activator – chapter 12 * create a chart and predict a figure for each of the following...

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Activator Chapter 12* Create a chart and predict a figure for each of the following Trend1900-19202009PredictionActual FigurePredictionActual FigureAverage Life Expectancy (years)Per Capita Income (1998 Dollars)Poverty Rate (percent of US Households)High School Completion (percent of adults)

1Activator Chapter 12 * Create a chart and predict a figure for each of the following Trend1900-19202009PredictionActual FigurePredictionActual FigureAverage Life Expectancy (years)47

77

Per Capita Income (1998 Dollars)Poverty Rate (percent of US Households)High School Completion (percent of adults)


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Per Capita Income (1998 Dollars)$520($4,800)$47,440($36,215.24)Poverty Rate (percent of US Households)High School Completion (percent of adults)


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Per Capita Income (1998 Dollars)$520($4,800)$47,440($36,215.24)Poverty Rate (percent of US Households)40%

14.3%

High School Completion (percent of adults)


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Per Capita Income (1998 Dollars)$520($4,800)$47,440($36,215.24)Poverty Rate (percent of US Households)40%

14.3%

High School Completion (percent of adults)22

88

5Chapter 12 Gross Domestic Product and GrowthMacroeconomics the study of the behavior and decision making of the economy as a whole.i.e. inflation, unemployment, and economic growthGross Domestic Product (GDP) the market value of all final goods and services produced within a countrys borders in a given period of time.Measures the economys total income Total income = total expenditureNational Income Accounting a system of statistics and accounts that keeps track of production, consumption, saving and investment.

Gross Domestic Product DefinedGross Domestic Product (GDP) the market dollar value of all final goods and services produced within a countrys borders in a given period of time Market Dollar Value market selling prices of goods and services. (prices = value) Price for both Apples and OrangesOf All all items produced in the economy and sold legally in markets. Pears, grapefruit, books, movies, haircuts, etc.Final only value of final goods and services (excluding intermediate products). Hallmark card (output), not input (paper)Goods and Services Tangible and intangible products food and haircuts, cds and concerts Produced only includes new goods and services produced currently. GM sells new car vs. person to person 2nd hand saleWithin a country only measures production within a countrys borders. Canadian citizen in the U.S., Am. Company in Haiti (not) In a given period of time measured within a specific interval of time,usually a year or quarterly (three months)

Components of GDPConsumption Investment Government Net Exports

Four components:GDP = C + I + G + NXConsumption of goods and services by households (C)Accounts for 70% of GDPInvestments by businesses in goods and services (I)Accounts for 15% of GDPGovernment goods and services (G)Accounts for 19% of GDPNet exports or imports of goods and services, (NX) *Exports (X) Imports (M)*Accounts for -5 of GDP

Excluded Products from GDPIntermediate 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. Cash Transfers government money sent from taxpayer to entitlement programSocial Security, welfare, etc.

Application - Calculating GDP ProductQuantity Price (per 1 unit)Dollar Value ConsumptionNew home salesFast Food SalesPersonal Computers101250$400$200$100_____________________________________________________________________________________________InvestmentTractorsBusiness ComputersTelecommunications151045$20$30$200__________________________________________________________________________________GovernmentMilitary PersonnelHelicoptersRoads521$50,000$200,000$300,000___________________________________________________________________________Net Exports*Figure this amount by taking Exports minus Imports*Total Exports $10,000Total Imports$20,000___________ - __________=___________

_________________________

Total Gross Domestic Product = _______________________________Application - Calculating GDP ProductQuantity Price (per 1 unit)Dollar Value ConsumptionNew home salesFast Food SalesPersonal Computers101250$400$200$100_________4000____________________________2400____________________________5000___________________InvestmentTractorsBusiness ComputersTelecommunications151045$20$30$200__________________________________________________________________________________GovernmentMilitary PersonnelHelicoptersRoads521$50,000$200,000$300,000___________________________________________________________________________Net Exports*Figure this amount by taking Exports minus Imports*Total Exports $10,000Total Imports$20,000___________ - __________=___________

