$100
$200
Total Market Value for Hot Dogs __________
+ Total Market Value for Hamburgers __________
= __________
$150
$200
$350
Total Market Value for Hot Dogs __________
+ Total Market Value for Hamburgers __________
= ___________
$200
$300
$500
Total Market Value for Hot Dogs __________
+ Total Market Value for Hamburgers __________
= __________
2005
2006
2007
$2
$3
$4
Quantity of Hamburgers
50
100
150
Calculate the increase in prices based on the GDP Deflator formula
GDP deflator = Nominal GDP × 100
Real GDP
$200
$200
100
____________/____________
× 100 = _____________
$600
$350
171
____________/____________
× 100 = _____________
240
____________/____________
× 100 = _____________
$1200
$500
Calculating GDP
1.
•
•
Calculate the GDP deflator using the following figures:
Real GDP 2008 ($13.7 trillion)
Nominal GDP 2008 ($14.6 trillion) using the following formula:
1.065
107
100 = _____
Nominal GDP X 100 = __14.6 = _______X
13.7
Real GDP
2. Calculate the nominal GDP for each year, then calculate the GDP deflator for year 2 using
year 1 as a base year.
PRODUCTION AND PRICES
YEAR 1
YEAR 2
GOODS
OUTPUT
PRICES
OUTPUT
PRICES
APRICOTS
10
$50
10
$55
BROCCOLI 10
$25
12
$25
CARROTS
$25
9
$30
10
Nominal GDP X 100 =
Real GDP
__1120
1025
Year 1:
2 Real GDP:
Apricots - $500
Broccoli - $300
Carrots - $225
Total GDP - $1025
Year 2:
2Nominal:
Apricots - $550
Broccoli - $300
Carrots - $270
Total GDP - $1120
= _______X
100 = _____
1.09
109 = 9% inflation
Business Cycles
•
Business Cycle – economy-wide fluctuations in a market or
economy over several months or years.
1.
Expansion – period of economic growth as measured by
GDP
2.
Peak – When real GDP stops rising
3.
Contraction – economic decline marked by falling real GDP
•
4.
Rise in unemployment
Trough – “bottomed out”, economy reaches its lowest
point, real GDP stops falling
Recovery - A return to a normal state of the economy, where
the economy begins to show signs of health "signs of recovery
in the housing market“.
•
Recession
Recession – a prolonged
economic contraction
 Real GDP falls for two
consecutive quarters
(6 straight months)
 Rise in unemployment, falling
profits, bankruptcies,
foreclosures, etc.

GDP
Depression


A long and severe
recession (8 quarters of
declining real GDP)
Severely high
unemployment and low
output
Stagflation

Combines two words, stagnant and inflation, is a
decline in real GDP combined with a rise in price
level
Four Main Economic Variables
Business Investment –
investing in physical capital
(plants and equipment)
2. Interest Rates and Credit –
the cost of borrowing, added
to the principal investment
3. Consumer Expectations –
fears of a weakening economy
can cause consumer
confidence to fall, cut back on
spending
4. External Shocks – conditions
in society that affect normal
economic activity
• Oil spill in the gulf, severe
drought, hurricanes, etc.
1.
Section 2 Daily Assignment Questions pgs. 312 – 316
1.
How does businesses investment affect
GDP?
2.
What happens when firms cut back on
investment spending?
3.
How does reduced investment affect
industries that produce capital goods?
4.
What do consumers in the U.S. use credit to
purchase; what is the cost of credit?
5.
How do high interest rates affect consumption
and business investment?
6.
How did high interest rates affect the
economy in 1980?
7.
What happened to unemployment as a result
of the recession?
8.
How does a fear of a weakened economy
affect spending?
9.
What effect does reduced spending have on
the economy?
10.
How was this evident in the spring of 2003?
11.
What happens when consumer confidence
rises?
Percentage Change in Real GDP
1.
