Download GDP Powerpoint - January, 2017

Piece 2
Measuring the
economy
Macro the Big Picture
Can you
define these
terms?
•
•
•
•
•
•
Gross
Unemployment
Cyclical
Frictional
Inflation
Stagflation
What do you know?
Answer this question in
at least 4 sentences:
How do you know if our
economy is experiencing
growth?
By the end Essential Questions
of this lesson • How do the types of unemployment experienced by
a nation reflect scarcity in the market for labor?
you should
• How does unemployment affect Gross Domestic
know….
Product?
•
Why should countries be concerned with inflation?
Terms
•
•
•
•
•
•
•
•
Unemployment
Labor force
GDP
Structural, Cyclical
and Frictional
unemployment
Inflation
Stagflation
Hyperinflation
Consumer Price
Index
Georgia Performance Standard
SSEMA1 The student will illustrate the means by which economic activity is
measured.
a. Explain that overall levels of income, employment, and prices are determined by
the spending and production decisions of households, businesses, government, and
net exports.
b. Define Gross Domestic Product (GDP), economic growth, unemployment,
Consumer Price Index (CPI), inflation, stagflation, and aggregate supply and
aggregate demand.
c. Explain how economic growth, inflation, and unemployment are calculated.
d. Identify structural, cyclical, and frictional unemployment. .
Literacy Standards
RH.11-12.2 Determine the central ideas or information of a primary or secondary
source; provide an accurate summary that makes clear the relationships among
the key details and ideas
RH.11-12.3 Evaluate various explanations for actions or events and determine
which explanation best accords with textual evidence, acknowledging where the
text leaves matters uncertain
WHST.11-12.9 Draw evidence from informational texts to support analysis,
reflection, and research.
How can you measure the
economy?
When we look at our economy to determine what
changes need to be made, we need to have
accurate data. That data should measure both
the goods and services that a country produces.
When getting a good economic picture, we need
to take all of the following economic activity into
account
1. Income
2. Unemployment
3. Prices
How can you measure a nation’s
income?
In order to determine how much money our country makes, we often use
GDP.
Gross Domestic Product or GDP is the value in dollars of the total amount of
goods and services produced in a nations borders in one year.
Gross
(Total value)
+
Domestic
(inside the country)
+
Product
(goods and services)
GDP
GDP is easy to calculate, add up all the goods, services and structures sold in a
one year period and multiply each by their prices. It is not possible to record
absolutely everything so economists use techniques to estimate GDP
quarterly.
What is NOT included in GDP?
• Intermediate products- goods that are used to produce other goods like
capitol goods.
• Secondhand sales- like used car dealerships, thrift stores or used book
dealers. These transactions go from one owner to another and do not
produce a new product.
• Nonmarket transactions- these are services that you do for yourself that
do not require a purchase outside of your home like home repairs,
mowing your lawn or doing your own taxes. You are providing a service
that has a value that is not counted.
• Underground economy- examples of this include illegal gambling,
prostitution or garage sales. These are cash activities that people do to
make money but are not reported for legal tax collecting purposes.
What is NOT included in GDP?
Take 3 minutes and list as many examples as you can of each
of these activities that are NOT counted in GDP.
You cannot use any of the examples given in the previous slide.
1. Intermediate products
2. Secondhand sales
3. Nonmarket transactions
4. Underground economy
GDP in Action
1. Add up the total dollar amount of goods and
services produced by the people in your room in
one year to determine how much your class adds
to the country’s GDP .
2. Explain what growth would look like for your
classroom?
Unemployment
Remember when you learned about the production possibilities frontier? In
order to produce on the frontier and maximize a country’s potential it is
necessary to have all resources working efficiently. This is why employment
is critical to economic growth.
So we should start off with some questions:
 Who counts as part of our labor force?
 How does a country determine the percentage of workers that should
be productive but are not?
 What is our country’s unemployment goal?
 Can you end unemployment?
 Are there different kinds of unemployment?
Who counts?
Which of these examples
The Labor Force includes…
would count as a part of the
labor force?
Our labor force consists of
everyone 16 and up who is
1. A stay at home dad
either employed OR actively
2. A recent college graduate
looking for a job.
3. A 25 year old inmate
4. A 15 year old high school
It does not include those in the
student looking for a
military or those who are
summer job
unable to work.
5. A 60 year old retired train
conductor who is trying to
work as a barista
Who counts?
1.
2.
3.
4.
5.
No
Yes
No
No
Yes
Which of these examples
would count as a part of the
labor force?
