Gross Domestic Product, WH/EES Standards Labs

Gross Domestic Product, WH/EES Standards Labs

Review:

Last time, we learned about trade between nations, and how trade influences a country's economy as well as political relations between countries.

Open Ended

Review Question: In your own words, explain why countries both benefit when they voluntarily trade with one another.

Today's Learning Goal:

After today's lesson, scholars will be able to explain what GDP is, how it's used, and how it reflects the state of a country's economy.

Overview: What is GDP?

GDP stands for Gross Domestic Product. Gross in this context doesn't mean nasty--it means total. So GDP is a measure of the total value of all new goods and services produced in a country during a set period of time. Goods are objects that can be bought and sold, such as books and toys. Services are actions other people or businesses do for you, like cutting your hair or fixing your car. All goods and services have a price. These prices are added up when calculating GDP.

GDP is usually calculated every year or quarter of a year (three months). In the US, the Bureau of Economic Analysis calculates GDP every quarter and releases the data to the public.

Multiple Choice

Which of the following would not be included in the calculation of a nation’s GDP?

• money spent on hair cuts at a hair salon

• soda sales at a restaurant

• the sale of a newly produced good, like a new car

• the sale of a previously owned good, like a used car

Multiple Select

Which of the following are examples of goods and/or services?

• giving advice to a friend

• receiving a grade on your homework

• paying a repairman to fix your bike

• buying a new phone

Calculating GDP (1/2)

The expenditure method is the most common way to calculate GDP. You add what consumers spend, what businesses spend, what the government spends and net exports. Net exports is exports minus imports. To find out America’s net exports, you’d look at the difference between goods shipped from the US to other countries and goods shipped from other countries to the US.

Calculating GDP (2/2)

The equation for calculating GDP with the expenditure method looks like this:

Y = C + I + G + NX

In this equation, Y stands for a nation’s GDP, C is consumer spending, I is investments made by businesses, G is government spending and NX is net exports. A nation’s GDP is usually measured in that nation’s own currency. However, GDP amounts can be converted, or changed, into any currency using the exchange rate.

Multiple Choice

Whose spending is included in GDP?

• consumers

• businesses

• government

• all of the above

Multiple Choice

__________ is a product sent and sold to another country.

• An import

• An export

• A service

Multiple Choice

Automobiles and cellphones are some of the biggest _______ to the US. We buy a lot of both from other countries.

• Imports

• Exports

• Services

Using GDP

A nation’s GDP can be used in many ways. Governments often consider GDP when deciding on new economic policies. When looked at it over time, GDP can show if an economy is experiencing growth (rising GDP) or contraction (falling GDP). An economic recession, indicated by a continuous fall in GDP, might be a sign that a country is in financial trouble. In contrast, a rising GDP over multiple quarters or years is a good thing for the government and country as a whole. Economic growth typically means low unemployment and higher wages, so everyday citizens are affected by rising or falling GDP, too.

Multiple Choice

A nation with a rising GDP most likely...

• has citizens earning low wages

• has a lower unemployment rate

• is entering a period of recession

• is in serious financial trouble.

Open Ended

Make an inference: during the past 2 years of the Covid19 pandemic, do you think that most countries' GDP went up or went down? Explain your answer.

GDP Per Capita (1/2)

GDP per capita is the average wealth per person in a country. To calculate it, you divide the total GDP of a nation by its population. The result is how much wealth each person would get if the wealth were divided evenly.

In reality, wealth isn’t divided evenly; one person might have $1 million, while 100 people have $10,000. Nonetheless, per capita GDP represents the average income or wealth of an individual in a country. This relates to standard of living. Standard of living is the level of wealth, comfort, material goods and necessities available to each person.

GDP Per Capita (2/2)

Generally, the higher the GDP per capita, the higher the standard of living in a country. GDP per capita is closely tied to standard of living because it takes into account a nation’s population. A country can have a large GDP but if it also has a large population, each person has a lower standard of living. Conversely, a country that has a moderate GDP with a smaller population can have a high individual income as shown by the GDP per capita.

Multiple Choice

What does per capita GDP show?

• exactly what every person in a country earns in income

• the average wealth of people in a country

• the number of people in a country who earn more than $1 million each year

• if the population of a country is growing or shrinking over time

Multiple Choice

True or False: A fall in per capita GDP means economic growth and productivity?

• True

• False

Today's Learning Goal:

After today's lesson, scholars will be able to explain what GDP is, how it's used, and how it reflects the state of a country's economy.

Poll

Which of the following best describes how you feel about today's learning goal?

• I'm still confused about what we learned today

• I understand some of what we learned today

• I understand all of what we learned today

• I'm an expert on what we learned today & I could teach the next lesson on this

Open Ended

In your own words, explain what 9th grade scholars need to know about Gross Domestic Product (GDP).