Calculate the percentage change in
Real GDP from July 2009 ($13.7
trillion) to March 2010 ($14.2
trillion) using the following
formula:
New number – Original X 100 =
Original
0.0365 100 = _______
3.65%
14.2 – 13.7 = _______X
13.7
2. Calculate Real Per Capita GDP by using
the following formula:
Real GDP 2009
Total Pop. 2009
*2009 Real GDP –
$13,700,000,000,000
*2009 Total Pop. – 304,500,000
137000 = _$44,991_
3.045
Economic Growth
•Economic Growth – sustained increases in an economy’s real
GDP
•Real GDP per capita – real GDP divided by the total population
• Per Capita – “for each person”
• Average income for each person in a country
• Considered the best measure of a nation’s standard of living.
GDP
and
Quality
of
Life
Nations with higher per capita GDP enjoy higher quality of life, such as:
•
•Better Nutrition
•Comfortable housing
•Longer life spans
•Better education
•Infrastructure/Telecommunications
(cable, internet, phone lines, etc.)
Productivity and Economic Growth

Productivity – the amount of goods and services produced for each unit of
labor input
◦ High productivity leads to high per capita real GDP = high standard of
living

Growth rate - how rapidly real GDP per person grows in a typical year
◦ U.S. real GDP per capita $3,752 in 1870 and $44,260 in 2006; 1.83%
growth rate per year
Improving Productivity and Economic Growth
•Capital deepening
– process of increasing the
amount of capital per worker (labor productivity)
•Increase investments in physical capital and
human capital
Saving and Investment
◦ Saving and Investment - a society can change the amount of capital
it has through S&I
◦ Every dollar saved is a dollar made available for investing
 Invest in capital today will raise future productivity tomorrow
(capital deepening)
Technological Progress
•Technological progress – producing more output without
using more inputs
• Technological Knowledge – understanding how to make
the best use of available resources
Population and Government
•Population Growth – can affect productivity and economic growth
•Ex. India, large population and low productivity, equals low wages and
quality of life
•Ex. United States, consistent population growth, high capital growth,
leads to high quality of life
•Government – government policies can affect a nation’s economic growth
• Increased taxes, reduces disposable income which takes money away
from private investing
Natural Resources
◦ Natural resources - inputs provided by nature that are converted into the
production of goods and services
 Provided by nature, such as land, rivers, and mineral deposits
 U.S. large supply of land and agriculture, Middle East oil supplies
◦ Renewable Resources - are natural resources that can be reproduced.
 Forest, wood, paper, energy (wind, solar power), etc.
◦ Nonrenewable Resources - are natural resources that are limited in
supply.
 Coal, gold, oil, etc.
47
Essential Question #1
What are the 4 components of GDP?
◦
C – Consumption
◦
I – Investment
◦
G – Government
◦
NX – Net Exports
Essential Question #2
What are the excluded components of GDP?
◦
Intermediate Products
◦
Second-Hand Sales
◦
Non-Market Transactions
◦
Underground Economy (Black Market)
◦
Cash Transfers
Essential Question #3
How do you calculate Real GDP and Nominal GDP?
dollars
prices
◦
Nominal is calculated using current _________(________),
not
inflation
accounting for_____________
base
◦
Real is calculated using a _________
year’s prices (dollars),
inflation
constant
accounting for__________,
keeping price_____________.
Essential Question #4
What are the characteristics of the 4 phases of the business cycle?
◦
Peak – GDP has reached its highest point
◦
Contraction – GDP begins to decline (recession)
◦
Trough – GDP has reached its lowest point
◦
Expansion – GDP begins to rise again
Essential Question #3
What does per capita GDP measure; what does it indicate about a
society’s standard of living?
◦
Average income for each person.
◦
Higher the per capita GDP, the higher the standard of living.
Essential Question #4
How can a country improve its standard of living/per capita GDP??
◦
Productivity, saving and investing, technology, natural resources,
population control and stable government
Bananas and Backrubs –Online Quiz
1. Calculate the nominal GDP for each year, then calculate the GDP deflator for
each year using year 1 as a base year.
