Unit 3 GDP

Reviewing GDP & adding new information.

Carefully read the slides and answer the quetions.

Some of this will be based on the notes and some of this will be new information you need to add to understanding of GDP so far. IT IS IMPORTANT YOU READ EACH SLIDE.

Match

Match each component of GDP with is definition.

• C

• I

• G

• X

• M

Spending by households

Spending by businesses on inventory

Spending by gov on goods & services

Goods purchased in other countries

Goods produced in other countries

• Spending by households

• Spending by businesses on inventory

• Spending by gov on goods & services

• Goods purchased in other countries

• Goods produced in other countries

Multiple Choice

In the context of GDP, "investment" means financial assets such as stocks and bonds.

• True

• False

Multiple Choice

Why are transfer payments not included in the calculation of GDP?

• They don't reflect the production of a good or service.

• They only include investment spending.

• They reflect actual production of a good which is not counted in GDP.

Match

Match

• Exports

• Imports

• Trade Balance

domestically produced goods

goods produced in other countries

the gap betwen exports and imports

• domestically produced goods

• goods produced in other countries

• the gap betwen exports and imports

Multiple Choice

Country A reports the following economic activity for one year (in billions of dollars):

Consumption (C): 500

Investment (I): 200

Government Spending (G): 300

Exports (X): 150

Imports (M): 100

Using the expenditures approach, what is Country A’s GDP?

• 1,150 billion

• 1,050 billion

• 200 billion

• 1,250 billion

Multiple Choice

Net exports = X − M

What is true about trade surplus?

• X > M → trade surplus

• M > X → trade surplus

• X = M → trade surplus

Multiple Choice

What types of products are excluded from GDP because they are used to make other products?

• 
  

  Intermediate products

• Secondhand sales

• Non-market transactions

Multiple Choice

Which of the following would increase GDP?

• You mow your own lawn this weekend.

• You buy a used car from a friend.

• A bakery sells a loaf of bread to a customer.

• You sell cookies at a neighborhood bake sale for cash that you don’t report.

Multiple Choice

Why are replacement tires for your car counted in GDP, but tires on a new car are not counted separately?

• Replacement tires are more expensive than tires on a new car.

• Tires on a new car are considered intermediate goods, already included in the car’s price.

• Replacement tires are part of the underground economy.

• Tires on a new car are secondhand goods.

Multiple Choice

What is GDP?

• national income within one year

• the value of all final goods and services produced within one year

• how much all workers in a country earn per year

• a population's standard of living across one year

Multiple Choice

How do we find per capita GDP?

• GDP divided by inflation

• exports minus imports

• GDP divided by population

• how much someone earns on average

Multiple Choice

What is the standard of living?

• quality of life in a country

• how much the average person makes

• how much the average company sells

• minimum wage

Multiple Choice

How does the standard of living relate to GDP and what factors contribute to it?

• Wealth and material goods

• Health care and education

• Freedom, safety, and stability

• All of the above

Multiple Choice

What is the purpose of using an exchange rate when comparing the GDP of countries with different currencies?

• To determine the population of a country

• To convert currencies to a common denominator

• To calculate the interest rates

• To analyze the stock market

Poll

Mexico's currency is called the ....

La moneda de México se llama...

• Peso

• Dollar

• Yen

• Ruble

Multiple Choice

Why do countries need an exchange rate?

• to promote tourism
• to see who has the most money
• to trade with each other

Reorder

Put in order the countries with the largest GDP in billions of US dollars from the largest to the smallest.

• USA

• China

• Japan

• United Kingdom

• Egypt

1

2

3

4

5

• 1
• 2
• 3
• 4
• 5

POPULATION

Changes in population can distort some macroeconomic measures like GDP.

Population growth can have several consequences. If a nation’s population grows faster than its output, per capita output grows more slowly, & the country could end up with more mouths than it can feed. This is not a good situation.

On the other hand, if a nation’s population grows too slowly, there may not be enough workers to sustain economic growth. This is also not a good situation.

In addition, a growing population puts more demand on resources. When a growing population shifts toward certain areas, such as cities or suburbs, it puts different pressures on existing resources. In Atlanta, Georgia, for example, urban sprawl and traffic congestion have become major problems. In heavily populated areas of Arizona, Nevada, and southern California, adequate supplies of fresh water have become concerns. Because it takes a long time to plan and construct a country’s infrastructure— the highways, levees, mass transit, communications systems, electricity, water, sewer, and other public goods needed to support a population—we need to pay attention to future population trends. If we neglect them, even modest shifts in the population can cause enormous problems in the future.

Multiple Choice

Think Back and Review: What is the formula for calculating GDP per capita?

• GDP/ population

• GDP x population

• GDP + population

• GDP - population

Multiple Choice

What happens if a nation’s population grows faster than its output?

• Economic growth is guaranteed
  

• The country could have more people than it can feed

Multiple Choice

What is a potential problem if a nation’s population grows too slowly?

• There may not be enough workers to sustain economic growth

• Traffic congestion becomes a major problem

• Freshwater supplies increase

• Per capita output decreases

Multiple Choice

Why is it important to plan infrastructure with population trends in mind?