_________________________

Total Gross Domestic Product = _______________________________Application - Calculating GDP ProductQuantity Price (per 1 unit)Dollar Value ConsumptionNew home salesFast Food SalesPersonal Computers101250$400$200$100_________4000____________________________2400____________________________5000___________________InvestmentTractorsBusiness ComputersTelecommunications151045$20$30$200__________300____________________________300____________________________9000_________________GovernmentMilitary PersonnelHelicoptersRoads521$50,000$200,000$300,000___________________________________________________________________________Net Exports*Figure this amount by taking Exports minus Imports*Total Exports $10,000Total Imports$20,000___________ - __________=___________

________________________

Total Gross Domestic Product = _______________________________Application - Calculating GDP ProductQuantity Price (per 1 unit)Dollar Value ConsumptionNew home salesFast Food SalesPersonal Computers101250$400$200$100_________4000____________________________2400____________________________5000___________________InvestmentTractorsBusiness ComputersTelecommunications151045$20$30$200__________300____________________________300____________________________9000_________________GovernmentMilitary PersonnelHelicoptersRoads521$50,000$200,000$300,000__________250000__________________________400000__________________________300000________________Net Exports*Figure this amount by taking Exports minus Imports*Total Exports $10,000Total Imports$20,000___________ - __________=___________

_________________________

Total Gross Domestic Product = ______________________________Application - Calculating GDP ProductQuantity Price (per 1 unit)Dollar Value ConsumptionNew home salesFast Food SalesPersonal Computers101250$400$200$100_________4000____________________________2400____________________________5000___________________InvestmentTractorsBusiness ComputersTelecommunications151045$20$30$200__________300____________________________300____________________________9000_________________GovernmentMilitary PersonnelHelicoptersRoads521$50,000$200,000$300,000__________250000__________________________400000__________________________300000________________Net Exports*Figure this amount by taking Exports minus Imports*Total Exports $10,000Total Imports$20,000____10000_______ - ___20000_______=____-10000_______

_________________________

Total Gross Domestic Product = ______________________________Application - Calculating GDP ProductQuantity Price (per 1 unit)Dollar Value ConsumptionNew home salesFast Food SalesPersonal Computers101250$400$200$100_________4000____________________________2400____________________________5000___________________InvestmentTractorsBusiness ComputersTelecommunications151045$20$30$200__________300____________________________300____________________________9000_________________GovernmentMilitary PersonnelHelicoptersRoads521$50,000$200,000$300,000__________250000__________________________400000__________________________300000________________Net Exports*Figure this amount by taking Exports minus Imports*Total Exports $10,000Total Imports$20,000____10000_______ - ___20000_______=____-10000_______

_________-10000_________________

Total Gross Domestic Product = _______________________________Application - Calculating GDP ProductQuantity Price (per 1 unit)Dollar Value ConsumptionNew home salesFast Food SalesPersonal Computers101250$400$200$100_________4000____________________________2400____________________________5000___________________InvestmentTractorsBusiness ComputersTelecommunications151045$20$30$200__________300____________________________300____________________________9000_________________GovernmentMilitary PersonnelHelicoptersRoads521$50,000$200,000$300,000__________250000__________________________400000__________________________300000________________Net Exports*Figure this amount by taking Exports minus Imports*Total Exports $10,000Total Imports$20,000____10000_______ - ___20000_______=____-10000_______

_________-10000_________________

Total Gross Domestic Product = __________$961,000_____________________Nominal Versus Real GDPNominal GDP GDP measured in current prices, not adjusted for inflation.Real GDP GDP expressed in constant, unchanging, prices, adjusted for inflation.

Year 1 Nominal GDPYear 2 Nominal GDPYear 2 Real GDPSuppose an economys entire output is cars and trucks.This year the economy produces:10 cars at $15,000 each =+ 10 trucks at $20,000 each = Total =In the second year, the economys 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 =Nominal Versus Real GDPYear 1 Nominal GDPYear 2 Nominal GDPYear 2 Real GDPSuppose an economys entire output is cars and trucks.This year the economy produces:10 cars at $15,000 each = $150,000+ 10 trucks at $20,000 each = $200,000Total = $350,000In the second year, the economys 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 =Nominal GDP GDP measured in current prices, not adjusted for inflation.Real GDP GDP expressed in constant, unchanging, prices, adjusted for inflation.