Year 1:
Bananas - $5
Backrubs - $30
Total GDP - $35
Year 2:
Bananas - $10
Backrubs - $42
Total GDP - $52
Year 3:
Bananas - $20
Backrubs - $54
Total GDP - $74
VIS Terms Due Tuesday 10 –27
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Macroeconomics
Gross Domestic Product
Nominal GDP
Real GDP
Expansion
Peak
Contraction
Trough
Recession
Depression
Stagflation
Binder Check Due Tuesday 10-25
1.
2.
3.
4.
5.
6.
7.
8.
9.
Daily Assignment Ch. 12 Sec. 1
Video Questions - Google
DAQ’s pg. 302
Ch. 12 Guided Reading Wksht.
Population Growth + GDP Wksht.
Section 2 DAQ’s pgs. 312-316
Study Guide Chapter 12
C.W. Puzzle Ch. 12
VIS Terms Ch. 12
GDP Country Comparison
Country
2011 GDP
Population
USA
$14,582,000,000,000
307,007,000
China
$5,879,000,000,000
1,338,000,000
Japan
$5,498,000,000,000
127,000,000
Germany
$3,286,000,000,000
82,372,000
France
$2,562,000,000,000
64,800,000
UK
$2,250,000,000,000
62,970,000
Brazil
$2,090,000,000,000
195,000,000
Mexico
$1,634,000,000,000
113,550,000
Russia
$1,479,000,000,000
142,860,000
Canada
$1,474,000,000,000
33,680,000
Per Capita GDP
Population Rank
Per Capita GDP
Rank
Use the first table to fill in the information, including population.
1. Describe how population might affect GDP.
2. What does Per Capita GDP tell you about a country's economy and standard of
living?
4. Based on the table above, which country has the highest standard of living? The
lowest?
5. Why are the citizens of the countries with high Per Capita GDP more likely to have a
better quality of life than other countries?
Practice Ch. 12
a. Consumption
b. No, because that transaction is a cash transfer,
not a purchase of currently produced capital
goods.
c. It means that imports exceed exports.
Practice Ch. 12
a. 100, 200, 400
b. 100, 100, 100
Practice Ch. 12
a.
b.
c.
d.
e.
f.
g.
h.
700 (1.00 x 200 = 200) + (10.00 x 50 = 500) = 700
700 (1.00 x 200 = 200) + (10.00 x 50 = 500) = 700
770 (1.00 x 220 = 220) + (11.00 x 50 = 550) = 770
720 (1.00 x 220 = 220) + (10.00 x 50 = 500) = 720
100 (700/700 x 100 = 100)
107 (770/720 = 1.069 x 100 = 107)
107 – 100/100 = .07 x 100 = 7%
770 – 700/700 = .10 = 10%, Percent increase in prices
= 7%, therefore most of the increase was due to
prices.
Practice Ch. 12
a. Year 1, because the deflator = 100.
b. Prices rose 20 percent and real output stayed
the same.
c. Prices stayed the same and real output rose 25
percent.
Application - Calculating GDP
Product Quantity
Consumption Automobiles
6
Replacement Tires
10
Shoes
55
Price (per 1 unit)
Dollar Value
$20000 _______________________________
$60 _______________________________
$50 _______________________________
Investment
Machinery
Computers
Cell Phones
10
30
45
$8000 ____________________________
$1500 ___________________________
$200 ___________________________
Government
Single Family
Multifamily
Commercial
3
5
1
$75,000 _________________________
$300,000 _________________________
$1,000,000 _________________________
Net Exports
*Figure this
amount by taking
Exports minus
Imports*
Total
Exports
$10,000
Total
Imports
$20,000
___________
- __________
=
___________ _________________________
Total Gross Domestic Product = _______________________________
Extra Credit
1. The country of Terrorville produces two goods: footballs and basketballs. The
following is a table showing the prices and quantities of output for three years.
