Transcript Economic Forecasting

What you should learn today:
• Define recession
• Be able to express the entire GDP equation,
and what each component stands for
• Identify a final good
• Identify an intermediate good
• Identify inflation
World Debt as of Dec 2, 2015
DECEMBER 2, 2015
How U.S.Government Gets & Receives Money
Circular Flow of Money
EXPANSION AND CONTRACTION: THE BUSINESS
CYCLE
A recession is a recurring
period of decline in




total output,
income,
employment,
trade,
Usually lasting from six months
to a year, and marked by
widespread contractions in
many sectors of the
economy.
Expansions can range in
duration from several
months to several years.
THE U.S. RECESSIONS SINCE 1981
Length of Recessions in the U.S. since 1981
20
18
16
14
12
10
8
6
4
2
0
7/81-11/82
7/90-3/91
3/01-11/01
12/07-6/09
Double Dip Recession
Recession + recovery + recession
Slowdown in demand for goods & service
Layoffs & spending cutbacks
9.7 9.6
2010
9
2009
6
2008
2007
4.7
2006
5.4
2005
5.8
2004
6.1
2003
4.5
2002
4.9
2001
4.2
2000
1999
4
1998
5.3
1997
5.6
1996
5.6
1995
6.2
1994
6.8
1993
7.5
1992
7
1991
1990
5.5
1989
5
1988
6
1987
7.2
1986
7.6
1985
7
1984
1983
1982
1981
10
9.3
9.6
8
7.5
6.9
5.5
5.8
5.1
4.6 4.6
4
3
2
1
0
GROSS DOMESTIC PRODUCT
• The market value of all final goods &
services produced within a country in a
given period of time
GROSS DOMESTIC PRODUCT
GDP = C + G + I + NX
C - Consumption
G – Government Spending
I – Investments
NX – Net Exports = exports - imports
Consumption
- Durable goods
•
(jewelry, laptop, baseball glove)
- Nondurable goods
•
(food, gasoline, clothing)
- Services
•
(medical expenses, mechanic,
landscaper)
Government Spending
- Defense
- Postal Service
- Roads
- Schools
- Doesn’t include social security or
unemployment benefits
Investments
• Residential
• Single-family homes
• Multi-family homes
• Rental Property
• Non-Residential
• Equipment (machines and tools)
• Business Plants
• Business Inventories
Net Exports
• Exports – Imports = NX
• Ship $128,000 worth of corn to
Columbia
• Receive $115,000 worth of coffee
beans from Columbia
• Net Exports?
Transfer Payments
$54
Interest Income
$150
Depreciation
$36
Wages
$67
Gross Private Investment
$124
Business Profits
$200
Indirect Business Taxes
$74
Rental Income
$75
Exports
Net Foreign Factor Income
Government Purchases
Household Consumption
Imports
GDP
•
•
•
•
•
Gross Private Investment$124
Government Purchases$156
Household Consumption$304
Exports- $118
Imports- $95
$118
$12
124+156+304+(118-95)=?
$156
$304
$95
GDP=$606
GROSS DOMESTIC PRODUCT
Final Goods
•Intended for the
end user
Intermediate Goods
•Components of
ingredients in the
production of other
goods
Tangible goods
•DVDs, mountain
bikes, soda
Intangible goods
•Dry cleaning,
concerts, cell
phone service
FINAL V. INTERMEDIATE GOODS
Final Goods and
Services
 Manicures
 Bread
 Cruise missile
 New factory
 Dresses
 Increase in
automobile inventory
Intermediate Goods
 Window glass in new
automobiles
 Lumber in a new house
 Screws used in a cruise
missile
 Flour for making bread
 Cloth for making dresses
GDP GOODS & SERVICES AT
FINAL DESTINATION
Who buys haircuts, bread & dresses?
Who buys cruise missiles?
Who buys a new factory or builds up an inventory of
unsold products such as automobiles?
Households, Government Businesses
families,
individuals
UNITED STATES GDP BY SECTOR
UNITED STATES TOP TRADING PARTNERS
ARUBA TRADING PARTNERS