Nominal Versus Real GDPYear 1 Nominal GDPYear 2 Nominal GDPYear 2 Real GDPSuppose an economys entire output is cars and trucks.This year the economy produces:10 cars at $15,000 each = $150,000+ 10 trucks at $20,000 each = $200,000Total = $350,000In the second year, the economys 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 = $210,000Total = $370,000Nominal GDP GDP measured in current prices, not adjusted for inflation.Real GDP GDP expressed in constant, unchanging, prices, adjusted for inflation.

Nominal Versus Real GDPYear 1 Nominal GDPYear 2 Nominal GDPYear 2 Real GDPSuppose an economys entire output is cars and trucks.This year the economy produces:10 cars at $15,000 each = $150,000+ 10 trucks at $20,000 each = $200,000Total = $350,000In the second year, the economys 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 = $210,000Total = $370,000To correct for an increase in prices, economists establish a set of constant prices by choosing one year as a base year. When they calculate real GDP for other year, they use the prices from the base year. So we calculate the real GDP for Year 2 using the prices from Year 1:10 cars at $15,000 each =+ 10 trucks at $20,000 each =Total =Nominal GDP GDP measured in current prices, not adjusted for inflation.Real GDP GDP expressed in constant, unchanging, prices, adjusted for inflation.

Nominal Versus Real GDPYear 1 Nominal GDPYear 2 Nominal GDPYear 2 Real GDPSuppose an economys entire output is cars and trucks.This year the economy produces:10 cars at $15,000 each = $150,000+ 10 trucks at $20,000 each = $200,000Total = $350,000In the second year, the economys 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 = $210,000Total = $370,000To correct for an increase in prices, economists establish a set of constant prices by choosing one year as a base year. When they calculate real GDP for other year, they use the prices from the base year. So we calculate the real GDP for Year 2 using the prices from Year 1:10 cars at $15,000 each = $150,000+ 10 trucks at $20,000 each = $200,000Total = $350,000Nominal GDP GDP measured in current prices, not adjusted for inflation.Real GDP GDP expressed in constant, unchanging, prices, adjusted for inflation.

Nominal Versus Real GDPYear 1 Nominal GDPYear 2 Nominal GDPYear 2 Real GDPSuppose an economys entire output is cars and trucks.This year the economy produces:10 cars at $15,000 each = $150,000+ 10 trucks at $20,000 each = $200,000Total = $350,000In the second year, the economys 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 = $210,000Total = $370,000To correct for an increase in prices, economists establish a set of constant prices by choosing one year as a base year. When they calculate real GDP for other year, they use the prices from the base year. So we calculate the real GDP for Year 2 using the prices from Year 1:10 cars at $15,000 each = $150,000+ 10 trucks at $20,000 each = $200,000Total = $350,000Calculate the increase in prices based on the GDP Deflator formulaGDP deflator = Nominal GDP 100 Real GDP______ 100 =

*_____rise in inflationNominal GDP GDP measured in current prices, not adjusted for inflation.Real GDP GDP expressed in constant, unchanging, prices, adjusted for inflation.

Nominal Versus Real GDPYear 1 Nominal GDPYear 2 Nominal GDPYear 2 Real GDPSuppose an economys entire output is cars and trucks.This year the economy produces:10 cars at $15,000 each = $150,000+ 10 trucks at $20,000 each = $200,000Total = $350,000In the second year, the economys 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 = $210,000Total = $370,000To correct for an increase in prices, economists establish a set of constant prices by choosing one year as a base year. When they calculate real GDP for other year, they use the prices from the base year. So we calculate the real GDP for Year 2 using the prices from Year 1:10 cars at $15,000 each = $150,000+ 10 trucks at $20,000 each = $200,000Total = $350,000Calculate the increase in prices based on the GDP Deflator formulaGDP deflator = Nominal GDP 100 Real GDP370000 100 = 106350000

*6% rise in inflationNominal GDP GDP measured in current prices, not adjusted for inflation.Real GDP GDP expressed in constant, unchanging, prices, adjusted for inflation.

Daily Assignment Questions Page 302Housing Market GDP When was the house counted towards GDP?Why was it not counted when it was sold this year?What can be counted towards GDP that was a service provided as a result of the sale of the house?What were the lumber, nails, shingles, windows and other items used to build your neighbors newly built house categorized as?What would be added to GDP?