2. What percentage of real GDP comes from consumption?
Study Guide Ch. 12
1.
Macroeconomics
2.
Gross Domestic Product
3.
A system of statistics and accounts that keeps track of production,
consumption, saving and investment.
4.
C – spending by consumers
I – spending by businesses ,
G – spending by government,
NX – spending by foreigners, minus imports
5.
“Market Dollar Value…” – market selling prices of goods and
services.
“…Final goods and services” – only value of final goods and
services (excluding intermediate products).
“…Within a country’s borders…” – only measures production
within a country’s borders.
6.
Intermediate products, which are inputs used to produce final goods
and services.
Second-hand sales - refer to the sales of used goods.
Nonmarket Transactions – transactions that do not take place in the
marketplace (i.e. fixing your car, mowing your lawn, etc.)
Underground Economy – illegal activities, gambling, drugs,
prostitution, smuggling, etc.
Study Guide Ch. 12
GDP:
7.
8.
Consumption
Investment
Government
Net Exports
a.
Second-hand sale
b.
Government
c.
Investment
d.
Nonmarket Transaction
e.
Underground Economy
f.
Consumption
g.
Net Exports
h.
Product
Quantity
Intermediate
goods
New home sales
Fast Food Sales
Personal Computers
Tractors
Plane Tickets
Blackberry Phones
Garbage Collection
Newly Hired Agents
Police
*Figure this amount
by taking Exports
minus Imports*
10
12
50
15
10
45
50
500
100
Total
Exports
$10,000
Total
Imports
$20,000
Price (per 1 unit)
$200,000
$10,000
$1,000
$10,000
$90
$400
$5,000
$60,000
$50,000
____10000_______
- ___20000_______
=
____-10000_______
Dollar Value
_________2,000,000___________________
_________120,000___________________
_________50000___________________
__________150,000__________________
__________900__________________
__________18,000_________________
__________250,000________________
__________30,000,000________________
__________5,000,000________________
_________-10000_________________
Total Gross Domestic Product = __________$37,578,900_____________________
Study Guide Ch. 12
9.
10.
11.
12.
13.
14.
15.
16.
a.
b.
c.
d.
Expansion
Peak
Contraction
Trough
Recession
Depression
Stagflation
Phase of Business Cycle:
Contraction
Peak
Trough
Expansion
Study Guide Ch. 12
17.
Contributing Factors
Example of increase in GDP
Example of decrease in GDP
Business Investment
During an expansionary economy,
During acontractionary economy, firms
firms invest in capital goods, this will
invest in capital goods, this will help
help create output and jobs, increase create output and jobs, increase GDP
GDP
Interest Rates and
If interest rates are low, people and
If interest rates are high, people and
Credit
businesses will be motivated to
businesses will be lose the motivation to
borrow, consume and invest
borrow, consume and invest
Consumer Expectations The way that people perceive the
The way that people perceive the
economy can influence consumption, economy can influence consumption, if
External Shocks
if they view it positively they will
they view it negatively they will consume
consume and this will add to GDP
and this will add to GDP
Positive external shocks such finding
Negative external shocks such as war,
a new oil source or if an area
hurricanes, droughts etc. can influence
experiences a great deal of rain
ability to consume and invest
18.
