1. BellRinger on your white board
1. Who do you think the richest person on your
street is?
2. How do you know?
3. Predict the country that has the world’s largest
economy.
We will take some notes today

2. Finished with Microeconomics
• Microeconomics – study
of individuals and the
economy
• Macroeconomics – study
of large organizations and
countries and the
economy
• Finance – study of
investment and credit

3. Comparing classes?
• On your white boards, what 3 ways could I
compare the economies of my 5 economics
classes?

4. Gross Domestic Product
• A measure of a country’s economy in a
given time (usually a year or quarter)

5. 2007 Top 10 World Economies

10. How do we calculate GDP?

11. Parts of GDP
• Write something new
you bought last week
• All consumer spending
on new items within a
country in a certain year,
month or quarter

12. Parts of GDP
• All investment within a
country in a certain year,
month or quarter
• IOW: business spending
$$ on capital goods
• Interest rates?

13. Parts of GDP
• All government
spending in a
country in a certain
year, month or
quarter
• Examples:
education, military,
roads, healthcare,
etc

15. Parts of GDP
• All net exports from a
country in a certain year,
month or quarter
• Exports = goods shipped
to other countries
• Imports = goods brought
into a country from
another country
• USA? Mexico?

16. Net Exporters
• A country or territory whose value of
exported goods is higher than its value of
imported goods over a given period of time.
• A net exporter is the opposite of a net importer.

17. Net Importers

18. GDP Calculation
Y=C+I+G+E
where
Y = GDP
C = Consumer Spending
I = Investment
E = Exports - Imports
G = Government Spending

19. United States GDP 2003
Y=C+I+E+G
$$ in Billions
Consumer Spending = $7605
Investment = $1606
Exports = $1021
Imports = $1508
Government Spending = $2017
$7605 + 1606 + (1021-1508) + 2017 = $10,741 (2003)

20. GDP
• What economic activity did I leave out?
• 2 ways GDP might be misleading?

21. GDP = C + I + G + (Ex – Im)
Assuming everything else stays equal, what happens if…
US consumers spend 5% more in 2013,
than 2012 for the Winter Holidays.

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

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

24. GDP = C + I + G + (Ex – Im)
Assuming everything else stays equal, what happens if…
Bank business lending increases by 7% in
2013

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…
Americans demand 50% more Mexican
baked goods

28. GDP = C + I + G + (Ex – Im)
Assuming everything else stays equal, what happens if…
NBA plays a game in China, afterwards
Chinese people demand more US made
basketballs

29. GDP = C + I + G + (Ex – Im)
Assuming everything else stays equal, what happens if…
US Government cuts
income tax rates by 2 %

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

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

33. Calculate the GDP for Portugal in
2008. (in millions)
Consumers spent: $90,000
Investment: $40,000
Exported $50,000
Imports $90,000
Portugal: 10 million people
Currency: Euro
Government: $10,000

34. Portugal

38. The Business Cycle
• Changes in GDP over time
prosperity
recovery

39. Recession
• 6 + months of negative GDP growth
Prosperity
• 6+ months of positive GDP growth

41. 1.
GDP Assignment(It’s the part
Which part of the GDP formula is the largest?
you are the most involved in)
2. How many recessions has Argentina had since 1900?
3. When was their worst one?
4. Why are recessions good for selling inferior goods?
5. Calculate US GDP 2010
Consumers: $12 trillion
Investment: $1.5 trillion
Government: $2 trillion
Exports: $1 trillion
Imports: $2 trillion
6. Describe US
Trade (net….?)

42. Netherlands GDP 2003
Y=C+I+E+G
$$ in Billions
Consumer Spending = $400
Investment = $104
Government Spending = $131
Exports = $339
Imports = $305
16 million Dutch citizens
$400 +4. Calculate the GDP for the Netherlands
104 + (339-305) + 131 = $669 (2003)
5. capita: 669,000,000,000/16,000,000 = $41,812.50
PerAre they net exporters or net importers? How do you know?
6. Which country has the largest economy in the world today?
7. Why are recessions usually caused by a
decline in consumer spending?