Download Chapter 12 – Macroeconomic Performance

Chapter 12 – Macroeconomic Performance
Section 1
Macroeconomics – the study of economic issues dealing with the economy as a whole.
Gross Domestic Product (GDP) – dollar value of all goods, services, and structures
produced within a country’s borders in a year (whether the producers are American or
not). GDP statistics measure economic growth.
Things not included in GDP
A. Intermediate products – products used to make other final products
B. Secondhand sales – sales of used goods
C. Nonmarket transactions – activities that do not generate expenditures
(ex. mowing your own lawn)
D. Underground economy – economic activities that are not reported
(some are illegal and some are legal)
Current GDP is GDP using that year’s dollar values
Real GDP is GDP using constant dollars ( real GDP is adjusted for inflation) and is a
more accurate measure of economic growth
Limitations of GDP
A. GDP numbers do not tell the composition of a country’s output
B. GDP numbers do not tell about quality of life
C. Some GDP is used to control unwanted activities
Gross National Product (GNP) – dollar value of all goods, services, and structures
produced by a country’s citizens (whether within our borders or not)
Disposable Personal Income (DPI) – Total consumer income minus income taxes
(represents amount of money consumers have to spend)
All of our country’s output (GDP) is purchased by one of four sectors. We use the
Output Expenditure model to show this relationship.
Output Expenditure Model
GDP=C+I+G+(X-M)
Consumer Sector – made up of households.
Investment Sector – made up of businesses. This sector produces the nation’s output
Government Sector – made up of all levels government (federal, state, and local)
Foreign Sector –difference between exports and imports (X-M)
Section 3
Poverty – being poor is a relative term
Poverty threshold – annual income mark that the govt. defines as the poverty. The
poverty threshold varies with the size of the family. If family income is below the line,
the family is said to be living in poverty.
Lorenz curve – shows how income distribution varies from an equal distribution.
Reasons for income inequality
A.
B.
C.
D.
E.
F.
G.
H.
Education
Wealth
Tax law changes
Decline of unions
More service jobs
Monopoly power
Discrimination
Changing family structure
Antipoverty programs
Welfare programs – general category of programs that provide assistance to those in
need
A. Income assistance – with TANF & SSI programs people are given cash benefits
B. General assistance – benefits to the poor that are not cash such as food stamps &
Medicaid
C. Social service programs – other programs for the poor such as job training &
daycare
D. Tax Credits – Earned income tax credit (EITC) for low income workers
E. Enterprise zones – govt. gives businesses tax breaks if they operate in low income
areas