Activator GDP Chapter 12

Activator – GDP Chapter 12 * Create a chart and predict a figure for each of the following

Trend 1900-1920 2011

Prediction Actual Figure Prediction Actual Figure

Average Life Expectancy (years)

Per Capita Income

Poverty Rate (percent of US Households)

High School Completion (percent of adults)

47

$520 (5609.15 in

today’s dollars)

40%

22%

78.37

$48,147

15.1% (46.2 million)

92%

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

Consumption Investment Government Net Exports

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

Application - Calculating GDP Product Quantity Price (per 1 unit) Dollar Value

Consumption Car Sales Fast Food Sales Personal Computers

10 12

50

$400

$200

$100

____________________________ ____________________________ ____________________________

Investment Tractors Business Computers Telecommunications

15 10

45

$20

$30

$200

____________________________ ____________________________ ___________________________

Government Military Personnel Helicopters Roads

5

2

1

$50,000

$200,000

$300,000

__________________________ __________________________ __________________________

Net Exports *Figure this amount by taking Exports minus Imports*

Total Exports

Total Imports

$10,000

$20,000

__________________________

Total Gross Domestic Product = _______________________________

4000 2400

5000

300 300

9000

250000 400000

300000

-10000

$961,000

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

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 =

+ 10 trucks at $20,000 each =

Total =

Nominal GDP – GDP measured in name only (current prices), not adjusted for inflation.

Real GDP – GDP expressed in fixed (unchanging prices), adjusted for inflation.






produces:


$150,000


$200,000

Total = $350,000








produces:


$150,000


$200,000

Total = $350,000

1. In the second year, the

economy’s output does not

increase, but the prices of cars

and trucks do:



Total =








produces:


$150,000


$200,000

Total = $350,000




and trucks do:


$160,000


$210,000

Total = $370,000








produces:


$150,000


$200,000

Total = $350,000




and trucks do:


$160,000


$210,000

Total = $370,000

1. To correct for an increase in

prices, economists establish a

set of constant prices by

choosing one year as a base

year. :



Total =








produces:


$150,000


$200,000

Total = $350,000




and trucks do:


$160,000


$210,000

Total = $370,000

1. To correct for an increase in

prices, economists establish a

set of constant prices by

choosing one year as a base

year. :


$150,000


$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

_____________× 100 =

_____rise in inflation

370,000

350,000 106

6%

Nominal GDP Versus Real GDP (RGDP)

$8 $9 $10 $11

1990 1995 2000 2012

•Nominal GDP is the Price

•RGDP is the Pizza Pie

(physical units sold)

Year Price Units

Sold

Nomina

l GDP

Real

GDP

1990 $8 10 $80 $80

2012 $11 10 $110 $80

Nominal GDP Versus Real GDP (RGDP)

$8 $9 $10 $11

1990 1995 2000 2012

•Nominal GDP is the Price

•RGDP is the Pizza Pie

(physical units sold)

Year Price Units

Sold

Nomina

l GDP

Real

GDP

1990 $8 10

2012 $11 10

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

Year Price of Hot Dogs Quantity of Hot Dogs Price of Hamburgers Quantity of Hamburgers

2005

2006

2007

$1

$2

$3

100

150

200

$2

$3

$4

50

100

150

Calculating Nominal GDP

2005

2006

2007

________ per hot dog ×________ hot dogs = ____



_____ per hamburger ×____ hamburger = ____



2005

2006

2007

Total Market Value for Hot Dogs _______ + Total Market Value for Hamburgers _______ = __________



Calculating Real GDP (base year 2005)

2005

2006

2007

______ per hot dog ×______ hot dogs = _______

______ per hot dog ×_______ hot dogs = ______

______ per hot dog ×_______ hot dogs = ______

______ per hamburger ×______ hamburger = ____

______ per hamburger ×_____ hamburger = ____

______ per hamburger ×_____ hamburger = ____

2005

2006

2007

Total Market Value for Hot Dogs __________ + Total Market Value for Hamburgers __________ = __________

Total Market Value for Hot Dogs __________ + Total Market Value for Hamburgers __________ = ___________

Total Market Value for Hot Dogs __________ + Total Market Value for Hamburgers __________ = __________

Calculate the increase in prices based on the GDP Deflator formula

GDP deflator = Nominal GDP × 100

Real GDP

2005

2006

2007

____________/____________ × 100 = _____________

____________/____________ × 100 = _____________

____________/____________ × 100 = _____________

$1 100 $100 $2 50 $100 $2 150 $300 $3 100 $300

$3 200 $600 $4 150 $600

$100 $100 $300 $300

$600 $600

$200 $600

$1200

$1 100 $100 $2 50 $100

$1

$1

150

200

$150

$200

$2

$2

100

150

$200

$300

$100

$150

$200

$100

$200

$300

$200

$350

$500

$200 $200 100

$600 $350 171

$1200 $500 240

Year 1: Apricots - Broccoli - Carrots - Total GDP -

Year 2: Apricots - Broccoli - Carrots - Total GDP -

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: Nominal GDP X 100 = Real GDP

