DPQDPQ

Capital gains tax?Capital gains tax?

What’s a second?What’s a second?

1/25 Test Results1/25 Test Results

Things to know from Things to know from last weeklast week

Things to know from Things to know from last weeklast week Supply side economicsSupply side economics

Things to know from Things to know from last weeklast week

Supply side economicsSupply side economics Laffer CurveLaffer Curve

Things to know from Things to know from last weeklast week

Supply side economicsSupply side economics Laffer CurveLaffer Curve Keynesian economicsKeynesian economics

National outputNational output

Fallacy of CompositionFallacy of Composition

Fallacy of CompositionFallacy of Composition

The mistaken assumption that The mistaken assumption that what applies to a part applies what applies to a part applies automatically to the wholeautomatically to the whole

Fallacy of CompositionFallacy of Composition

The mistaken assumption that The mistaken assumption that what applies to a part applies what applies to a part applies automatically to the wholeautomatically to the whole

Example?Example?

Fallacy of CompositionFallacy of Composition

The mistaken assumption that The mistaken assumption that what applies to a part applies what applies to a part applies automatically to the wholeautomatically to the whole

Example?Example? ““Saving” jobs in the U.S. auto Saving” jobs in the U.S. auto

industryindustry

Fallacy of CompositionFallacy of Composition

The mistaken assumption that The mistaken assumption that what applies to a part applies what applies to a part applies automatically to the wholeautomatically to the whole

Example?Example? ““Saving” jobs in the U.S. auto Saving” jobs in the U.S. auto

industryindustry Obama spent at least $85 billion Obama spent at least $85 billion

to bail out GM and Chryslerto bail out GM and Chrysler

Fallacy of CompositionFallacy of Composition

The mistaken assumption that what The mistaken assumption that what applies to a part applies automatically applies to a part applies automatically to the wholeto the whole

Example?Example? ““Saving” jobs in the U.S. auto industrySaving” jobs in the U.S. auto industry Obama spent at least $85 billion to bail Obama spent at least $85 billion to bail

out GM and Chryslerout GM and Chrysler But how many jobs elsewhere did it But how many jobs elsewhere did it

cost?cost?

Why would auto Why would auto bailout cost jobs bailout cost jobs elsewhere?elsewhere?

Why would auto Why would auto bailout cost jobs bailout cost jobs elsewhere?elsewhere? Everything the government Everything the government

spends is taken from somebody spends is taken from somebody elseelse

Why would auto Why would auto bailout cost jobs bailout cost jobs elsewhere?elsewhere? Everything the government Everything the government

spends is taken from somebody spends is taken from somebody elseelse

The taxes to support above The taxes to support above market-rate UAW wages and market-rate UAW wages and benefits could have been used to benefits could have been used to support the next Google or Applesupport the next Google or Apple

Why would auto Why would auto bailout cost jobs bailout cost jobs elsewhere?elsewhere? Everything the government spends Everything the government spends

is taken from somebody elseis taken from somebody else The taxes to support above The taxes to support above

market-rate UAW wages and market-rate UAW wages and benefits could have been used to benefits could have been used to support the next Google or Applesupport the next Google or Apple

Government is notoriously Government is notoriously inefficientinefficient

Measuring National Measuring National OutputOutput

Measuring National Measuring National OutputOutput GDP: gross domestic productGDP: gross domestic product

Measuring National Measuring National OutputOutput GDP: gross domestic productGDP: gross domestic product GNP: gross national productGNP: gross national product

Gross National ProductGross National Product

The sum total of all the goods and The sum total of all the goods and services produced by the services produced by the country’s people in any given country’s people in any given year, year, whereverwherever they may be they may be locatedlocated

Gross Domestic Gross Domestic ProductProduct

Gross Domestic Gross Domestic ProductProduct The sum total of all goods and The sum total of all goods and

services produced services produced withinwithin a a nation’s borders including that by nation’s borders including that by foreign nationalsforeign nationals

Gross Domestic Gross Domestic ProductProduct The sum total of all goods and The sum total of all goods and

services produced services produced withinwithin a a nation’s borders including that by nation’s borders including that by foreign nationalsforeign nationals

GDP is the preferred GDP is the preferred measurement of contemporary measurement of contemporary economists, used by the U.S. economists, used by the U.S. since 1992since 1992