Year
Price of Oranges
Prices and Quantities
Price of Video
Quantity of Oranges
Games
2005
2006
2007
$1
$2
$3
50
100
150
2005
2006
2007
Calculating Nominal GDP
$__1__ per orange ×___50___ oranges = $__50_____ $__10__ per video game ×__5____ video games =$__50_____
$__2__ per orange ×___100___ oranges = $__200___ $__15__ per video game ×__10___ video games =$__150____
$__3___ per orange ×__150___ oranges =$ __450___ $__20__ per video game ×__15___ video games =$__300___
2005
2006
2007
Total Market Value for Oranges $___50_____ + Total Market Value for Video Games $ ___50_____ = $____100_____
Total Market Value for Oranges $___200____ + Total Market Value for Video Games $ ___150____ = $____350____
Total Market Value for Oranges $___450____ + Total Market Value for Video Games $ ___300____ = $____750____
2005
2006
2007
Calculating Real GDP (base year 2005 prices)
$__1__ per orange ×___50___ oranges = $__50_____ $__10__ per video game ×__5____ video games =$__50_____
$__1__ per orange ×___100___ oranges = $__100___ $__10__ per video game ×__10___ video games =$__100____
$__1___ per orange ×__150___ oranges =$ __150___ $__10__ per video game ×__15___ video games =$__150___
2005
2006
2007
Total Market Value for Oranges $___50_____ + Total Market Value for Video Games $ ___50_____ = $____100_____
Total Market Value for Oranges $___100____ + Total Market Value for Video Games $ ___100____ = $____200____
Total Market Value for Oranges $___150____ + Total Market Value for Video Games $ ___150____ = $____300____
2005
2006
2007
GDP deflator = Nominal GDP/Real GDP × 100
Nominal GDP___100_____/ Real GDP ____100___ = ____1_____× 100 = ___100___ or ___NA__ % increase in prices
Nominal GDP___350_____/ Real GDP ____200___ = ___1.75___× 100 = ____175___ or ___75___ % increase in prices
Nominal GDP__750______/ Real GDP ___300___ = ___2.5_____× 100 = ____250___ or __150___ % increase in prices
$10
$15
$20
Quantity of Video Games
5
10
15
Study Guide Ch. 12
19.
20.
21.
22.
23.
24.
25.
9.3 – 6.7/6.7 = .39 X100 = 39%
$9,300/281 = 33.096 X 1000 = $33096
Capital Deepening
There is an inability to create job
opportunities in the economy, which leads
to a lower standard of living.
If the government increases taxes, this will
put a strain on people’s ability to save
their money, vice versa
Trade Deficit
Technological
Binder Check Due Monday 11 - 14
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
All about GDP worksheet
Chapter 12 Practice Review
GDP Country Comparison
Ch. 12 Guided Reading
Study Guide Chapter 12
CW Puzzle Chapter 12
VIS Terms
Essential Questions
Daily Tens
Notes
11. Standard Sheet Ch. 7 + 8
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Daily Assignment Questions –
Chapter 12 Section 1 (pgs. 301 – 303)
1.
What does macroeconomics study? (57)
2.
Break down the carefully worded
definition of gross domestic product, by
explaining each of the following.
a)
Dollar value…
b)
Final goods and services…
c)
Produced within a country’s borders…
3.
What are intermediate products used
for?
4.
What are the four categories of final
goods and services?
5.
How does the expenditure approach
calculate GDP?
6.
Describe the difference between durable
and nondurable goods.
7.
How does the income approach work?
