- Slides: 25
Gross Domestic Product GDP
Gross Domestic Product �GDP = the total market value of all final goods and services produced in a country in a year. Measurement �The expenditure approach everything bought in the country. �Real GDP = adjusted for inflation
Y = C+ I+ G+ XM National GDP Is composed of Consumption by households Investment purchases of business and households Government Spending Total Exports minus Total Imports
Not Counted �Raw materials �Intermediate goods �Car parts, etc �Anything for resale �Purchase of stocks and bonds (transfer of money nothing is bought) �Money put in savings �Leisure activities �reading, listening to music, etc. �Household activities: �cleaning, cooking, mowing lawn, etc.
Not included �Retirement �Days off �Vacations �Child care �Housework �Gardening �DIY
Economic Growth �Economic growth = �Rise in real GDP = economic growth �Decline in real GDP = contraction �Decline for 2 quarters = recession �Decline for longer than 2 quarters = depression
Aggregate Supply �Aggregate = Total �Aggregate Supply = total supply for everything �Short run = aggregate supply curve (SRAS) �positive slope �Shows direct relationship between price level and real GDP. �Long run = �prices completely flexible �Full employment �supply curve (LRAS) is vertical
Aggregate Demand �Aggregate Demand = �Everything bought in the country �GDP �negative-sloping �shows inverse relationship of price level and real GDP.
The Business Cycle The national economy goes up and down like a roller coaster over time Real GDP Inflationary Gap Recessionary Gap Peak Real GDP Trough Full Employment Recession (Contraction) Recovery (Expansion) Time A recession is 6 month period of decline in Real GDP. (If really bad…then depression) Copyright ACDC Leadership 2018 10
Recession �Contraction for 2 consecutive quarters �unemployment rises �Begins at peak �Ends at the trough �Depression = severe recession
Depression �severe recession �Has large unemployment, �acute shortages �excess capacity in manufacturing.
The Cycles �If there is a contraction �Expansion follows �If there is a Recession �Recovery follows Boom = �period of prosperity �New cycle expands further than previous peak
Expansion �production increases �resources are being utilized. �GDP increases, �unemployment decreases �inflationary pressure rises.
Question #1 � In the formula, C + I + G + Nx, what does the C stand for? �Consumption
Question #2 � What do we call the total market value of all goods and services produced in a year? �GDP
Question #3 �Real GDP is adjusted for what? �Inflation
Question #4 �In the formula, C + I + G + Nx, what does the G stand for? �Government Spending
Question #5 � A period of economic decline (1 Quarter or less) is called? �Contraction
Question #6 �What is the lowest point of the business cycle? �Trough
Question #7 � In the formula, C + I + G + Nx, what does the I stand for? � Investment Spending
Question #8 � A period of economic growth following a contraction is called? �Expansion
Question #9 �The highest point of the business cycle is called? �Peak
Question #10 �What do we call a severe recession? �Depression
Summarizer What I thought you taught: �Students will brainstorm 4 -6 new vocabulary from today’s lesson and write them in a list. �The students will write a paragraph of 5 -7 sentences explaining each of the new vocabulary and how they relate to each other.