Economics 12Ms. Park

Nicole Justin

Next Presenters

GDP = Consumption + Gross Investment + Government Purchases + Net Exports

Gross Investment = Net investment + depreciation

GNP = GDP – net investment income to the rest of the world

NDI = GDP – indirect taxes - depreciation - allowances - statistical discrepancy

Text book #2

PI = NDI + Government transfer payments + Other payments to persons – earnings not paid out to persons – net investment income

DI = Household incomes – Personal taxes and other personal transfers to the government

Household Incomes = Personal Income (PI)

Textbook #2 Cont.

Each of the following cases applies to a country whose per capita real GDP has been rising at 1% per year.

PER CAPITA REAL GDP IS RISING. Explain whether GDP overstates or

understates the change in LIVING STANDARDS

Textbook #6

Q1: The average amount of leisure time for workers have decreased

5. Leisure: With increased leisure, GDP understates economic well-being

Textbook #2

Q2: The relative importance of nonmarket sector has decreased

1. Excluded activities: GDP does not include some types of productive activities. This can understate economic activity and living standards.

a) Non-market activities: homework, unpaid childcare

b) Underground activities: smuggling, under-the-table money

Textbook #6:Limitations of GDP

Assignment from last class: Textbook #1

Redo: Assignment #3: Textbook #5, Handout #3 &4 (I will only remark assignments that received

lower than 20/25)Assignment #5: Textbook #2 &6

Hand-in Original Assignment with the New Assignment

Tasks to do:

- If you get over 90% on your bonus assignment, I will add 2% to your test score

- Come get your bonus assignment, only after you have re-submitted your assignments

- Must be handed in before the bell

Bonus Assignment