Transcript Chapter 10 Economic Performance

CHAPTER 10
Economic Performance
SECTION 1: Gross Domestic Product
SECTION 2: Business Cycles
SECTION 3: Economic Growth
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SECTION 1
Gross Domestic Product
Objectives:
 How do economists calculate gross domestic
product?
 What are some of the limitations of gross
domestic product?
 What other statistics do economists use to
measure the economy?
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SECTION 1
Gross Domestic Product
Output expenditure model:
 used to calculate gross domestic product
 sum of the output produced by personal
consumption expenditures (C), gross
investment (I), government purchases of
goods and services (G), and net export of
goods and services (X-M)
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SECTION 1
Gross Domestic Product
Limitations of gross domestic
product:
 initial figures often inaccurate
 does not include nonmarket activities or the
underground economy
 does not accurately measure a nation’s wellbeing
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SECTION 1
Gross Domestic Product
Other statistics economists use to
measure the economy:
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gross national product
net national product
national income
personal income
disposable personal income
SECTION 2
Business Cycles
Objectives:
 What are the four phases of the business
cycle?
 What factors influence the business cycle?
 What are the three leading indicators used to
determine the current phase of the business
cycle and predict where the economy is
headed?
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SECTION 2
Business Cycles
The four phases of the business cycle:
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expansion
peak
contraction or recession
trough
SECTION 2
Business Cycles
Factors that influence the business
cycle:
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levels of business investment
availability of money and credit
public expectations about the future
changes in the world’s economy or political
climate
SECTION 2
Business Cycles
Predicting the business cycle:
 leading indicators—anticipate the direction
of the economy
 coincident indicators—tell economists that
the economy has shifted
 lagging indicators—help economists predict
the duration of economic upturns and slumps
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SECTION 3
Economic Growth
Objectives:
 Why is economic growth important?
 What are the requirements of economic
growth?
 What is the relationship between economic
growth and productivity?
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SECTION 3
Economic Growth
Importance of economic growth:
 to maintain a high standard of living
 to compete effectively in the global
marketplace
 to provide the resources to deal with
domestic problems
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SECTION 3
Economic Growth
Requirements of economic growth:
Increasing
 natural resources
 human resources
 capital resources
 entrepreneurship
 productivity levels
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SECTION 3
Economic Growth
Relationship between economic
growth and productivity:
 Economic growth requires either more
inputs or an increase in the productivity of
these inputs.
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CHAPTER 10
Wrap-Up
1. Explain the difference between nominal GDP and
real GDP. Why is real GDP a better measure to use
when examining changes in GDP over time?
2. Explain the difference between personal income
and disposable income.
3. Identify and explain the four phases of the business
cycle.
4. How are economic growth and productivity
related?
5. Why is real GDP per capita used to measure
economic growth?
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