Review Components of GDPIndicate the components of GDP that each of the following transactions falls under. A family buys a new refrigerator.Ford opens a new plant in Detroit, Michigan.Glynn County builds a new middle school.China imports commodities from the United States.What exclusionary components are affected by the following transactions?A garage sale in your neighborhood.The tires, bolts, and engine for a new automobile.The illegal sale of imitation purses.Mowing your lawn every other Saturday and being paid an allowance.Checks sent to Social Security recipients

GDPPrices and QuantitiesYearPrice of Hot DogsQuantity of Hot DogsPrice of HamburgersQuantity of Hamburgers200520062007$1$2$3100150200$2$3$450100150Calculating Nominal GDP200520062007________ per hot dog ________ hot dogs = ____________ per hot dog ________ hot dogs = ____________ per hot dog ________ hot dogs = _________ per hamburger ____ hamburger = _________ per hamburger ____ hamburger = _________ per hamburger ____ hamburger = ____200520062007Total 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 _______ = __________Calculating Real GDP (base year 2005)200520062007______ per hot dog ______ hot dogs = _____________ per hot dog _______ hot dogs = ____________ per hot dog _______ hot dogs = ____________ per hamburger ______ hamburger = __________ per hamburger _____ hamburger = __________ per hamburger _____ hamburger = ____200520062007Total 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 formulaGDP deflator = Nominal GDP 100 Real GDP200520062007____________/____________ 100 = _____________ ____________/____________ 100 = _________________________/____________ 100 = _____________GDPPrices and QuantitiesYearPrice of Hot DogsQuantity of Hot DogsPrice of HamburgersQuantity of Hamburgers200520062007$1$2$3100150200$2$3$450100150Calculating Nominal GDP200520062007___1_____ per hot dog __100______ hot dogs = __100_____2_____ per hot dog __150______ hot dogs = __300_____3_____ per hot dog __200______ hot dogs = __600____2___ per hamburger __50__ hamburger = __100____3___ per hamburger __100__ hamburger = __300____4___ per hamburger __150__ hamburger = __600__200520062007Total 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 _______ = __________Calculating Real GDP (base year 2005)200520062007______ per hot dog ______ hot dogs = _____________ per hot dog _______ hot dogs = ____________ per hot dog _______ hot dogs = ____________ per hamburger ______ hamburger = __________ per hamburger _____ hamburger = __________ per hamburger _____ hamburger = ____200520062007Total 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 formulaGDP deflator = Nominal GDP 100 Real GDP200520062007____________/____________ 100 = _____________ ____________/____________ 100 = _________________________/____________ 100 = _____________GDPPrices and QuantitiesYearPrice of Hot DogsQuantity of Hot DogsPrice of HamburgersQuantity of Hamburgers200520062007$1$2$3100150200$2$3$450100150Calculating Nominal GDP200520062007___1_____ per hot dog __100______ hot dogs = __100_____2_____ per hot dog __150______ hot dogs = __300_____3_____ per hot dog __200______ hot dogs = __600____2___ per hamburger __50__ hamburger = __100____3___ per hamburger __100__ hamburger = __300____4___ per hamburger __150__ hamburger = __600__200520062007Total Market Value for Hot Dogs ___100____ + Total Market Value for Hamburgers ___100____ = ____200______Total Market Value for Hot Dogs ___300____ + Total Market Value for Hamburgers ___300____ = ____600______Total Market Value for Hot Dogs ___600____ + Total Market Value for Hamburgers ___600____ = ____1200______Calculating Real GDP (base year 2005)200520062007______ per hot dog ______ hot dogs = _____________ per hot dog _______ hot dogs = ____________ per hot dog _______ hot dogs = ____________ per hamburger ______ hamburger = __________ per hamburger _____ hamburger = __________ per hamburger _____ hamburger = ____200520062007Total 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 formulaGDP deflator = Nominal GDP 100 Real GDP200520062007____________/____________ 100 = _____________ ____________/____________ 100 = _________________________/____________ 100 = _____________GDP Prices and QuantitiesYearPrice of Hot DogsQuantity of Hot DogsPrice of HamburgersQuantity of Hamburgers200520062007$1$2$3100150200$2$3$450100150Calculating Nominal GDP200520062007___1_____ per hot dog __100______ hot dogs = __100_____2_____ per hot dog __150______ hot dogs = __300_____3_____ per hot dog __200______ hot dogs = __600____2___ per hamburger __50__ hamburger = __100____3___ per hamburger __100__ hamburger = __300____4___ per hamburger __150__ hamburger = __600__200520062007Total Market Value for Hot Dogs ___100____ + Total Market