Application - Calculating GDP
Product Quantity
Consumption Automobiles
6
Replacement Tires
10
Shoes
55
Price (per 1 unit)
Dollar Value
$20000 _________120,000________________
$60 _________600_____________
$50 _________2,750__________________
Investment
Machinery
Computers
Cell Phones
10
30
45
$8000 _________80,000__________________
$1500 _________45,000_________________
$200 _________9,000_________________
Government
Single Family
Multifamily
Commercial
3
5
1
$75,000 _________225,000________________
$300,000 _________1,500,000_______________
$1,000,000 _________1,000,000_______________
Net Exports
*Figure this
amount by taking
Exports minus
Imports*
Total
Exports
$10,000
Total
Imports
$20,000
___________
- __________
=
___________ _________-10,000________________
Total Gross Domestic Product = _________2,972,350______________________
Prices and Quantities
Price of Honey
Year
Price of Milk
Quantity of Milk
2005
2006
2007
$1
$1
$2
100
200
200
2005
2006
2007
Calculating Nominal GDP
___1_____ per milk ×___100_____ milk = __100_____
__2____ per honey ×___50____ honey =___100_____
___1_____ per milk ×___200_____ milk = __200_____
__2____ per honey ×___100____ honey =__200______
___2_____ per milk ×___200_____ milk = __400_____
__4____ per honey ×___100____ honey =__400______
2005
2006
2007
Total Market Value for Milk ___100_______ + Total Market Value for Honey ___100_______ = ____200________
Total Market Value for Milk ___200_______ + Total Market Value for Honey ___200_______ = ____400________
Total Market Value for Milk ___400_______ + Total Market Value for Honey ___400_______ = ____800________
2005
2006
2007
Calculating Real GDP (base year 2005)
___1_____ per milk ×__100______ milk = __100_____
___2____ per honey ×___50____ honey =__100______
___1_____ per milk ×__200______ milk = __200_____
___2____ per honey ×___100____ honey =__200______
___1_____ per milk ×__200______ milk = __200_____
___2____ per honey ×___100____ honey =__200______
2005
2006
2007
Total Market Value for Milk ___100_______ + Total Market Value for Honey ___100_______ = ____200_________
Total Market Value for Milk ___200_______ + Total Market Value for Honey ___200_______ = ____400_________
Total Market Value for Milk ___200_______ + Total Market Value for Honey ___200_______ = ____400_________
2005
2006
2007
GDP deflator = Nominal GDP/Real GDP × 100
____200________/____200________ × 100 = _____100________ or ____N/A________ % increase
_____400_______/____400________ × 100 = ____100_________ or ___0_________ % increase
___800_________/___400_________ × 100 = ___200__________ or ___100_________ % increase
$2
$2
$4
Quantity of Honey
50
100
100
Paper Airplane Simulation
With a group of 4, form a company that builds paper airplanes. As a group
experiment and agree on a simple design. Your airplanes must be made of only
one half of an 8 ½ x 11 piece of paper (8 ½ x 5 ½). Next choose a company name.
This will be printed on both sides of the plane’s fuselage. Each member should
practice making an airplane before beginning the activity.
The Simulation will consist of three shifts, during each shift the group’s workers will
manufacture airplanes. All workers must cease work immediately after each shift.
Shift 1
Materials:
1 pair of scissors
1 Pencil
2 desks
10 sheets of paper
Procedure: Each worker must
work alone to make his or her
airplanes. The materials must
be shared. After the shift, the
quality control manager (who
cannot participate) should
inspect the airplanes and
record the number of airplanes
completed.
Shift 2
Materials:
1 pair of scissors
1 Pen/Pencil
2 desks
10 sheets of paper
Procedure: Before this shift
begins, work as a group to
break the production process
into a series of steps.
- Cutting the paper
- Folding the paper
- Writing the Company Name
Record the results.
Shift 3
Materials:
Using the costs listed on the
productivity chart, decide as a
group what additional capital
goods you will purchase. You
have $10.00. You may acquire a
maximum of 6 desks, 3 scissors,
40 sheets of paper and 10
pencils. (You can also hire a new
laborer – QCM)
Procedure: Before this shift
begins, determine the most
efficient manner of producing
the airplanes
Paper Airplane Simulation Reflection Questions
1.
2.
3.
4.
5.
6.
7.
8.
9.
What shift were you most productive?
Why were you most productive during that
shift?
What effect did investing in additional capital
goods have on productivity?
What product allowed your group the most
growth?
When did your group experience diminishing or
negative returns?
If instead of making an additional capital
investment in shift 3, what would have happened
if the company laid off one or two workers, how
would that have affected production?
How did your group exhibit capital deepening?
(pg. 320)
How could new technology have affected your
productivity? (pg. 322)
How could foreign trade have been positive for
your company? (pg. 322)
GDP Simulation
Year
Price
Quantity Sold
Total GDP
GDP Simulation
Year
Price
Quantity Sold
Total GDP
1
1
10
10
2
2
10
20
3
2
20
40