Transcript Measuring the Nation`s Output and Income 1

Tuesday, 6/09/15, Day 6
Do you know where your assigned textbooks are?
*United States Government: Democracy in Action
$89.00
*Economics: Principles and Practices
$118.00
1-“Measuring the Nation’s Output and Income”
2- “Business Cycles and Fluctuations”
3- “Bring your “FINAL” study materials to class this Friday”
Measuring the Nation’s Output and Income
1-What is “macroeconomics”?
The branch of economics that deals with the
economy as a whole, using aggregate measures of
output; income; prices and employment.
2-What is gross domestic product?
The most comprehensive measure of national
output.
Multiply all of the final goods and services
produced in a 12 month period by their prices
and then add them to get the total dollar value.
All final goods and services that are sold in a year
Gross Domestic Product
The total dollar value of all final goods and
services produced within a country’s borders
in a given year.
https://www.stlouisfed.org/education/economic-lowdown-video-series/episode-7gross-domestic-product
3-What things may be excluded from GDP? In each
case, give a brief explanation why.
a-Intermediate products, or goods that are used to make
other products that are counted in GDP: tires on a new
car; paper used to make a newspaper [replacement tires
are counted in GDP.
Flour and sugar used at home to bake are counted; those
used in a bakery to make a baked good for sale are not.
b-Second hand sales [used goods…only original sale is
counted in GDP.
c-Nonmarket transactions: when you mow your lawn or
do household repairs: only count when done for pay
outside the home.
d-Underground economy: drugs, gambling; flea
markets; garage sales [difficult to trace]
4-What are the limitations of GDP?
1-tells us nothing about the composition of the output,
or what is being produced
2-Impact of production on quality of life: environment,
health
3-Some GDP is produced to control activities that give us
little utility or satisfaction: money spent to fight crime
5-List the five measures of national income.
a. Gross National Product: The dollar value of all final goods and
services produced in one year with labor and property owned by a
country’s residents.
b. Net National Product: GNP less depreciation charges for wear
and tear on capital equipment.
c. National income: Income that is left after all taxes are
subtracted from the Net National Product.
d. Personal Income: Total amount of income going to the
consumer sector before income taxes are paid.
e. Disposable Personal Income: Personal income less income
taxes.
6-What are the four sectors of the economy? Explain
each one briefly.
a. Consumer sector: Households
b. Investment sector: Businesses
c. Government sector: Local. state and federal
d. Foreign sector: All consumers and producers outside
the United States
7-What is the output-expenditure model?
Shows how GDP is equal to the sum of aggregate
demand by the consumer, investor, government and
foreign sectors.
GDP= C + I + G + [X-M]
How GDP is calculated:
GDP=
Consumer purchases + Investments by businesses +
Government purchases + [Exports – Imports]