1. http://www.slatev.com /video/what-exactly- gdp/

2. 1. What is the difference between real GDP and nominal GDP? 2. Why is real GDP the appropriate measure of real economic activity? VE4 Video: Real and Nominal GDP

3. 1. A measure of the size of the e________ 2. Comparison scale to compare e___________ of different c____________ 3. Current dollar GDP = 2012 p_____________ with 2012 p_________ 4. Issue: Can prices fluctuate? Will that influence GDP? 5. What can be done to get accurate measurements?

4. 1. A measure of the size of the economy 2. Comparison scale to compare economies of different countries 3. Current dollar GDP = 2012 production with 2012 prices 4. Issue: Can prices fluctuate? Will that influence GDP? 5. What can be done to get accurate measurements? Take out the distortion

5. 1. Nominal GDP is measured in current prices, which may include i________or d___________. 2. How does inflation distort GDP? 3. Real GDP is measured in c_________ p_________ or an a________ to give a more accurate or un-skewed reflection of what is really being produced in the economy.

6. 1. Nominal GDP is measured in current prices, which may include inflation or deflation. 2. How does inflation distort GDP?  If prices go up and quantity does not, GDP will increase because it is a dollar amount. Production has not increased so this is misleading; the economy has not truly grown. To adjust for changing prices, Real GDP is calculated with the value of current production using prices from a fixed point in time. This fixed point in time is called the base year. 3. Real GDP is measured in constant prices or an average to give a more accurate or un- skewed reflection of what is really being produced in the economy.

7. 1.Calculate the nominal GDP for both years. By how much as the economy grown according to nominal GDP? 2.Was the increase due to an increase in output? 3.What caused the increase? 4.Calculate real GDP for 2008 using 2008 output & 2007 prices. By how much did the economy grow?

8. 1.Calculate the nominal GDP for both years. By how much as the economy grown according to nominal GDP? Nominal GDP rose by $8250 or 59%. Holy cow!! 2.Was the large increase due to an increase in output? NO, output in 2008 was miniscule 3.What caused the increase? Increase in prices from 2007 to 2008 4.Calculate real GDP for 2008 using 2008 output & 2007 prices. By how much did the economy grow? $15250 - $14000 = $1250 or 9%, NOT $8250

9.  Just a statistical measure  Are these measures positive or normative?  GDP cannot measure everything: self esteem, overall happiness, leisure activities  GDP per Capita: GDP divided by the size of the population (average GDP per person) http://www.tradingeconomics.com/united-states/gdp-growth

10. http://www.tradingeconomics.com/gdp-growth-rates-list-by-country

12. Non-Market Activities Negative Externalities Underground Economy Quality Of Life Notes Illustration

13. Non-Market Activities Negative Externalities Underground Economy Quality Of Life Notes GDP does not measure goods and services that people make or do themselves, such as babysitting, mowing lawns, or cooking dinner. Unintended economic side effects, such as pollution, have a monetary value that is often not reflected in GDP. There is a TON of economic activity that is never reported to the government. Examples include black market (illegal) transactions and "under the table" wages. G DP is used as a standard of living measurement, but there are factors NOT covered by it. These include quality of life, leisure time, pleasant surroundings, & personal safety. Illustration

14.  Time off to coach your child’s soccer game.  Cleaning up after a natural disaster (hurricane Sandy)  Reading a book.  Raking your own leaves rather than hiring out.  Paying for divorce.  Leave your job to raise children.

15.  Complete Module 11 questions p. 116-117  Read Module 12  Strive for a 5 Module 11 vocab & fill in the blank