Value for Hamburgers ___100____ = ____200______Total Market Value for Hot Dogs ___300____ + Total Market Value for Hamburgers ___300____ = ____600______Total Market Value for Hot Dogs ___600____ + Total Market Value for Hamburgers ___600____ = ____1200______Calculating Real GDP (base year 2005)200520062007___1___ per hot dog ___100___ hot dogs = ___100_______1___ per hot dog ___150____ hot dogs = __150_______1___ per hot dog ___200____ hot dogs = __200______2____ per hamburger ___50___ hamburger = _100_____2____ per hamburger ___100__ hamburger = _200_____2____ per hamburger ___150__ hamburger = _300___200520062007Total 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 formulaGDP deflator = Nominal GDP 100 Real GDP200520062007____________/____________ 100 = _____________ ____________/____________ 100 = _________________________/____________ 100 = _____________GDPPrices and QuantitiesYearPrice of Hot DogsQuantity of Hot DogsPrice of HamburgersQuantity of Hamburgers200520062007$1$2$3100150200$2$3$450100150Calculating Nominal GDP200520062007___1_____ per hot dog __100______ hot dogs = __100_____2_____ per hot dog __150______ hot dogs = __300_____3_____ per hot dog __200______ hot dogs = __600____2___ per hamburger __50__ hamburger = __100____3___ per hamburger __100__ hamburger = __300____4___ per hamburger __150__ hamburger = __600__200520062007Total Market Value for Hot Dogs ___100____ + Total Market Value for Hamburgers ___100____ = ____200______Total Market Value for Hot Dogs ___300____ + Total Market Value for Hamburgers ___300____ = ____600______Total Market Value for Hot Dogs ___600____ + Total Market Value for Hamburgers ___600____ = ____1200______Calculating Real GDP (base year 2005)200520062007___1___ per hot dog ___100___ hot dogs = ___100_______1___ per hot dog ___150____ hot dogs = __150_______1___ per hot dog ___200____ hot dogs = __200______2____ per hamburger ___50___ hamburger = _100_____2____ per hamburger ___100__ hamburger = _200_____2____ per hamburger ___150__ hamburger = _300___200520062007Total Market Value for Hot Dogs ___100_______ + Total Market Value for Hamburgers ___100_______ = ____200_______Total Market Value for Hot Dogs ___150_______ + Total Market Value for Hamburgers ___200_______ = ____350_______Total Market Value for Hot Dogs ___200_______ + Total Market Value for Hamburgers ___300_______ = ____500_______Calculate the increase in prices based on the GDP Deflator formulaGDP deflator = Nominal GDP 100 Real GDP200520062007____________/____________ 100 = _____________ ____________/____________ 100 = _________________________/____________ 100 = _____________GDP Prices and QuantitiesYearPrice of Hot DogsQuantity of Hot DogsPrice of HamburgersQuantity of Hamburgers200520062007$1$2$3100150200$2$3$450100150Calculating Nominal GDP200520062007___1_____ per hot dog __100______ hot dogs = __100_____2_____ per hot dog __150______ hot dogs = __300_____3_____ per hot dog __200______ hot dogs = __600____2___ per hamburger __50__ hamburger = __100____3___ per hamburger __100__ hamburger = __300____4___ per hamburger __150__ hamburger = __600__200520062007Total Market Value for Hot Dogs ___100____ + Total Market Value for Hamburgers ___100____ = ____200______Total Market Value for Hot Dogs ___300____ + Total Market Value for Hamburgers ___300____ = ____600______Total Market Value for Hot Dogs ___600____ + Total Market Value for Hamburgers ___600____ = ____1200______Calculating Real GDP (base year 2005)200520062007___1___ per hot dog ___100___ hot dogs = ___100_______1___ per hot dog ___150____ hot dogs = __150_______1___ per hot dog ___200____ hot dogs = __200______2____ per hamburger ___50___ hamburger = _100_____2____ per hamburger ___100__ hamburger = _200_____2____ per hamburger ___150__ hamburger = _300___200520062007Total Market Value for Hot Dogs ___100_______ + Total Market Value for Hamburgers ___100_______ = ____200_______Total Market Value for Hot Dogs ___150_______ + Total Market Value for Hamburgers ___200_______ = ____350_______Total Market Value for Hot Dogs ___200_______ + Total Market Value for Hamburgers ___300_______ = ____500_______Calculate the increase in prices based on the GDP Deflator formulaGDP deflator = Nominal GDP 100 Real GDP200520062007___200_________/____200________ 100 = ____100_________ or ____NA______ %___600_________/____350________ 100 = ___171__________ or ______71_____ %____1200________/___500_________ 100 = ___240__________ or _______140_____%Year 1:Apricots -Broccoli -Carrots -Total GDP -Year 2:Apricots -Broccoli -Carrots -Total GDP -Calculating GDPCalculate the GDP deflator using the following figures: Real GDP 2007 ($13.7 trillion)Nominal GDP 2008 ($14.6 trillion) using the following formula: Nominal GDP X 100 = Real GDP