__14.6 = _______X 100 = _____ 13.7

1.065 107

PRODUCTION AND PRICES

YEAR 1 YEAR 2

GOODS OUTPUT PRICES OUTPUT PRICES

APRICOTS 10 $50 10 $55

BROCCOLI 10 $25 12 $25

CARROTS 10 $25 9 $30

2. Calculate the nominal GDP for each year, then calculate the GDP deflator for year 2 using year 1 as a base year.

Year 2 Real GDP: Apricots - $500 Broccoli - $300 Carrots - $225 Total GDP - $1025

Year 2Nominal: Apricots - $550 Broccoli - $300 Carrots - $270 Total GDP - $1120

__1120 = _______X 100 = _____ 1025

1.09 109 = 9% inflation Nominal GDP X 100 = Real GDP

• 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

• Rise in unemployment

4. 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“.

Business Cycles

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 1. 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.

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

14.2 – 13.7 = _______X 100 = _______ 13.7

0.0365 3.65%

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

= _$44,991_ 137000 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 - 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)

Saving and Investment

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 - 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

Natural Resources

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?

◦ Nominal is calculated using current _________(________), not

accounting for_____________

◦ Real is calculated using a _________ year’s prices (dollars),

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

prices dollars

inflation

base

inflation constant

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 - Backrubs - Total GDP -


Year 1: Bananas - $5 Backrubs - $30 Total GDP - $35




VIS Terms Due Tuesday 10 –27 1. Macroeconomics

2. Gross Domestic Product

3. Nominal GDP

4. Real GDP

5. Expansion

6. Peak

7. Contraction

8. Trough

9. Recession

10. Depression

11. Stagflation

Binder Check Due Tuesday 10-25 1. Daily Assignment Ch. 12 Sec. 1

2. Video Questions - Google

3. DAQ’s pg. 302

4. Ch. 12 Guided Reading Wksht.

5. Population Growth + GDP Wksht.

6. Section 2 DAQ’s pgs. 312-316

7. Study Guide Chapter 12

8. C.W. Puzzle Ch. 12

9. VIS Terms Ch. 12

GDP Country Comparison

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?

Country 2011 GDP Population Per Capita GDP Population Rank Per Capita GDP

Rank

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

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. 700 (1.00 x 200 = 200) + (10.00 x 50 = 500) = 700

b. 700 (1.00 x 200 = 200) + (10.00 x 50 = 500) = 700

c. 770 (1.00 x 220 = 220) + (11.00 x 50 = 550) = 770

d. 720 (1.00 x 220 = 220) + (10.00 x 50 = 500) = 720

e. 100 (700/700 x 100 = 100)

f. 107 (770/720 = 1.069 x 100 = 107)

g. 107 – 100/100 = .07 x 100 = 7%

h. 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.


Consumption Automobiles Replacement Tires Shoes

6 10 55

$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

_________________________ _________________________ _________________________


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 7. GDP:

a. Second-hand sale

b. Government

c. Investment

d. Nonmarket Transaction

e. Underground Economy

f. Consumption

g. Net Exports

h. Intermediate goods

8. Product Quantity Price (per 1 unit) Dollar Value Consumption New home sales

Fast Food Sales Personal Computers

10 12

50

$200,000

$10,000

$1,000

_________2,000,000___________________ _________120,000___________________ _________50000___________________

Investment Tractors Plane Tickets Blackberry Phones

15 10

45

$10,000

$90

$400

__________150,000__________________ __________900__________________ __________18,000_________________

Government Garbage Collection

Newly Hired Agents Police

50

500

100

$5,000

$60,000

$50,000

__________250,000________________ __________30,000,000________________ __________5,000,000________________




____10000_______ - ___20000_______

= ____-10000_______

_________-10000_________________

Total Gross Domestic Product = __________$37,578,900_____________________

Study Guide Ch. 12

9. Expansion

10. Peak

11. Contraction

12. Trough

13. Recession

14. Depression

15. Stagflation

16. Phase of Business Cycle: a. Contraction

b. Peak

c. Trough

d. Expansion

Contributing Factors Example of increase in GDP Example of decrease in GDP

Business Investment During an expansionary economy,

firms invest in capital goods, this will

help create output and jobs, increase

GDP

During acontractionary economy, firms

invest in capital goods, this will help

create output and jobs, increase GDP

Interest Rates and

Credit

If interest rates are low, people and

businesses will be motivated to

borrow, consume and invest

If interest rates are high, people and

businesses will be lose the motivation to

borrow, consume and invest

Consumer Expectations The way that people perceive the

economy can influence consumption,

if they view it positively they will

consume and this will add to GDP

The way that people perceive the

economy can influence consumption, if

they view it negatively they will consume

and this will add to GDP

External Shocks Positive external shocks such finding

a new oil source or if an area

experiences a great deal of rain

Negative external shocks such as war,

hurricanes, droughts etc. can influence

ability to consume and invest

Study Guide Ch. 12 17.

