Economics 51004

1
Economics 5/10/04

• OBJECTIVE Begin analysis of Economic
  Performance
• I. Journal 47 pt. A
• -read the comic on p.343
• -answer the caption question
• II. Homework due Thursday 5/13/04
• -Read Ch13 sec1 p.340-348
• answer questions (1,3-6) p.348
• -Read Ch13 sec2 p.350-354
• answer questions (1,3-6) p.354
• III. Journal 47 pt. B
• -notes on measuring the Nations Output

2
CIG(X-M)GDP

• C consumer spending
• I investment
• G government spending
• X exports
• M imports
• GDP Gross Domestic Product

3
GDP v. GNP

• Gross Domestic Product is the dollar amount of
  all final goods and services produced within a
  countrys national borders in a year.
• Gross National Product is the dollar value of all
  final goods, services, and structures produced
  with labor and property supplied by a countrys
  residents.

4
CPI Unemployment

• Consumer Price Index- a statistical series that
  can be used to measure changes in prices over
  time.
• Unemployment rate- ratio of unemployed
  individuals divided by total persons in the
  civilian workforce, expressed as a percentage.

5
Economics 5/11/04

• OBJECTIVE Examine Price Indexes
• I. Journal 48 pt. A
• -questions on NBR video
• II. Journal 48 pt. B
• -Whose to blame for high gas prices?
• III. Math Practice for Economics
• -worksheet on CPI

6
NBR Questions

• What is the PPI? (producer price index)
• What do economists learn from the CPI and PPI?
• What is the difference between the leading and
  lagging economic indicators?

7
Economics 5/12/04

• OBJECTIVE Examine the multitude of formulas in
  measuring economic performance.
• I. Finish work with CPI
• II. Journal 49 pt. A
• -Look at the chart on p.345 answer the caption
  question.
• III. Journal 49 pt. B
• -a few notes on Keynesianism

8
Did you know?

• The United States has the highest GDP in the
  world. In 2001 it was 9.4 trillion, up from
  9.1 trillion in 2000.
• What does GDP indicate?
• That a nation has experienced growth if the new
  number is higher.

9
GNP- measure of National Income

• GNPGDP (all payments that Americans receive
  from outside the U.S. all payments made to
  foreign owned resources)
• NNP is the Net National Product
• NNP GNP- depreciation
• NI is the national income

10
National Income

• NINNP- all taxes paid by businesses other than
  the corporate profits tax.
• PI is personal income
• PI gross pay (income before taxes)
• DI is Disposable Personal Income (income after
  taxes, net pay)
• Which measure of income would you be interested
  in if you were trying to forecast sales of
  consumer goods?

11
CIG(X-M)GDP

• This is the Output-expenditure model.
• Your book writes it as CIGFGDP
• F is the foreign sector which is (X-M).
  Basically they have already done the math for
  you.

12
What is C and what do they do?

• It is the private sector (household) and all
  households buy stuff.
• TVs, microwaves, cable, telephone service, phone,
  energy, cars, etc
• As you know, household also are the main source
  of investment in the economy
• Households cant buy stuff and save if they dont
  have any money, so they need jobs!!!

13
What is I?

• Investment, and as you know, is responsible for
  capital creation.
• The more capital that is created, the bigger I
  will get.

14
What is G?

• The Government sector, aka the public sector.
• They also buy stuff, but unlike households they
  get their money mainly from income taxes.
• People need to be working, so the government can
  get money to spend.
• Frightening Fact
• The current U.S. Congress is spending 20,000
  per household up from the last Congress that
  spent 16,000 per household.

15
Economics 5/13/04

• OBJECTIVE Examine the effect of inflation on
  economic measures
• I. Journal 50 pt. A
• -Read Business Week Newsclip p.362
• -Answer questions (1-2) p.362
• II. Journal 50 pt. B
• -notes on population
• REMINDER No School Tomorrow!!

16
Current v. Real GDP

• Current GDP- not adjusted for inflation
• Real GDP- adjusted for inflation
• Real GDP GDP in current dollars x 100
• implicit GDP price deflator

17
Why do this?

• It is necessary for making comparisons because it
  reveals if the rise in GDP was truly a rise, or
  if it was caused by inflation.

18
Rate of population growth influences GDP by

• 1.) Factors of production must grow or become
  more productive. (Labor is tied to pop. size)
• 2.) distorting GDP GNP measures per-capita (per
  person)
• 3.) Pop. growth affects quality of life

19
U.S. Census Bureau

• The Constitution requires a census to be taken
  every ten years.
• U.S. Population Growth
• 1790-1860 3.0 per year
• 1860-1900 2.2
• 1900-1940 1.4
• Currently 0.9

20
Other Changes

• Regional Change- beginning in the 1970s
  population in Southern and Western U.S. grew
  faster than the Northern Eastern U.S.
• Population becoming less white.
• Size of U.S. Households
• 1790-1860 5.8 people
• 1960 3.33 people
• Currently 2.60 people

21
Why do economist care about population shifts?
22
(No Transcript)
23
(No Transcript)
24
Growth

• In the short run, GDP Real GDP are
  satisfactory, but doesnt tell the whole story
• Real GDP per capita
• Real GDP Real GDP per capita
• population

25

• If population increases faster than real GDP,
  average output per person falls.
• If population increases slower than real GDP,
  there are more goods services available for
  everyone.

26
(No Transcript)
27
(No Transcript)
28
Importance of Economic Growth

• 1.) raises standard of living (quality of life)
• 2.) eases the burden of govt (tax base)
• 3.) solve domestic problems (low unemployment
  increases wages)
• 4.) boosts the economies of foreign trade partners