1. A stay at home dad
2. A recent college graduate
3. A 25 year old inmate
4. A 15 year old high school
student looking for a
summer job
5. A 60 year old retired train
conductor who is trying to
work as a barista
So how is unemployment
calculated?
Number of
unemployed persons = % unemployed
Civilian labor force
6,122,000
166,452,000
= .036779 = 3.6%
Take a moment to calculate
the unemployment rate in
your classroom
What should unemployment be?
As a class discuss:
What do you think the unemployment rate
SHOULD be.
Can the unemployment rate ever be 0%?
Where are we now?
1.
2.
3.
What is the highest that
unemployment has been since
June 2014?
Describe the trends in
unemployment shown by this
graph.
How much farther does
unemployment need to drop to
reach the goal your class agreed
on?
US Bureau of Labor Statistics
http://www.bls.gov/news.release/pdf/empsit.
pdf
Types of Unemployment
The Full Employment and Balanced Growth Act of 1978 states a
goal of 4% for unemployment, which based on US historical data,
is very low.
This goal however does not give us enough information to
determine how to address unemployment because there are
several different reasons why people in our labor force are
unemployed. There are four basic types of unemployment:
• Frictional
• Structural
• Cyclical
• Seasonal
Types of Unemployment
Frictional- this is the most
common type of unemployment, it
occurs when workers are between
jobs and is usually short term. This
type of unemployment will never be
0%.
Examples: someone quitting their
job to find a better one, someone
who gets fired for their
performance, someone who leaves
a job to find one in a different city
1. Write down 3
examples of frictional
unemployment.
2. Choose 1 of them to
illustrate on your
paper.
Types of Unemployment
Structural- this type occurs when
there is a change in how the
economy operates due to a change
in consumer tastes and preference
or from new technology or
progress.
Examples: outsourcing production
to China, the change from video
tapes to DVD’s, when people
started buying cars instead of
horses and buggies
Class Discussion
What should you do if
you became structurally
unemployed?
Types of Unemployment
Seasonal- this type of
unemployment occurs when work is
dependent on weather or for certain
jobs that are available only certain
times of the year.
Examples: a Six Flags worker in
November, a Toy’s R Us employee
after Christmas
Cyclical- this type of
unemployment occurs because of
changes in the business cycle
Examples: a banker who lost their
job in 2009 when the bank closed,
a factory worker in Detroit who lost
their job in 2008
Quick Write
Write at least 5 sentences in response to ONE
of the following questions:
Which type of unemployment do
you think should be targeted
right now to help our economy?
Who’s job should it be to make
sure unemployment is at the
correct level?
So far can
you…
Answer these Questions?
•
•
Define these
Terms?
•
•
•
•
Unemployment
Labor force
GDP
Structural,
Cyclical and
Frictional
unemployment
How do the types of unemployment
experienced by a nation reflect scarcity in the
market for labor?
How does unemployment affect Gross
Domestic Product?
Perform these Standards?
•
•
•
Define Gross Domestic Product (GDP),
economic growth and unemployment
Explain how economic growth and
unemployment are calculated.
Identify structural, cyclical, and frictional
unemployment. .
We still need to learn about
Prices
Why do prices matter?
Prices are interrelated with employment
and GDP.
Can you explain how?
Inflation
Inflation is an increase in the level of prices in the economy. We
have all experienced this at the gas pump on a regular basis.
Some inflation is normal, as people’s incomes rise because of
economic growth, so do prices. There is a normal rate of
increase that we want to maintain because inflation is harmful to
specific groups of people.
Who does inflation hurt?
Who does Inflation hurt?
• Those on fixed incomes.
The income of people
who live on retirement
or social security never
changes, so increases in
prices mean that they
have less money to live
on each month.
Who does Inflation hurt?
• Inflation hurts lenders
because the money that
is paid back is worth
less.
• Finally inflation hurts
savers because the
money they save will
buy less when they take
it out of savings.
Different types of Inflation
Inflation can occur in a society
without economic growth.
Because the economy is
stagnant-showing no activitythis is called stagflation. In the
1980’s the US experienced
stagflation when OPEC, the
Organization of Petroleum
Exporting Countries, raised the
price of oil by almost 10%.
Different types of Inflation
German children playing with
stacks of money in the 1920’s
On occasion, if a country is
facing a political or economic
crisis, inflation can get out of
control. Extreme inflation is
called Hyperinflation.
Examples of hyperinflation are
Germany in the 1920’s after
WWI when inflation occurred
at a rate over 300% and most
recently Zimbabwe in 2006
when prices rose at a rate of
1,000%.
So how can we measure
inflation?
In order to measure how much
prices have risen we need to have a
common group of goods and services
that people have purchased over the
last years called a market basket.