18.

Prices and Quantities

Year Price of Oranges Quantity of Oranges Price of Video Games

Quantity of Video Games

2005 2006 2007

$1

$2

$3

50

100

150

$10

$15

$20

5

10

15


2005 2006 2007

$__1__ per orange ×___50___ oranges = $__50_____ $__2__ per orange ×___100___ oranges = $__200___ $__3___ per orange ×__150___ oranges =$ __450___

$__10__ per video game ×__5____ video games =$__50_____ $__15__ per video game ×__10___ video games =$__150____ $__20__ per video game ×__15___ video games =$__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____

Calculating Real GDP (base year 2005 prices)

2005 2006 2007

$__1__ per orange ×___50___ oranges = $__50_____ $__1__ per orange ×___100___ oranges = $__100___ $__1___ per orange ×__150___ oranges =$ __150___

$__10__ per video game ×__5____ video games =$__50_____ $__10__ per video game ×__10___ video games =$__100____ $__10__ per video game ×__15___ video games =$__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____

GDP deflator = Nominal GDP/Real GDP × 100

2005 2006 2007

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

Study Guide Ch. 12

19. 9.3 – 6.7/6.7 = .39 X100 = 39%

20. $9,300/281 = 33.096 X 1000 = $33096

21. Capital Deepening

22. There is an inability to create job

opportunities in the economy, which leads

to a lower standard of living.

23. If the government increases taxes, this will

put a strain on people’s ability to save

their money, vice versa

24. Trade Deficit

25. Technological

Binder Check Due Monday 11 - 14

1. All about GDP worksheet

2. Chapter 12 Practice Review

3. GDP Country Comparison

4. Ch. 12 Guided Reading

5. Study Guide Chapter 12

6. CW Puzzle Chapter 12

7. VIS Terms

8. Essential Questions

9. Daily Tens

10. Notes

11. Standard Sheet Ch. 7 + 8

http://abcnews.go.com/video/playerIndex?i

d=8228701

http://abcnews.go.com/2020/stosselvideo


d=6770261


d=8221074

http://abcnews.go.com/video/playerIndex?id=8228701








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?


Consumption Automobiles Replacement Tires Shoes

6 10 55

$20000

$60

$50

_________120,000________________ _________600_____________ _________2,750__________________

Investment Machinery Computers Cell Phones

10 30 45

$8000

$1500

$200

_________80,000__________________ _________45,000_________________ _________9,000_________________

Government Single Family Multifamily Commercial

3 5 1

$75,000

$300,000

$1,000,000

_________225,000________________ _________1,500,000_______________ _________1,000,000_______________




___________ - __________

= ___________

_________-10,000________________

Total Gross Domestic Product = _________2,972,350______________________

Prices and Quantities

Year Price of Milk Quantity of Milk Price of Honey Quantity of Honey

2005

2006

2007

$1

$1

$2

100

200

200

$2

$2

$4

50

100

100


2005

2006

2007

___1_____ per milk ×___100_____ milk = __100_____

___1_____ per milk ×___200_____ milk = __200_____

___2_____ per milk ×___200_____ milk = __400_____

__2____ per honey ×___50____ honey =___100_____

__2____ per honey ×___100____ honey =__200______

__4____ per honey ×___100____ honey =__400______

2005

2006

2007

Total Market Value for Milk ___100_______ + Total Market Value for Honey ___100_______ = ____200________



Calculating Real GDP (base year 2005)

2005

2006

2007

___1_____ per milk ×__100______ milk = __100_____

___1_____ per milk ×__200______ milk = __200_____

___1_____ per milk ×__200______ milk = __200_____

___2____ per honey ×___50____ honey =__100______

___2____ per honey ×___100____ honey =__200______

___2____ per honey ×___100____ honey =__200______

2005

2006

2007

Total Market Value for Milk ___100_______ + Total Market Value for Honey ___100_______ = ____200_________



GDP deflator = Nominal GDP/Real GDP × 100

2005

2006

2007

____200________/____200________ × 100 = _____100________ or ____N/A________ % increase

_____400_______/____400________ × 100 = ____100_________ or ___0_________ % increase

___800_________/___400_________ × 100 = ___200__________ or ___100_________ % increase

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

1. What shift were you most productive?

2. Why were you most productive during that

shift?

3. What effect did investing in additional capital

goods have on productivity?

4. What product allowed your group the most

growth?

5. When did your group experience diminishing or

negative returns?

6. 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?

7. How did your group exhibit capital deepening?

(pg. 320)

8. How could new technology have affected your

productivity? (pg. 322)

9. How could foreign trade have been positive for

your company? (pg. 322)

Paper Airplane Simulation Reflection Questions

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

Documents

Activator GDP Chapter 12