HomeworkHomeworkRead chapter 11.Define the following terms.

◦GDP◦Real GDP◦Nominal GDP ◦GDP per capita◦GNP◦Intermediate goods ◦What relationship exists between GDP

and standard of living?

Measuring Measuring Economic Economic PerformancePerformanceChapter 11Economics

Gross Domestic Gross Domestic ProductProductGDP: The total market value of

all final goods and services produced annually in a country.

Real GDPReal GDPReal GDP compares current

prices to a base year. This is a more useful economic indicator than nominal GDP.

Final GoodsFinal GoodsFinal goods are sold to the final user.Intermediate goods are sold to

someone, often a producer, who will use it in the manufacture of a final good.

Intermediate goods are not counted in GDP to avoid double counting.

Government statisticians assume that all products that are produced are sold.

Omitted from Omitted from GDPGDP1. Illegal goods and services2. Transactions of legal goods and

services with no record3. Some nonmarket goods and

services4. Sales of used goods5. Stock transactions and other

financial transactions6. Government transfer payments

GDP v. GNPGDP v. GNPGNP measures the total market

value of final goods and services produced by U.S. citizens no matter where they reside.

GDP measures final goods produced within the borders of the U.S. no matter who produces them.

http://www.fte.org/teacher-resources/economic-barometer/?data=2-4

GDP & Standard of GDP & Standard of LivingLivingHigh GDP per capita is usually

associated with a high standard of living.

http://www.fte.org/teacher-resources/economic-barometer/?data=4-4

GDP FormulaGDP FormulaC = consumption (household

spending)I = investment (business

spending)G = government purchases (3

levels of gov.)EX = export spending IM = import spending

GDP = C + I + G + (EX – IM)

Can GDP be used to predict standard of Can GDP be used to predict standard of living?living?*Use CIA World Fact Book *Use CIA World Fact Book

Country GDP GDP per

Capita

Life expectan

cy

Literacy rate

Infant Mortality Rate

Fertility Rate

1 U.S.A. 48,100 78.49 99% 5.98 2.06

2 Somalia

3 Mexico 15100 76.66 86.1% 16.77 2.27

4 Canada

5 Madagascar

6 Great Britain

7 Qatar 102,700 78.09 89% 6.81 1.93

8 Norway 53,300 80.32 100% 3.5 1.77

9 Chad 1,900 48.69 25.7% 93.61 4.93

10

https://www.cia.gov/library/publications/the-world-factbook/

GapminderGapminder

CPICPICPI – Consumer Price Index

◦Used to compute the average price level or inflation

◦Calculated by the U.S. Bureau of Labor Statistics

http://www.fte.org/teacher-resources/economic-barometer/?data=7-12

Inflation CalculatorInflation Calculator

http://www.fte.org/teacher-resources/economic-barometer/?data=8-12

http://www.bls.gov/data/inflation_calculator.htm

UnemploymeUnemploymentnt The U.S. population is divided in

to 2 groups: 1. noninstitutionalized adult civilian

population & the other group consists of people under 16, people in the military.

2. those in a mental or correctional facility.

UnemploymentUnemployment Noninstitutionalized adult

population consists of 2 groups.1. Not in the labor force2. Civilian labor force

Civilian labor force consists of 2 groups:

1. Unemployed persons2. Employed persons

UnemploymentUnemploymentThe unemployment rate is the

percentage of the civilian labor force that is unemployed.

Unemployment rate = unemployed persons/civilian labor force

Current Unemployment Current Unemployment RateRateOctober 7.9% Adult men: 7.3% Adult women: 7.2% Teenagers: 23.7% Whites: 7% Blacks: 14.3% Hispanics: 10% Less than a high school diploma: 12.2% High school graduates: 8.4% Some college or associates degree: 6.9% Bachelor degree: 3.8%

http://www.bls.gov/news.release/empsit.a.htm

Unemployment by StateUnemployment by Statehttp://www.bls.gov/web/laus/laumstrk.htm

Supply & Demand in the Supply & Demand in the EconomyEconomySee example of aggregate supply

& demand curve on p. 305.

Aggregate Demand Aggregate Demand Aggregate demand curve:

Shows the quantity of goods and services that buyers are willing and able to buy at different prices.

Aggregate Supply Aggregate Supply Aggregate supply curve:

Shows the quantity of goods and services that producers are willing and able to supply at different price levels.

Aggregate Supply & Aggregate Aggregate Supply & Aggregate Demand Demand

Term Student Definition

Showing Sentence

Inflation

Deflation

Consumer Price Index

Gross domestic product

Real GDP

Nominal GDP

GDP per capita