WarmUp What are some measures you might use

Warm-Up What are some measures you might use to evaluate the health of the economy?

Circular Flow Model and Gross Domestic Product Chapter 23: Tracking the Macroeconomy (pages 590 -603)

Coupon Redemption Index Weaker economies = more coupon usage

Hemline Index Hemlines move with stock prices

Men’s Underwear Index Sales drop with bad economy

Goods and Services Consumer Spending Circular Flow Wages, Rent, Dividends Factors of Production

Circular Flow Diagram

More Complex Circular Flow…

Gross Domestic Product (GDP) Value of FINAL goods & services • Final = used by end users (laptop) • Intermediate = used to make final (steel to make cars) GDP = C + I + G + (X – M)

Calculating GDP = C + I + G + (X-M) • C Consumers • I Investment • G Government • X-M Net Exports

Check for Understanding Is This Counted as Part of GDP? GDP: Is It Counted and Where?

Does an increase in GDP mean a growing economy?

Real vs. Nominal GDP Nominal Value in today’s $$ Real Value compared to base Year Tons of Corn $ per Tons of Soybeans $ per Ton Nominal GDP Real GDP 2012 100 $100 80 $50 $14, 000 2013 110 $110 80 $100 $20, 100 $15, 000 2014 90 $120 80 $110 $19, 600 $13, 000

Real vs. Nominal GDP Find nominal and real GDP Year Widgets Price Gizmos Price Thingamagigs Price 2013 1 $100 8 $10 4 $5 2014 1 $100 10 $11 5 $4 Year 2013 2014 Nominal GDP $200 $230 Real GDP $200 $225

Drawbacks to GDP? Some good activities hurt GDP • Volunteerism • Leisure • Work around the house GDP doesn’t always = happiness • Putting bars on windows for safety • Cleaning up from hurricanes • Buying tax prep software