1. In your notes
1.
Draw 2 graphs showing Mexico’s GDP over the
past 10 years. (nominal GDP and % change)
2.
How would you describe their economy?
Year
GDP
Percent change
2000
1065.207
8.27 %
2001
1079.214
1.31 %
2002
1097.527
1.70 %
2003
1135.984
3.50 %
2004
1231.841
8.44 %
2005
1297.514
5.33 %
2006
1408.444
8.55 %
2007
1496.239
6.23 %
2008
1547.597
3.43 %
2009
1467.581
-5.17 %
2010
1564.872
6.63 %

2. 2 goals of Macroeconomic Policy


Long Term Growth
Stability

3. Mexico’s Economy

7. US GDP Changes


Write down 3 events that might have
either negatively or positively
affected the US GDP
For example: 1890’s Railroad
connections increased consumer
spending and investment

8. The Business Cycle

Changes in GDP over time

9. 
“downturn”
Recession
“slump”
6 + months of negative GDP growth
• Decreased Spending
• Lack of trade
Prosperity

“boom”
“Expansion”
6+ months of positive GDP growth
• Technology
• Productivity

10. Label recession on Mexico BR graph

11. Klein draw recession on PPF

16. In your notes
Calculate the GDP for Portugal in
2008. (in millions)
Consumers spent: $131,300
Investment: $42,000
Exported $56,000
Imports $87,000
Portugal: 10 million
people
Government: $90,000
Currency: Euro
What is Portugal’s GDP per
Capita?

17. Portugal

19. Great
Depression
1929-1933
27% drop in GDP
25% Unemployment
36% drop in World
trade
43 straight months
of declining
spending !!!!
Great
Recession
2007-2009
5 % drop in GDP
10% Unemployment
20% drop in World
trade
18 straight months
of declining
spending
Source Yoram Bauman, World Bank

20. Fiscal Cliff
Y = C + I + G + X >>>> (exports-imports)
Short Run
5% reduction in Government spending
Significant tax increases affect on I and C
What would a ________ say about this in SR and LR?
Keynesian
Classical Perspective (Hayek)

22. GDP = C + I + G + (Ex – Im)
Assuming everything else stays equal, what happens if…
US consumers spend 5% more in
2012, than 2011 for the Winter
Holidays.

23. GDP = C + I + G + (Ex – Im)
Assuming everything else stays equal, what happens if…
Banks report 3 % increase in business
spending

24. GDP = C + I + G + (Ex – Im)
Assuming everything else stays equal, what happens if…
US government passes $800 billion
healthcare reform bill

25. GDP = C + I + G + (Ex – Im)
Assuming everything else stays equal, what happens if…
Mexican citizens demand 15 % fewer
US made cars

26. GDP = C + I + G + (Ex – Im)
Assuming everything else stays equal, what happens if…
The internet is created

27. GDP = C + I + G + (Ex – Im)
Assuming everything else stays equal, what happens if…
US students learn about the benefits
of saving money

28. GDP = C + I + G + (Ex – Im)
Assuming everything else stays equal, what happens if…
Free trade zone extends from Canada
to Argentina

29. GDP = C + I + G + (Ex – Im)
Assuming everything else stays equal, what happens if…
US military invades Iran

30. GDP = C + I + G + (Ex – Im)
Assuming everything else stays equal, what happens if…
World Demand for US timber increases

31. Assignment
What would happen to the GDP of the US if…(assume only 1 variable
changes)
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
The government increases education spending by
$12 billion
Russians demand more US made cars
The US government decides the border fence is
too expensive and cuts its funding
US government places a tax on all Japanese
imports
Consumers get easier access to credit cards and
buy 35 % more video games this year
High school graduates get excited about the stock
market and invest 10% of their future incomes.
The price of food increases by 14% in 2010
US business become fearful of the coming
recession and slow spending by 4%
New modern warfare game released
Make up an example of your own, show GDP change.

32. Assignment
Create an assignment for the regular
students to do
#1 12 realistic scenarios for students to
choose the component. 3 for each part of
GDP. For example: 1965 US creates
Medicare (govt spending)
#2 2 GDP problems (C + I + G + X)
#3 Why is GDP per capita a better
measure of wealth than GDP?
