Economic Performance

Tuesday 5.17, Economic PerformanceSWBAT describe how and why the GDP changes over time.Agenda1. Announce new students of

the month2. Go over unit 3 test3. UNIT 4 Warm Up #14. Notes: Economic

Performance5. Measure your household

GDP6. Begin Homework

Homework• Quiz Friday

1. Key Terms pgs 335-3482. Outline section 11.33. Answer q’s 1-4 on pg 341

Warm Up #1

1. What is macroeconomics?2. How can we measure wealth using the Big

Mac Price Index?

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

GDP

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

How to study GDP• One person’s

spending is another person’s income

• Spending – Consumption– Investment– Government

purchases– Net exports

1. Consumption

• Final goods and services purchased by households

• Makes up 2/3 of our spending

2. Investments

• The purchase of new capital resources is an investment toward producing goods and services

3. Government Purchases

• Paying for public utilities and state employees

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

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

Aggregate Income

• The sum of income earned by all resource suppliers in the economy

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

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

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

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)

Begin Homework Assignment

• Chapter 12-1 Reteaching Activity• Pages 350-355

• CHAPTER 12 QUIZ WEDNESDAY MAY 15