Homework Read 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 Economic Performance Chapter 11 Economics

Gross Domestic Product GDP: The total market value of all final goods and services produced annually in a country.

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

Final Goods Final 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 GDP 1. Illegal goods and services 2. Transactions of legal goods and services with no record 3. Some nonmarket goods and services 4. Sales of used goods 5. Stock transactions and other financial transactions 6. Government transfer payments

GDP v. GNP GNP 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. resources/economic- barometer/?data=2-4 resources/economic- barometer/?data=2-4

GDP & Standard of Living High GDP per capita is usually associated with a high standard of living. resources/economic-barometer/?data=4-4 resources/economic-barometer/?data=4-4

GDP Formula C = 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 living? *Use CIA World Fact Book CountryGDPGDP per Capita Life expectancy Literacy rate Infant Mortality Rate Fertility Rate 1U.S.A.48, % Somalia 3Mexico % Canada 5Madagascar 6Great Britain 7Qatar102, % Norway53, % Chad1, %

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CPI CPI – Consumer Price Index ◦ Used to compute the average price level or inflation ◦ Calculated by the U.S. Bureau of Labor Statistics resources/economic- barometer/?data= resources/economic- barometer/?data=7-12

Inflation Calculator resources/economic-barometer/?data= alculator.htm

Unemployment 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.

Unemployment Noninstitutionalized adult population consists of 2 groups. 1.Not in the labor force 2.Civilian labor force Civilian labor force consists of 2 groups: 1.Unemployed persons 2.Employed persons

Unemployment The unemployment rate is the percentage of the civilian labor force that is unemployed. Unemployment rate = unemployed persons/civilian labor force

Current Unemployment Rate October 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%

Unemployment by State k.htm k.htm

Supply & Demand in the Economy See example of aggregate supply & demand curve on p. 305.

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

Aggregate Supply & Aggregate Demand

TermStudent Definition Showing Sentence Inflation Deflation Consumer Price Index Gross domestic product Real GDP Nominal GDP GDP per capita