Lecture Introduction to economics: Social issues and economic thinking: Chapter 6 - Wendy A. Stock

Chapter 6 - Measuring economic activity. After completing this unit, you should be able to: Explain the circular flow model, define gross domestic product, describe differences in GDP across countries and time,...

Trang 1

Introduction to Economics: Social Issues and Economic Thinking

Measuring Economic Activity

Trang 2

Ø Explain the circular flow model

Ø Define gross domestic product

Ø Describe differences in GDP

across countries and time

Ø Describe what business cycles are and how they occur

Ø Illustrate the workings of the aggregate demand/aggregate supply model

After studying this chapter, you should be

able to:

Trang 3

Ø The Circular Flow Model shows the movement

of income and spending between households and businesses in the economy.

& Sons, Inc.

3

The circular flow model

Trang 4

& Sons, Inc.

4

The circular flow model with government and

foreign sector

Trang 5

Ø Exports are the sale of goods and services to

foreign buyers

Ø Imports are the purchases of goods and services from foreign producers

& Sons, Inc.

5

Foreign sector

Trang 6

Ø Gross Domestic Product (GDP) measures the

dollar value of all final goods and services produced

in an economy in a given time period

Ø “dollar value”

Ø “final goods”

Ø “in an economy”

Ø “in a given time period”

& Sons, Inc.

6

GROSS DOMESTIC PRODUCT

Trang 7

Ø The income approach uses incomes earned by

producers to measure GDP

Ø The value-added approach uses total sales minus the value of inputs to measure GDP

Ø The expenditures approach uses total expenditures

on final goods and services to measure GDP

& Sons, Inc.

7

Measuring gdp

Trang 8

Ø Income approach GDP = farmer’s income + miller’s income + baker’s income

GDP = $2 + $3 + $4 = $9 per period

Ø Value-added GDP = (farmer’s sale revenue -

farmer’s input cost) + (miller’s revenue - miller’s cost) + (baker’s revenue - baker’s cost)

GDP = ($2 - $0) + ($5 - $2) + ($9 - $5) = $9 per period

Ø The expenditures approach GDP = total

expenditures on final goods and service = $9

& Sons, Inc.

8

Measuring gdp: An example

Trang 9

Ø Consumption Expenditure (C) by households

Ø Private Investment (I) by businesses

Ø Net Exports (X – M)

GDP = C + I + G + (X – M)

& Sons, Inc.

9

Four components of expenditure

Trang 10

& Sons, Inc.

10

U.S Gross domestic product In 2011

Trang 11

Consumption (C) is household spending on final

goods and services

Purchases of items like TVs, groceries, restaurant

meals, and doctor and lawyer services are counted in consumption

& Sons, Inc.

11

Trang 12

Private Investment (I) is a measure of business

spending on equipment used in production, spending

on construction, and changes in business inventories

& Sons, Inc.

12

Trang 13

Government Expenditure (G) includes government

spending on wages for government employees,

government purchases of services, government

purchases of final goods, and government investment

in buildings and other capital

 Public transfer payments not included (social

security, debt service, unemployment insurance, etc.)

& Sons, Inc.

13

Trang 14

Net Exports (X – M) is a measure of the difference between exports and imports.

goods, we subtract off the value of imports (M) from total expenditure to ensure that it only includes

domestic production

& Sons, Inc.

14

Trang 15

& Sons, Inc.

15

U.S gdp (1929 – 2009)

Trang 16

& Sons, Inc.

16

International GDP Comparisons, 2010

Trang 17

& Sons, Inc.

17

International GDP Per Capita Comparisons,

2010

Trang 18

Ø Aggregate Demand (AD) is the demand for all goods and services in an economy, ceteris

paribus.

Ø Aggregate Supply (AS) is the supply of all

goods and services in an economy, ceteris

paribus.

& Sons, Inc.

18

ad/as model

Trang 19

& Sons, Inc.

19

ad/as model

Trang 20

& Sons, Inc.

20

Shifts in AD and AS

Trang 21

Ø Factors that change any of the components in

AD will shift AD curve.

Ø C

Ø I

Ø G

Ø X - M

& Sons, Inc.

21

Factors That Shift AD curve

Trang 22

& Sons, Inc.

22

Factors That Shift As curve

Trang 23

Ø Business Cycles are recurring expansions and contractions in the level of aggregate economic activity.

Ø Business Cycle Expansions are periods of

increasing economic activity, rising production, and increasing employment.

& Sons, Inc.

23

Business Cycles

Trang 24

Ø Business Cycles are recurring expansions and contractions in the level of aggregate economic activity.

Ø Business Cycle Expansions are periods of

increasing economic activity, rising production, and increasing employment.

Ø Business Cycle Contractions or Recessions are periods of decreasing economic activity, falling production, and falling employment.

& Sons, Inc.

24

Business Cycles

Trang 25

& Sons, Inc.

25

Business Cycles

Trang 26

& Sons, Inc.

26

Business Cycles in Ad/as model

Trang 27

& Sons, Inc.

27

How will each of the following affect the GDP and the price level of the U.S economy?

a) The government drastically cuts its

spending on goods and services.

b) The UK bans all U.S imports.

c) The United States expands its military

operations after the bombing of Pearl Harbor in 1941.

d) A large group of oil-producing countries

band together to restrict output and raise oil prices.

The United States bans all imports from

Trang 28

& Sons, Inc.

• Business cycle expansions

• Business cycle contractions

• Recessions

Định dạng
Số trang	28
Dung lượng	434,36 KB