__14.6 = _______X 100 = _____ 13.71.065 107PRODUCTION AND PRICESYEAR 1YEAR 2GOODSOUTPUTPRICESOUTPUTPRICESAPRICOTS10$5010$55BROCCOLI10$2512$25CARROTS10$259$302. Calculate the nominal GDP for each year, then calculate the GDP deflator for year 2 using year 1 as a base year.

Year 1:Apricots - $500Broccoli - $250Carrots - $250Total GDP - $1000Year 2:Apricots - $550Broccoli - $300Carrots - $270Total GDP - $1120 __1120 = _______X 100 = _____ 10251.09 109Nominal GDP X 100 = Real GDPSection 2 - Business Cycles

Business Cycle - an economy-wide fluctuations in production or economic activity over a period of timeExpansion period of economic growth as measured by GDPPeak When real GDP stops risingContraction economic decline marked by falling real GDPRise in unemploymentTrough bottomed out, economy reaches its lowest point, real GDP stops fallingRecovery A period in a business cycle following a recession, during which the GDP rises

RecessionRecession prolonged economic contractionReal GDP falls for two consecutive quarters (6 straight months)Rise in unemployment, falling profits, bankruptcies, foreclosures, etc.

GDP

DepressionA long and severe recession (8 quarters of declining real GDP)Severely high unemployment and low output

StagflationStagnant and inflation, is a decline in real GDP combined with a rise in price level

Four Main Economic VariablesBusiness Investment investing in physical capital (plants and equipment)Interest Rates and Credit the cost of borrowing, added to the principal investmentConsumer Expectations fears of a weakening economy can cause consumer confidence to fall, cut back on spendingExternal Shocks conditions in society that affect normal economic activityOil spill in the gulf, severe drought, hurricanes, etc.

Section 2 Daily Assignment Questions pgs. 312 316How does businesses investment affect GDP? What happens when firms cut back on investment spending? How does reduced investment affect industries that produce capital goods?What do consumers in the U.S. use credit to purchase; what is the cost of credit? How do high interest rates affect consumption and business investment? How did high interest rates affect the economy in 1980? What happened to unemployment as a result of the recession? How does a fear of a weakened economy affect spending? What effect does reduced spending have on the economy?How was this evident in the spring of 2003? What happens when consumer confidence rises?

Ch. 12 Section 3Calculate 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 = _______ 13.70.0365 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 Section 3 Economic GrowthReal 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 nations standard of living.

GDP and Quality of LifeNations with higher per capita GDP enjoy higher quality of life, such as:Better NutritionComfortable housingLonger life spansBetter educationTelecommunications

Productivity and Economic Growth Productivity the amount of goods and services produced for each unit of labor inputHigh productivity leads to high per capita real GDP = high standard of livingGrowth rate - how rapidly real GDP per person grows in a typical yearU.S. real GDP $3,752 in 1870 and $44,260 in 2006; 1.83% growth rate per year

Improving Productivity and Economic GrowthCapital deepening process of increasing the amount of capital per worker (labor productivity)Increase physical capital and human capital

Saving and Investment - a society can change the amount of capital it has through S&IEvery dollar saved is a dollar made available for investingInvest in capital today will raise future productivity tomorrow (capital deepening)Saving and Investment

Technological ProgressTechnological progress producing more output without using more inputs Technological Knowledge understanding how to make the best use of available resources

Natural resources - inputs provided by nature that are converted into the production of goods and servicesLand, rivers, and mineral depositsU.S. large supply of land and agriculture, Middle East oil suppliesRenewable 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, petroleum, oil, etc. 46Natural Resources

