Transcript Chapter 12 GDP and Growth

Chapter 12: GDP and
Growth
Section 1: Gross Domestic
Product
Section 2: Business Cycles
Section 3: economic Growth
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Section 1: Gross Domestic
Product

Nation income accounting
• A system that collects macroeconomic
statistics on production, income,
investment, and savings

Gross Domestic Product
• The dollar value of all final goods and
services produced within a country’s
boarders in a given year
Section 1: GDP
types of goods

Intermediate goods
• Goods used in production of final goods

Durable goods
• Goods that last for a relatively long time such
as refrigerators, cars, and DVD players

Nondurable goods
• Goods that last a short period of time, such as
food, light bulbs, and sneakers
Different GDP’s

Nominal GDP
• GDP measured in current prices

Real GDP
• GDP expressed in constant, or
unchanging, prices
Not gdp…..

Gross National Product
• The annual income earned by U.S.
owned firms and U.S. citizens

Depreciation
• The loss of capital equipment that
results form normal wear and tear
How we add this up…
GDP + income earned outside the
U.S. by U.S. firms and citizens –
income earned by foreign firms and
foreign citizens located in the U.S. =
GNP
 GNP – depreciation of capital
equipment = Net Nation Product
 Net Nation Product – excise taxes =
National income

Supply and Demand to the

Aggregate supply
• The total amount of goods and services
in the economy available at all possible
price levels

Aggregate demand
• The amount of goods and services in
the economy that will be purchased at
all possible price levels
Section 2: Business Cycles

Business cycle
• A period of macroeconomic expansion
followed by a period of contraction
Business cycles

Expansion
• a period of economical growth as measured by
a rise in real GDP
• Peak, contraction, trough, expansion
• waves
ion’s

Recession
• A prolonged economic contraction

Depression
• A recession that is especially long and
severe

Stagflation
• A decline in real GDP combined with a
rise in price level
Government influence over this
cycle

Only a few ways government can
help
Taxes
 Federal Interest Rates
 Government Spending

Section 3: Economic Growth

Measuring Economic Growth
• We can use GDP to measure standard of living,
which relates to material goods.
• We cannot use it, however as a complete
measure of people’s quality of life.
Section 3: Economic Growth

Saving and Investment
• Income that is not used for consumption is
called saving.
• The proportion of disposable income that is
saved is called the savings rate.
Section 3: Economic Growth

Technological Progress
• Technological Progress is an increase in
efficiency gained by producing more
output without using more inputs.
• Causes of Technological Progress
Scientific Research
 Innovation
 Scale of the Market
 Education and Experience
 Natural Resource Use
