macro gdp
TRANSCRIPT
BellRinger on your white board
1. Who do you think the richest person on your street is?
2. How do you know?
3. Predict the country that has the world’s largest economy.
We will take some notes today
• Microeconomics – study of individuals and the economy
• Macroeconomics – study of large organizations and countries and the economy
• Finance – study of investment and credit
Finished with Microeconomics
Comparing classes?• On your white boards, what 3 ways could I
compare the economies of my 5 economics classes?
Gross Domestic Product
• A measure of a country’s economy in a given time (usually a year or quarter)
2007 Top 10 World Economies
How do we calculate GDP?
Parts of GDP
• Write something new you bought last week
• All consumer spending on new items within a country in a certain year, month or quarter
• All investment within a country in a certain year, month or quarter
• IOW: business spending $$ on capital goods
• Interest rates?
Parts of GDP
Parts of GDP• All government
spending in a country in a certain year, month or quarter
• Examples: education, military, roads, healthcare, etc
Parts of GDP
• All net exports from a country in a certain year, month or quarter
• Exports = goods shipped to other countries
• Imports = goods brought into a country from another country
• USA? Mexico?
Net Exporters
• A country or territory whose value of exported goods is higher than its value of imported goods over a given period of time.
• A net exporter is the opposite of a net importer.
Net Importers
GDP Calculation
Y = C + I + G + E
where
Y = GDP
C = Consumer Spending
I = Investment
E = Exports - Imports
G = Government Spending
United States GDP 2003
Y = C + I + E + G
$$ in Billions
Consumer Spending = $7605
Investment = $1606
Exports = $1021
Imports = $1508
Government Spending = $2017$7605 + 1606 + (1021-1508) + 2017 = $10,741 (2003)
GDP
• What economic activity did I leave out?
• 2 ways GDP might be misleading?
GDP = C + I + G + (Ex – Im)Assuming everything else stays equal, what happens if…
US consumers spend 5% more in 2013, than 2012 for the Winter Holidays.
GDP = C + I + G + (Ex – Im)Assuming everything else stays equal, what happens if…
US government passes $800 billion healthcare reform bill
GDP = C + I + G + (Ex – Im)Assuming everything else stays equal, what happens if…
US Students learn about the benefits of saving money
GDP = C + I + G + (Ex – Im)Assuming everything else stays equal, what happens if…
Bank business lending increases by 7% in 2013
GDP = C + I + G + (Ex – Im)Assuming everything else stays equal, what happens if…
Mexican citizens demand 15 % fewer US made cars
GDP = C + I + G + (Ex – Im)Assuming everything else stays equal, what happens if…
The internet is created
GDP = C + I + G + (Ex – Im)Assuming everything else stays equal, what happens if…
Americans demand 50% more Mexican baked goods
GDP = C + I + G + (Ex – Im)Assuming everything else stays equal, what happens if…
NBA plays a game in China, afterwards Chinese people demand more US made basketballs
GDP = C + I + G + (Ex – Im)Assuming everything else stays equal, what happens if…
US Government cuts
income tax rates by 2 %
GDP = C + I + G + (Ex – Im)Assuming everything else stays equal, what happens if…
World Demand for American timber increases
GDP = C + I + G + (Ex – Im)Assuming everything else stays equal, what happens if…
US military invades Iran
Calculate the GDP for Portugal in 2008. (in millions)
Consumers spent: $90,000
Investment: $40,000
Exported $50,000
Imports $90,000
Government: $10,000Portugal: 10 million peopleCurrency: Euro
Portugal
The Business Cycle
• Changes in GDP over time
recovery
prosperity
Recession• 6 + months of negative GDP growth
• 6+ months of positive GDP growth
Prosperity
GDP Assignment1. Which part of the GDP formula is the largest? (It’s the part
you are the most involved in)
2. How many recessions has Argentina had since 1900?
3. When was their worst one?
4. Why are recessions good for selling inferior goods?
5. Calculate US GDP 2010Consumers: $12 trillion
Investment: $1.5 trillion
Government: $2 trillion
Exports: $1 trillion
Imports: $2 trillion
6. Describe US
Trade (net….?)
Netherlands GDP 2003Y = C + I + E + G
$$ in Billions
Consumer Spending = $400
Investment = $104
Government Spending = $131
Exports = $339
Imports = $305$400 + 104 + (339-305) + 131 = $669 (2003)
Per capita: 669,000,000,000/16,000,000 = $41,812.50
16 million Dutch citizens
4. Calculate the GDP for the Netherlands5. Are they net exporters or net importers? How do you know?6. Which country has the largest economy in the world today?
7. Why are recessions usually caused by a decline in consumer spending?