Population and GovernmentPopulation Growth can affect productivity and economic growthEx. India, large population and low productivity, equals low wages and quality of lifeEx. United States, consistent population growth, high capital growth, leads to high quality of lifeGovernment government policies can affect productivity Increased taxes, reduced government spending takes money away from private investing

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 2:Bananas -Backrubs - Total GDP - Year 1:Bananas - $5Backrubs - $30Total GDP - $35Year 3:Bananas -Backrubs - Total GDP - Year 2:Bananas - $10Backrubs - $42Total GDP - $52Year 3:Bananas - $20Backrubs - $54Total GDP - $74VIS Terms Due Tuesday 10 27MacroeconomicsGross Domestic ProductNominal GDPReal GDPExpansionPeakContractionTroughRecessionDepressionStagflation

Binder Check Due Tuesday 10-25Daily Assignment Ch. 12 Sec. 1Video Questions - GoogleDAQs pg. 302Ch. 12 Guided Reading Wksht.Population Growth + GDP Wksht.Section 2 DAQs pgs. 312-316Study Guide Chapter 12C.W. Puzzle Ch. 12VIS Terms Ch. 12

Practice Ch. 12

ConsumptionNo, because that transaction is a purchase of an asset, not a purchase of currently produced capital goods.It means that imports exceed exports.Practice Ch. 12100, 200, 400100, 100, 100

Practice Ch. 12700 (1.00 x 200 = 200) + (10.00 x 50 = 500) = 700700 (1.00 x 200 = 200) + (10.00 x 50 = 500) = 700770 (1.00 x 220 = 220) + (11.00 x 50 = 550) = 770720 (1.00 x 220 = 220) + (10.00 x 50 = 500) = 720100 (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. 12Year 1, because the deflator = 100.Prices rose 20 percent and real output stayed the same.Prices stayed the same and real output rose 25 percent.

Extra CreditThe country of Terrorville produces two goods: footballs and basketballs. The following is a table showing the prices and quantities of output for three years.

Study Guide Ch. 12MacroeconomicsGross Domestic ProductA system of statistics and accounts that keeps track of production, consumption, saving and investment.C spending by consumers I spending by businesses ,G spending by government, NX spending by foreigners, minus importsMarket 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 countrys borders only measures production within a countrys borders.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. 12GDP:Second-hand saleGovernmentInvestmentNonmarket TransactionUnderground EconomyConsumptionNet ExportsIntermediate goods

8. ProductQuantity Price (per 1 unit)Dollar Value ConsumptionNew home salesFast Food SalesPersonal Computers101250$200,000$10,000$1,000_________2,000,000____________________________120,000____________________________50000___________________InvestmentTractorsPlane TicketsBlackberry Phones151045$10,000$90$400__________150,000____________________________900____________________________18,000_________________GovernmentGarbage CollectionNewly Hired AgentsPolice50500100$5,000$60,000$50,000__________250,000__________________________30,000,000__________________________5,000,000________________Net Exports*Figure this amount by taking Exports minus Imports*Total Exports $10,000Total Imports$20,000____10000_______ - ___20000_______=____-10000_______

_________-10000_________________

Total Gross Domestic Product = __________$37,578,900_____________________Study Guide Ch. 12ExpansionPeakContractionTroughRecessionDepressionStagflationPhase of Business Cycle:ContractionPeakTroughExpansion