The two main The two main components of GDPcomponents of GDP

The two main The two main components of GDPcomponents of GDP Private consumption and public Private consumption and public

sector spendingsector spending

The two main The two main components of GDPcomponents of GDP Private consumption and public Private consumption and public

sector spendingsector spending In 2010, U.S. GDP was $14.7 In 2010, U.S. GDP was $14.7

trilliontrillion

The two main The two main components of GDPcomponents of GDP Private consumption and public Private consumption and public

sector spendingsector spending In 2010, U.S. GDP was $14.7 In 2010, U.S. GDP was $14.7

trilliontrillion Private consumption was $10.4 Private consumption was $10.4

trilliontrillion

The two main The two main components of GDPcomponents of GDP Private consumption and public Private consumption and public

sector spendingsector spending In 2010, U.S. GDP was $14.7 In 2010, U.S. GDP was $14.7

trilliontrillion Private consumption was $10.4 Private consumption was $10.4

trilliontrillion Private investment was $1.8 Private investment was $1.8

trilliontrillion

The two main The two main components of GDPcomponents of GDP Private consumption and public Private consumption and public

sector spendingsector spending In 2010, U.S. GDP was $14.7 trillionIn 2010, U.S. GDP was $14.7 trillion Private consumption was $10.4 Private consumption was $10.4

trilliontrillion Private investment was $1.8 trillionPrivate investment was $1.8 trillion Government spending was $3 Government spending was $3

trillion, about 20%trillion, about 20%

Hey, wait a minute!Hey, wait a minute!

Hey, wait a minute!Hey, wait a minute!

Problem 1: The totals are $15.2 Problem 1: The totals are $15.2 trillion, not $14.7 trilliontrillion, not $14.7 trillion

Hey, wait a minute!Hey, wait a minute!

Problem 1: The totals are $15.2 Problem 1: The totals are $15.2 trillion, not $14.7 trilliontrillion, not $14.7 trillion

Problem 2: Federal budget alone Problem 2: Federal budget alone in 2010 was $3.69 trillionin 2010 was $3.69 trillion

Common GDP FormulaCommon GDP Formula

GDP = C + I + G + (X − M)GDP = C + I + G + (X − M)

C is consumptionC is consumptionI is gross investmentI is gross investmentG is government spendingG is government spendingX is exportsX is exportsM is importsM is imports

Top 5 GDP NationsTop 5 GDP Nations

Top 5 GDP NationsTop 5 GDP Nations

U.S.................$14.6 trillionU.S.................$14.6 trillion PRC (China)......$5.7 trillionPRC (China)......$5.7 trillion Japan...............$5.3 trillionJapan...............$5.3 trillion Germany..........$3.3 trillionGermany..........$3.3 trillion France.............$2.6 trillionFrance.............$2.6 trillion

Top 5 GDP Nations, Top 5 GDP Nations, Per CapitaPer Capita

Top 5 GDP Nations, Top 5 GDP Nations, Per CapitaPer Capita LuxembourgLuxembourg NorwayNorway QatarQatar SwitzerlandSwitzerland DenmarkDenmark

Top 5 GDP Nations, Top 5 GDP Nations, Per CapitaPer Capita LuxembourgLuxembourg NorwayNorway QatarQatar SwitzerlandSwitzerland DenmarkDenmark #10: United States#10: United States

Top 5 GDP Nations, Top 5 GDP Nations, Per CapitaPer Capita LuxembourgLuxembourg NorwayNorway QatarQatar SwitzerlandSwitzerland DenmarkDenmark #10: United States#10: United States #95: China#95: China

“Figures often beguile me, particularly when I have the arranging of them myself; in which case the remark attributed to Disraeli would often apply with justice and force: ‘There are three kinds of lies: lies, d**n lies and statistics.’"

Mark Twain's Own Autobiography: The Chapters from the North American Review

Unintended Unintended ConsequencesConsequences

““Chili’s Feels Heat to Pare Costs”Chili’s Feels Heat to Pare Costs”

Wall Street JournalWall Street Journal, 1/28/11, 1/28/11

Assignment for Feb. 15Assignment for Feb. 15

Read and study chapter 16 of Read and study chapter 16 of Basic EconomicsBasic Economics: “Money and the : “Money and the Banking System”Banking System”