Transcript Ch. 11.1 Gross Domestic Product

• Learning Objective
–Today I will be able to compare the
GDPs and CPIs of different countries
by calculating the GDP & CPI across
the world by searching online.
• Agenda:
1.
2.
3.
4.
5.
Learning Objective
Lecture: Ch. 11.1 Gross Domestic Product
CPI-GDP Worksheet
Vocabulary Ch. 11 OR Ch. 18
No Exit Slip
Title Notes: Ch. 11.1 Gross Domestic Product
• Economy
– Structure of economic activity in a region, a country,
group of countries, or the world.
• GDP (Gross Domestic Product)
– Measures the market values of all FINAL goods &
services produced w/ in an economy.
– Within a given period!
– GDP/Economy by region:
• Ex. U.S. economy, European economy, LA economy, OR World
Economy
• Double-counting
– ONLY the final sale of the good/service is accounted for.
– OR the added value is accounted for
.05 Cents per
LB.
.50 Cents per
LB.
$5 per Pizza
Manufacturer
sells it retail
store for $120
Ikea sells desk
to you for $200
Log/Tree
Milling company sells to
manufacturer for $50
Sold to milling
company for
$20
Wood/Lumber
If you add up each value in which the wood/desk was sold
to create it into a desk, total $390.
BUT, that is double-counting!!!!
$20 + $50 + $120 + $200 = $390
The actual value is $200, because that is the FINAL/added
value.
• National Incomes Accounts:
– Organizes data collected about economy
– Tracks final goods (and services)
– By the federal government
– Variety of sources
• Two approaches to calculate GDP:
1. Expenditure approach Aggregate Expenditure
2. Income approach Aggregate Income
Aggregate Expenditure= GDP = Aggregate Income
-how is spent should match how much income is made.
• GDP = Aggregate
Expenditure
C + I + G + (X – M)= GDP
– Consumption:
• purchase of final
goods/services.
• Nondurable & durable
goods.
– Investment:
• spending on capital goods
& inventories. Not used
goods.
• Ex. New computers
(inventory), but not used
computers sold.
– Government purchases:
• Public goods & services
– Net Exports (X-M):
• X= Exports total value
• M= Imports total value
• Subtract imports from
exports.
– Transfer payment
(EBT/unemployment),
stocks, bonds, & used
items not included in
GDP.
• Government spending accounts for 20% of US GDP.
– Public Spending—what gov. buys for the public: clearing
snowy roads, new books for library, etc.
– Expenditure: (EBT, Medicare, etc.) money provided in
GDP, NOT what is spent by those who receive gov. aid.
GDP: How Does it Work?
• Read each situation.
• Based on the situation, decide if product
would be accounted for in GDP.
• Explain why or why not.
No Exit Slip