Contributing FactorsExample of increase in GDPExample of decrease in GDPBusiness InvestmentDuring an expansionary economy, firms invest in capital goods, this will help create output and jobs, increase GDPDuring acontractionary economy, firms invest in capital goods, this will help create output and jobs, increase GDPInterest Rates and CreditIf interest rates are low, people and businesses will be motivated to borrow, consume and investIf interest rates are high, people and businesses will be lose the motivation to borrow, consume and investConsumer ExpectationsThe way that people perceive the economy can influence consumption, if they view it positively they will consume and this will add to GDPThe way that people perceive the economy can influence consumption, if they view it negatively they will consume and this will add to GDPExternal ShocksPositive external shocks such finding a new oil source or if an area experiences a great deal of rainNegative external shocks such as war, hurricanes, droughts etc. can influence ability to consume and investStudy Guide Ch. 1217.18.Prices and QuantitiesYearPrice of OrangesQuantity of OrangesPrice of Video GamesQuantity of Video Games200520062007$1$2$3 50100150$10$15$2051015 Calculating Nominal GDP200520062007$__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___200520062007Total 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____ = $____750____Calculating Real GDP (base year 2005 prices)200520062007$__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___200520062007Total 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 200520062007Nominal GDP___100_____/ Real GDP ____100___ = ____1_____ 100 = ___100___ or ___NA__ % increase in pricesNominal GDP___350_____/ Real GDP ____200___ = ___1.75___ 100 = ____175___ or ___75___ % increase in pricesNominal GDP__750______/ Real GDP ___300___ = ___2.5_____ 100 = ____250___ or __43___ % increase in pricesStudy Guide Ch. 129.3 6.7/6.7 = .39 X100 = 39% $9,300/281 = 33.096 X 1000 = $33096Capital DeepeningThere 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 peoples ability to save their money, vice versaTrade DeficitTechnological

Binder Check Due Thursday 3-31Population Growth and GDP Worksheet All about GDP worksheet Chapter 12 Practice ReviewDaily Tens CW Puzzle Chapter 12 Study Guide Chapter 12 Vocab Terms Notes

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Daily Assignment Questions Chapter 12 Section 1 (pgs. 301 303)What does macroeconomics study? (57)Break down the carefully worded definition of gross domestic product, by explaining each of the following.Dollar valueFinal goods and servicesProduced within a countrys bordersWhat are intermediate products used for?What are the four categories of final goods and services?How does the expenditure approach calculate GDP?Describe the difference between durable and nondurable goods.How does the income approach work?

Prices and QuantitiesYearPrice of MilkQuantity of MilkPrice of HoneyQuantity of Honey200520062007$1$1$2 100200200$2$2$450100100 Calculating Nominal GDP200520062007___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______200520062007Total 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________Calculating Real GDP (base year 2005)200520062007___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______200520062007Total 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_________GDP deflator = Nominal GDP/Real GDP 100 200520062007____200________/____200________ 100 = _____100________ or ____N/A________ % increase_____400_______/____400________ 100 = ____100_________ or ___0_________ % increase___800_________/___400_________ 100 = ___200__________ or ___100_________ % increaseApplication - Calculating GDP ProductQuantity Price (per 1 unit)Dollar Value ConsumptionAutomobilesReplacement TiresShoes

61055$20000$60$50_____________________________________________________________________________________________InvestmentMachineryComputers Cell Phones103045$8000$1500$200__________________________________________________________________________________GovernmentSingle FamilyMultifamilyCommercial351$75,000$300,000$1,000,000___________________________________________________________________________Net Exports*Figure this amount by taking Exports minus Imports*Total Exports $10,000Total Imports$20,000___________ - __________=___________

_________________________

Total Gross Domestic Product = _______________________________Application - Calculating GDP ProductQuantity Price (per 1 unit)Dollar Value ConsumptionAutomobilesReplacement TiresShoes

61055$20000$60$50_________120,000_________________________600______________________2,750__________________InvestmentMachineryComputers Cell Phones103045$8000$1500$200_________80,000___________________________45,000__________________________9,000_________________GovernmentSingle FamilyMultifamilyCommercial351$75,000$300,000$1,000,000_________225,000_________________________1,500,000________________________1,000,000_______________Net Exports*Figure this amount by taking Exports minus Imports*Total Exports $10,000Total Imports$20,000___________ - __________=___________

_________-10,000________________

Total Gross Domestic Product = _________2,972,350______________________

Paper Airplane SimulationWith 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 x 11 piece of paper (8 x 5 ). Next choose a company name. This will be printed on both sides of the planes fuselage. Each member should practice making an airplane before beginning the activity. The Simulation will consist of three shifts, during each shift the groups workers will manufacture airplanes. All workers must cease work immediately after each shift.

Shift 1Materials:1 pair of scissors1 Pencil2 desks10 sheets of paperProcedure: 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 2Materials:1 pair of scissors1 Pen/Pencil2 desks10 sheets of paperProcedure: 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 NameRecord the results.

Shift 3Materials: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 airplanesWhat 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) Paper Airplane Simulation Reflection Questions

activator – chapter 12 * create a chart and predict a figure for each of the following...

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