1. GDP

2. Unpacking the Standard
SSEMA1 Illustrate the means by which economic activity is measured.
Identify and describe the macroeconomic goals of steady economic growth, stable prices, and full employment.
Define Gross Domestic Product (GDP) as the sum of Consumer Spending, Investment, Government Spending, and Net Exports (output expenditure model).
Define real GDP, aggregate supply and aggregate demand and explain how each is used to evaluate the macro goal of economic growth.

3. What is Macroeconomics?
Macroeconomics: the study of a nation’s entire economy
GDP and Economic Growth
Business Cycles
Inflation
Unemployment
Monetary Policy
Fiscal Policy

4. What are the Goals of Macroeconomics?
Economic Growth – GDP
Stable Prices – Inflation Rate
Full Employment – Unemployment Rate

5. Gross Domestic Product: the dollar value of all final goods and services produced with in a country’s borders in a given year.

6. How Do We Calculate GDP? GDP = C + I + G + (X-N) Gov’t Spending
Public Goods/Services: national defense, highways, edu.
Consumer Spending
Durable and nondurable goods: groceries, rent, cars, clothes, etc.
Foreign Spending
Exports – Imports
Includes items MADE here and sold elsewhere (exports)
DOES NOT include items made outside the US but sold here (imports)
Business Investment
Capital Goods: office space/items, equipment, labor

7. Nike buys a new computer system for all their stores
Write #1-6 in your notes. For each example listed below, determine which part of GDP that purchase would belong in (C, I, G, X-n)
You buy a new pillow
Nike buys a new computer system for all their stores
All potholes down Austell Rd are filled
Owner of a hair salon sends stylists to learn a new dye technique
You buy a new dress/suit for homecoming
A French man orders a new TV off Amazon from a company based in the US. C I G
X-n

8. What’s NOT Included in GDP?
1. Intermediate Products
The raw materials (factors of production) that are used to make FINAL GOODS/SERVICES.
Ex: the wood used to build a house. The wood will be included in the price of the house, so you don't include it's original purchase (you'd be counting it twice)

9. What’s NOT Included in GDP?
2. Secondhand Sales (used goods)
Not included in GDP because it counted the FIRST time it was bought.
Ex: You buy a video game at Wal-Mart. Two months later you sell it to Game Stop. They put it up for sale. It would already be counted in the GDP from the ORIGINAL sale (Wal-Mart)

10. What’s NOT Included in GDP?
3. Underground Production (black market)
Includes illegal activities and “gray area” ones.
Not included because no way to track.
Ex. Cash only transactions that never get reported to the IRS: mowing lawns, babysitting, or unlicensed businesses working out of homes.

11. What’s NOT Included in GDP?
4. Financial Transactions
Transfer payments: giving money from one group of people to another (social security, unemployment, welfare, etc)
Security payments: income from sale of stocks and bonds
5. Household Production
Nonmarket Transactions
Not counted because you did it yourself instead of paying someone else to do it.
Examples:
You fix your IPhone yourself instead of paying someone to do it.
You cook dinner instead of ordering pizza on a Friday night.

12. What’s NOT Included in GDP?
6. Not sold this year
Something made, but not sold.
Counted in the year sold.
Examples:
A Dell computer is made in 2014, but not sold until The computer would count towards GDP in 2015

13. You buy a used book off Amazon.
Write #1-5 in your notes. Determine why each of the following would NOT be included in GDP (intermediate, secondhand, underground, financial, household production)
You buy a used book off Amazon.
You get paid $50 to babysit the neighbor’s kid.
The leather used to make shoes for sell at Payless.
You give your little brother a haircut.
Your grandparents cash their social security check.
Secondhand
Underground
Intermediate
Household
Financial