Upload File

how the u.s. economy works

19
Circular Flow & GDP How the U.S. Economy works Economics

Upload: delilah-conley

Post on 18-Jan-2018

239 views

Category:

Documents


0 download

Report

DESCRIPTION

What is an Economy? The way goods, services & money flow through an economic system The Circular Flow describes how goods, services & money flow through a market economy

TRANSCRIPT

Page 1: How the U.S. Economy works

Circular Flow & GDP

How the U.S. Economy works

Economics

Page 2: How the U.S. Economy works

What is an Economy?

• The way goods, services & money flow through an economic system

The Circular Flow describes how goods, services & money flow through a market economy

Page 3: How the U.S. Economy works

2 Sides of a Market Economy

• Consumers decide what to BUY!– Demand side of economy

• Producers decide what to SELL (MAKE)– Supply side of economy

Page 4: How the U.S. Economy works

4 Factors of Production• Resources used to make goods & services1) Land- all basic natural resources2) Labor- human work/labor3) Physical Capital- previously produced goods4) Human Capital education, skills, etc…

To open a coffee shop:

Land = Beans & Rent store

Labor = worker Physical Capital =Coffee Machine

Human Capital = Skills of workers & owner of store

Page 5: How the U.S. Economy works

where any good or service is sold

Product & Factor Markets

Product Market:

Factor Market: where factors of production are exchanged

Consumers use product market

Producers use factor market

Page 6: How the U.S. Economy works

PRODUCERS CONSUMERS

Factors ofProduction

ProductMarket

CIRCULAR FLOW CIRCULAR FLOW of a Market Economyof a Market Economy

Supply

DemandSupply

Demand

(Land, Labor & Physical CapitalHuman Capital)

Money-$Money-$

Money-$Money-$

Circular Flow

Page 7: How the U.S. Economy works

Circular Flow Worksheet

Page 8: How the U.S. Economy works

Circular Flow

Price of Oil

$95 => $150

Affect onCircular Flow?

Circular Flow CONSUMERS

Factors ofProduction

Products

SupplySupply

DemandDemand

SupplySupply

Demand

Demand

(Land, Labor & Capital)

Money-$

Money-$Money-$

Money-$

Money-$

Money-$Money-$Money-$

PRODUCERS

Jobs are createdas Circular Flow ↑

Page 9: How the U.S. Economy works

Gross Domestic Product

Measuring Economic Growth

Page 10: How the U.S. Economy works

Measuring the Circular Flow• The total dollar value of economic output of the

circular flow is called Gross Domestic Product (GDP)

• The U.S. attempts to maximize GDP– Higher GDP growth leads to job creation

Circular FlowPRODUCERS CONSUMERS

Factors ofProduction

Products

Land, Labor & Capital

Jobs are createdAs GDP ↑

Page 11: How the U.S. Economy works

GDP growth: what is too high?

• The economy has an upper and lower “speed limit” of growth

• Too fast: If GDP grows above 5.0% per year, the economy may experience inflation– Prices rise

• Too slow: If GDP grows below 2%, not enough jobs are created– Unemployment rate increases

Page 12: How the U.S. Economy works

2012 = + 2.2%

2013 = + 1.5%2014 = + 2.4%

2015 = + 2.1%

GDP growth too slow to create enough jobs!

Page 13: How the U.S. Economy works

GDP = C + I + G + (X-M)

How GDP is calculated

Circular Flow CONSUMERS

Factors ofProduction

Products

SupplySupply

DemandDemand

SupplySupply

Demand

Demand

(Land, Labor & Capital)

Money-$

Money-$Money-$

Money-$

Money-$

Money-$Money-$Money-$

Page 14: How the U.S. Economy works

What goods count in GDP?

• Dollar Value of all FINAL new goods & services produced in USA over one year– Imports do not count– Used goods do not count

• Must avoid “double counting” in GDPExample: Steel used in automobiles

Count value of the entire car (final good)—not the parts

Page 15: How the U.S. Economy works

GDP = C + I + G + (X-M)

Circular Flow & GDP Review

Circular FlowPRODUCERS CONSUMERS

Factors ofProduction

Products

SupplySupply

DemandDemand

SupplySupply

Demand

Demand

(Land, Labor & Capital)

Money-$

Money-$Money-$

Money-$

Money-$

Money-$Money-$Money-$

Page 16: How the U.S. Economy works

Slow GDP Growth U.S. Economy in 2015

Factors Causing Slow Growth?

Recessions in EuropeSlow Growth in ChinaCollapsing Oil Prices => USA layoffsUnderemployment of Human Capital Declining Labor Force Participation

GDP = C + I + G + (X-M)

Page 17: How the U.S. Economy works

GDP Worksheet

• Circular Flow

Page 18: How the U.S. Economy works

GDP does NOT Measure:

• Leisure time– Vacation Days: Europe get many more than U.S. workers

• Hours Worked:– Work 80 hours vs. 40 hrs per week => GDP goes up

• What you produce– Guns vs. butter: all products count the same!

Page 19: How the U.S. Economy works

U.S. GDP in Comparison

• U.S. 15.6 Trillion

• Entire World: 65.0 Trillion• China 5.8 Trillion• Japan 5.6 Trillion• Germany 3.3 Trillion

24% of World GDP


Economix - how our economy works?

The Changing U.S. Economy

2016 State of the U.S. Economy

Chair of Economy Committee works alongside apprentices

U.S. Chamber Works Council Report (1)

Mozambique: Politics, Economy, and U.S. Relations

Towards an Economy which Works for Women

The U.S. and the Global Economy

Market Review and 2020 Outlook€¦ · Market Review and 2020 Outlook. U.S. Economy. U.S. economy overview U.S. Economy 3 ... from Atlanta Fed The unemployment rate for December was

Building an Economy That Works For All Us

McKinsey An economy that works: job creation

U.S. Economy

The U.S. in 2008: The Election and the Economy I. Demographic data II. U.S. political process III. 2008 election IV. State of U.S. economy

An Economy That Works

Marine Economy Satellite Account, 2014-2019 · 2021. 6. 9. · Growth in Marine Economy Compared with . Growth in the U.S. Economy, 2019. Marine Economy. U.S. Economy. U.S. Bureau

The U.S. Economy

The Economy and How It Works

Whither the U.S. and Massachusetts Economy?

Circular Flow & Business Cycle How the U.S. Economy works AP Macroeconomics

The U.S. Economy & Small Business Credit

The U.S. Economy in Charts

U.s. resources and economy

Outlook for the U.S. Economy

Review of U.S. Economy

Module 6 - Growth of U.S. Economy

The Outlook for the U.S. Economy

Immigration and the U.S. Economy

Global Political Economy: How The World Works?

U.S. changed from an agricultural (farming) economy to an industrial economy

Political Economy of U.S. Militarism_1403972850

Contributions of the U.S. Honey Industry to the U.S. Economy

THE TRANSATLANTIC ECONOMY 2020 - U.S. Chamber

2.04 U.S. Economy - robeson.k12.nc.us€¦ · United States’ Economy Summary Largest national economy in the world A mixed economy Corporations the U.S. have and other private firms

Circular Flow Describes How a Market Economy Works

John Marshall and the U.S. economy