Items like a house, healthcare,
peanut butter, etc.
Next we need a base year, this year
will be used as a basis for
comparison. The US Bureau of Labor
Statistics uses years 1982 to 1984 as
the base year.
So how can we measure
inflation?
Next Step
Total the cost of the market basket in
the base year, and divide it by the
total of the market basket this year.
If the market basket in 1982-84 was
2,012 and today it is 4, 240 then your
equation would be:
4,240
= 2.107 or 210.7%
2,012
The result is called the Consumer Price Index
which is a series of statistical data that tracks
changes in price on a monthly basis.
But how do we interpret that?
So how do you translate CPI?
Today CPI was 210.7, exactly one year ago CPI was 201.4. To find out how
much inflation has occurred, complete the formula
(210.7-201.4) = 9.3
=
0.046 =
4.6%
201.4
201.4
So in the last year inflation has occurred at a rate of 4.6%. The Full
Employment and Balanced Growth Act of 1978 states a goal of 3% for
inflation. This relates to the US social and economic goal of stability.
Now you
should be
able to….
Answer these Questions
•
•
•
How do the types of unemployment experienced by
a nation reflect scarcity in the market for labor?
How does unemployment affect Gross Domestic
Product?
Why should countries be concerned with inflation?
Define these Terms
•
•
•
•
•
•
•
•
Unemployment
Labor force
GDP
Structural,
Cyclical and
Frictional
unemployment
Inflation
Stagflation
Hyperinflation
Consumer Price
Index
Perform these Standards
• Illustrate the means by which economic activity is measured.
• Explain that overall levels of income, employment, and prices are
determined by the spending and production decisions of
households, businesses, government, and net exports.
• Define Gross Domestic Product (GDP), economic growth,
unemployment, Consumer Price Index (CPI), inflation, stagflation
• Explain how economic growth, inflation, and unemployment are
calculated.
• Identify structural, cyclical, and frictional unemployment.
Sample
Questions
Try These
1. The data in the bar graph shows
A. that the number of unemployed
workers in Group 1 is greater than the
number of unemployed workers in Group
2 from 1995 to 1999
B. that the unemployment rate for all
workers was a serious economic problem
by the late 1990s
C. that the percentage of unemployed
workers in Group 1 was roughly twice as
high as the percentage of all unemployed
workers in the labor force from 1995 to
1999
D. that the percentage of unemployed
workers in Group 2 was higher than the
percentage of all workers who were
unemployed from 1995 to 1999
Try These
2. The BEST example of structural
unemployment in an economy is
someone
A. between jobs or entering the work
force
B. out of work due to a change in the
business cycle
C. out of work due to a seasonal
downturn in business
D. whose job skills do not match the
economy’s needs
3. Carol’s teaching contract was not
renewed this year because the county
downsized due to the recent recession.
Carol is experiencing which type of
unemployment?
A. Seasonal
B. Cyclical
C. Structural
D. Frictional
4. Of the following groups, the one hurt the
LEAST by unanticipated inflation is
A. workers who have cost-of-living
adjustments in their labor contracts
B. people who have saved money in
accounts with a fixed interest rate
C. banks that have made long term, fixed
rate mortgage loans
D. consumers who buy goods and
services at prevailing market prices
5. Peggy, a recent college graduate, decides
to look for a job instead of going to
graduate school. If she is unable to find a
job that suits her interests right away,
what type of unemployment is she MOST
likely experiencing?
A. structural
B. seasonal
C. frictional
D. cyclical
Resources
• US Bureau of Labor Statistics News Release July 2012
http://www.bls.gov/news.release/pdf/empsit.pdf
• Consumer Price Index, US Bureau of Labor Statistics
http://www.bls.gov/cpi/
• Organization of Petroleum Exporting Countries (OPEC)
http://www.opec.org/opec_web/en/
•
Georgia Department of Education’s Economics/Business/Free Enterprise EOC
Assessment Guide
– http://www.gadoe.org/Curriculum-Instruction-andAssessment/Assessment/Documents/Milestones/Assessment%20Guides/GM
%20Economics%20EOC%20Assessment%20Guide%20081715.pdf
Resources
• Economics GPS Frameworks: Unit 4- “The Government and the Economy:
Superhero or Villain”
https://www.georgiastandards.org/Frameworks/GSO%20Frameworks/Eco
nomics%20Unit%204.pdf
• Georgia Department of Education Released EOCT’s and answer keys
http://www.doe.k12.ga.us/Curriculum-Instruction-andAssessment/Assessment/Pages/EOCT-Released-Tests.aspx