1. Economic Indicators: GDP, INFLATION AND UNEMPLOYMENT
Unit V
Economic Indicators:
GDP, INFLATION AND
UNEMPLOYMENT

2. Page 35 – Gross Domestic Product
The Components of GDP
GDP - market value of final goods, services produced in set time period
To be included in GDP, product must be:
final, not intermediate
produced during the time period, regardless of when sold
produced within nation’s borders
*Use page 351 – 352 to identify and describe the four components of GDP (one sentence for each).

3. Page 35 – Gross Domestic Product
Look at graph on 351. What does it show you about net exports?
Calculating GDP - The Expenditures Approach
Consumption - household spending on durable, nondurable goods, services (2/3 of spending)
Investment - business spending on capital goods, inventory
Government spending - federal, state, local; not transfer payments
Net exports - value of exports minus value of imports

4. Page 35 – Gross Domestic Product
Two Types of GDP
Nominal GDP - price levels for the year in which GDP is measured
states GDP in terms of current value of goods and services
Real GDP - GDP adjusted for changes in prices
estimate of GDP if prices were to remain constant

5. Page 35 – Gross Domestic Product
1967
2014
Price
$4000
$40,000
# Produced
1000
$4,000,000
$40,000,000
Real vs. Nominal
Assuming Camaro production was the only component used to calculate our GDP, which type of GDP would you use and why?

6. Next Level Question Questions:
Rank
Country/Region
GDP in millions ($)
Year --
European Union
16,721,383
2012 1
United States
16,244,600 2
China
8,358,000
103
Afghanistan
20,497
104
Uganda
19,881
Questions:
Looking at this table, what might you infer about the relationship between GDP and quality of life?
Does GDP and quality of life have a negative, positive or no correlation?

7. GDP Review Components of U.S. GDP (in billions $) Year
Consumption Expenditure
Investment Expenditure
Government Expenditure
Net Export Expenditure
Nominal GDP
1980
1757
479
566
-13
2,789
1985
2,720
736
879
-115
4,220
1990
3,840
861
1,180
-78
5,803
1995
4,976
1,144
1,369
-91
7,398
2000
6,739
1,736
1,722
-380
9,817
2005
8,746
2,105
2,363
-727
12,487
What trend can be seen in U.S. nominal GDP? What can you tell from this about the growth of the U.S. economy? Do you need more information?
Does the proportion of consumption and the other two positive expenditures remain about the same in the six years shown here? Briefly explain how you estimated this.

8. Draw this figure on the top half of page 36
Page 36 – Business Cycles
PEAK
EXPANSION
CONTRACTION
REAL GDP
TROUGH
TIME

9. Page 36 – Inflation
After watching the video, answer the following questions:
What factors influence inflation?
Too many dollars in circulation
Supply is limited is not a factor that affects inflation!
What role does the Federal Reserve play with regards to inflation?
Regulates the amount of money in circulation in order to keep inflation low.

10. Page 37 – gdp, business cycles
Please complete #’s 1 – 8 on page 378 to help you review for the Test on Thursday!