1. Economic Performance
Chapter 13

2. Chapter Essential Questions
13.1: What are our 2 major measures of economic performance? 13.2: What is calculated at existing prices and adjusted for inflation to make comparisons over time? 13.3: What can help determine the direction of economic development? 13.4: How does economic growth increase the standard of living?

3. 13.1 Measuring the Nation’s Output

4. I. GDP- The Measure of National Output
Gross Domestic Product (GDP) is computed by multiplying all final goods and services produced in a 12 month period by their prices.
B. GDP tells nothing about the composition of output or the impact of production on quality of life.
C. Despite it’s limitations, GDP is still the best measure of overall economic health.

5. Economic growth can be shown through an increase in GDP.30
True
False
:20

6. II. GNP- the Measure of National Income
A. GNP is the dollar value of all final goods, services, and structures produced in one year with labor and property supplied by a country’s residents. B. Gross National Product (GNP) is equal to GDP plus all payments that American’s receive from outside the US minus all payments made to foreign owned resources inside the US.

7. Investopedia Presents:
What is GDP?
GDP vs. GNP

8. Other Measures of Income
C. Net National Product (NNP) is equal to GNP minus depreciation. D. National Income (NI) is equal to NNP minus all taxes paid by businesses other than the corporate profits tax. E. Personal Income (PI) is the total amount of income received by individuals before taxes. F. Disposable Personal Income (DI) is PI less taxes.

9. Which of these is not a measure of National Income?
GNP
GDP
Personal Income
Net National Product 20
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10. III. Economic Sectors and Circular Flows
The consumer sector includes individuals/ households
B The investment sector includes businesses.
C. The govt. sector includes local, state and federal levels of government.
D. The foreign sector includes all
consumers, and producers
outside the U.S. (X-M)

11. IV. The Output- Expenditure Model
The output-expenditure model is a macroeconomic model used to show aggregate demand by all the economic sectors.
B. The equation for the output-expenditure model is GDP= C+I+G+F
C. Each sector spends its
income on different types
of goods and services.
next→

12. Economic Sectors
C= Consumer Sector I= Investment Sector G= Government Sector F= Foreign Sector: F=(X-M) or Exports-Imports ←back

13. GNP : Income as GDP : _________20
Seconds
Remaining
GNP : Income as GDP : _________
Party
Demand
Money
Output
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14. 13.1 EQ
Q: What are our 2 major measures of economic performance? A: GDP and GNP

15. 13.2 GDP and Changes in the Price Level

16. I. Constructing a Price Index
A price index is used to measure change in prices over time.
B. A price index is created by selecting a base year and a representative market basket of goods.

17. II. Major Price Indices
The consumer price index (CPI) reports changes in the prices of 80,000 consumer goods and services.
B. The producer price index (PPI) reports changes in prices received by domestic producers for 3,000 commodities.
C. The GDP price deflator is an index of average prices for all goods and services.

18. III. Real vs. Current GDP
Example: (using 1996 as a base) The GDP estimate for 2003 was $10,688.4 billion. The GDP deflator was (prices is 2003 were 111.9% higher than in 1996) Real GDP= $ b/ x100 = $9,551.7 billion
Real GDP is calculated by dividing current GDP by the implicit price deflator and multiplying by 100.
B. Converting current GDP into real GDP is useful for comparing GDP over time.

19. Why is a market basket used whenever a price index is constructed?
It shows only a few items.
It is a representative of purchases.
It shows imported goods.
:20
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20. 13.2 EQ
Q: What is calculated at existing prices and adjusted for inflation to make comparisons over time? A: GDP!!

21. 13.3 GDP and Population

22. I. Population in the U.S. A census is an official count
of all people, including their
places of residence.
B. The Census Bureau conducts surveys every month and a full census every 10 years.
C. The Census Bureau tabulates and presents its data in 2 classifications: the urban population and the rural population.

23. D. The rate of population growth in the US has been declining since 1860, falling to 0.9% in 2002.
E. The Census Bureau tracks geographic distribution of population and reports that the population is growing in the West and South and shrinking in the Northeast and Central Plains regions.

24. The Census Bureau conducts a full census every month.20
True
False
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25. II. Projected Population Trends
Factors that affect population are the fertility rate, life expectancy, and net immigration.
B. The dependency ratio will rise as a result of the aging of the baby boom generation.
C. Factors that affect population will also affect the racial and ethnic makeup of the U.S.

26. Which of the following does NOT affect population?
Fertility Rate
Life Expectancy
Net Immigration
Geographic distribution
:20
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27. 13.3 EQ
Q: What can help determine the direction of economic development? A: Population trends!!

28. 13.4 Economic Growth

29. I. Economic Growth in the U.S.
Real GDP per capita: the dollar amount of real GDP produced on a per person basis.
B. Economic growth is best measured by real GDP per capita.
C. Real GDP per capita has grown somewhat more slowly that real GDP.

30. Discussion Question
Q: Why is it important to look at per capita rather than total GDP? A: It shows how much output increased per person. If the population grows more rapidly than the economy, per capita GDP will fall and people will be worse off on average than they were the previous year, even if the economy grows.

31. II. Importance of Economic Growth
Economic Growth Increases:
i. The standard of living
ii. The tax base, allowing the govt. to provide more and better-quality public services.
iii. US demand for imports, which helps create jobs and generate income in foreign countries

32. Economic Growth reduces the demand for imports?30
True
False 20

33. B. Economic growth helps reduce poverty and related problems.
C. Economic growth in the US encourages other countries to adopt market economies.

34. III. Factors Influencing Economic Growth
Natural and renewable resources, including land and minerals
B. A high capital-to- labor ratio.
C. Skilled and growing labor force
D. Entrepreneurs

35. Which of the following does NOT influence economic growth?
Capital-to-resource ratio
Renewable resources
Skilled labor force 20
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36. IV. Productivity and Growth
Productivity has increased in the US since 1959.
B. Declines in productivity hurt the economy.

37. 13.4 EQ
Q: How does economic growth increase the standard of living? A: When the economy grows, unemployment falls and income rises. The standard of living rises because people are able to purchase more goods and better services.