Agenda- 12/2

1. Turn in 8.1 Labor WS, Tucker Questions, and Guided reading WS (yellow)

2. Current Events

3. Review Taxes and GDP

4. Unit 3 Quiz

5. Stock Market Game

6. HW: Community Service Fri., 12/12

Warm-up

List the last five times you paid a tax to the government in the past week.

Measuring the Nation’s Output & Income

Ch. 12, Sec. 1

GROSS DOMESTIC PRODUCT (GDP)

The total dollar value of all final goods and services produced by resources located in the United States (regardless of who owns them) during one year’s time.

The single most important measurement of the economy’s overall performance.

COMPUTING GDP

Conceptually, you simply multiply all the final goods & services produced in a year by their prices.

(skip a line after each of the following) Goods Services Structures

CONSUMER GOODS

Goods Products purchased for final consumption

Services Items consumed instantaneously

Structures (Investment Goods) Single Family Multifamily Commercial

THINGS THAT ARE EXCLUDED FROM GDP

Intermediate Products –pieces of an item i.e. a bottle-label-cap-juice-box, etc.

Non-market Transactions –items that are not paid for such as barter or unpaid household duties.

Secondhand Sales -items that have already been counted.

Transfer Payments – when money is simply transferred back & forth between the Govt. & individuals & businesses.

Financial Transactions – Stock market / investments

COMPOSITION OF GDP

Consumer Goods (C) - items made for final consumption

Investment Goods (I) -increase in productive (physical) capital

The Government Sector (G) -purchases by government

Foreign Sector (NX) – exports minus imports

GDP (cont.)

GDP = Personal Consumption + Investments + Government Purchases + Foreign Transactions

GDP = C + I + G + NX NX = Net Exports (Exports – Imports)

Generally a negative #

“C” (Consumers)

The Consumer Sector or households account for nearly 2/3 of the economy.

The Consumer Sector receives its income from disposal personal income (after taxes).

GDP

Which of the following are included and which are excluded in calculating this year’s GDP?

- Discuss with your partner, and be prepared to show your decisions on your whiteboard. - If YES, tell me which Sector. If NO, tell

me why.

WHITEBOARDS!!! 1 board & dry erase pen per pair!

GDP?

A monthly check received by an economics student who has been granted a government scholarship that does not need to be paid back. (PELL Grant)

Answer

No, transfer payment

GDP?

A farmer’s purchase of a new tractor.

Answer

Yes, investment

GDP?

A plumber’s purchase of a used truck.

Answer

No, used good

GDP?

The cashing of a U.S. government bond.

Answer

No, transfer payment / financial transaction

GDP?

The services of a mechanic in fixing the radiator on his car.

Answer

No, not a market activity

GDP?

A Social Security check paid by the government to a retired store clerk.

Answer

No, transfer payment

GDP?

An increase in business inventories.

Answer

Yes, investment

GDP?

The government’s purchase of a new submarine for the Navy.

Answer

Yes, government expenditure

GDP?

A barber’s income from cutting other’s hair.

Answer

Yes, a consumer service

GDP?

Income received from the sale of Nike stock.

Answer

No, purely financial transaction

THE FIVE INCOME MEASURERS (Chart p. 325 of the “flow”){ This is INCOME measure, not PRODUCTION }

Gross National Product (GNP) – dollar value produced by US citizens & corporations

Net National Product (NNP) – which is GNP less depreciation

Depreciation represents the capital equipment that has worn out or become obsolete over the year.

THE FIVE INCOME MEASURERS (cont.) National Income (NI) –income left over after

all taxes have been taken out of the corporations.

Personal Income (PI) –the total amount of the nation’s income going to consumers before individual income taxes are subtracted.

THE FIVE INCOME MEASURERS (cont.) Disposal Personal Income (DPI) –

the total income the consumer sector has at its disposal after personal income taxes.

Disposable Income is the amount of money that consumers have to spend.