• Infrastructure only affects rural populations

• Population growth does not impact infrastructure needs

• Infrastructure construction takes a long time, and neglecting trends can cause future problems

• Population shifts only affect agricultural areas

Multiple Choice

Who has a larger GDP per capita? India or South Korea?

• India

• South Korea

Multiple Choice

Who has a larger GDP in billions of US dollars? India or South Korea?

• India

• South Korea

Multiple Choice

A high standard of living is typically characterized by:

• Low GDP per capita

• High levels of poverty

• High GDP per capita

• High levels of unemployment

Multiple Choice

Economists use different indicators to understand how well people in a country are living — known as the standard of living.
Life Expectancy – The average number of years a person is expected to live in a country.
Literacy Rate – The percentage of people who can read and write.
Infant Mortality Rate – The number of babies who die before their first birthday for every 1,000 born.

Based on the info above, which of the following is NOT commonly used to measure a country's standard of living?

• Life Expectancy

• Literacy Rate

• Infant Mortality Rate

• National Debt

Open Ended

Life Expectancy – The average number of years a person is expected to live in a country.

Example: Japan – 84 years; Nigeria – 55 years

Literacy Rate – The percentage of people who can read and write.

Example: United States – 99%; Afghanistan – 38%

Infant Mortality Rate – The number of babies who die before their first birthday for every 1,000 born.

Example: Canada – 4 deaths per 1,000 births; Somalia – 73 deaths per 1,000 births

What can differences in life expectancy between Japan and Nigeria tell you about their healthcare systems and overall living conditions?

Open Ended

Life Expectancy – The average number of years a person is expected to live in a country.

Example: Japan – 84 years; Nigeria – 55 years

Literacy Rate – The percentage of people who can read and write.

Example: United States – 99%; Afghanistan – 38%

Infant Mortality Rate – The number of babies who die before their first birthday for every 1,000 born.

Example: Canada – 4 deaths per 1,000 births; Somalia – 73 deaths per 1,000 births

How might the difference in literacy rates between the United States and Afghanistan affect job opportunities and economic growth in each country?

Multiple Choice

The ultimate source of the region’s wealth is Washington’s unparalleled human capital. The population is the best educated of any large metro’s in the United States; about half the region’s adults hold bachelor’s degrees, and nearly a quarter have graduate degrees.

—Richard Florida, “The Boom Towns and Ghost Towns of the New Economy,” The Atlantic, October 2013

Which statement can best be inferred from the excerpt?

• The region’s wealth is primarily based on its investment in education and skilled workers.

• The region’s economy is strong because it exports more goods than it imports.

• The region’s wealth depends mainly on its access to raw materials and land.

Multiple Choice

What does Human Capital refer to in economics?

• The size of a country's labor force

• The ratio of workers to physical capital

• The economic value of a worker's skill set

• The number of workers needed to build the Capitol

Multiple Select

A Natural Resource comes from Earth. Which items are natural resources? Select ALL that apply...

• wood

• plastic

• bricks

• water

• wind

Multiple Choice

Physical capital refers to the tools, machines, buildings, and equipment that help produce goods and services. When countries invest in physical capital, workers can produce more in less time, helping to increase Gross Domestic Product (GDP) — the total value of goods and services a nation produces.

Document A:
In Country A, most factories use modern machinery and technology to manufacture cars. Each worker produces 10 cars per week.

Document B:
In Country B, factories rely on old equipment that often breaks down. Each worker produces only 4 cars per week.

Based on the documents above, what can be inferred about the relationship between physical capital and a country's GDP?

• Investing in modern tools and equipment helps workers become more productive, increasing GDP.

• Older tools and machinery make workers more efficient and reduce production costs.

• GDP decreases when countries invest in physical capital instead of labor.

What else impacts economic growth and development?

The Dependency Ratio

Dependents rely on workers for support (like money for food, healthcare, schools, and pensions).

A high dependency ratio means fewer workers supporting more dependents → more pressure on the economy.

A low dependency ratio means more workers per dependent → easier to support services and grow the economy.

Dependency Ratio

• Imagine a small town with: 10 children, 5 elderly, and 50 working age adults.
  

Multiple Choice

Now imagine a city with: 40 children, 20 elderly, 50 working-age adults.

Step 1- Add the dependents

Step 2- Find the amount of the working age adults.

Step 3- Calculate-

What is the dependency ratio and what does it mean?

• 120%- There are more dependents than workers! This is tough on the economy because fewer workers must support more people.

• 100%- There are more dependents than workers! This is tough on the economy because fewer workers must support more people.

• 30%- Not too high—workers can handle supporting the dependents.

• 25%- Not too high—workers can handle supporting the dependents.

Match

The dependency ratio is like a balance scale between people who work and people who depend on them.

Match.

• High dependency

• low dependency

• dependents

more stress on workers and the economy.

easier to provide services, save money,

People that cannot work

• more stress on workers and the economy.

• easier to provide services, save money,

• People that cannot work

Robert F. Kennedy

"GDP is a very important measurement of everything except that which makes life worthwhile."

"It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country."