Warm-up: Get a yellow text 1.What does GDP stand for? 2.How do we calculate GDP? 3.What do we use to...

Warm-up: Get a yellow text

1. What does GDP stand for?

2. How do we calculate GDP?

3. What do we use to measure inflation?

4. How do we measure unemployment?

Begin Unit 3 Macroeconomics

SSEMA1

b. Define Gross Domestic Product (GDP), economic growth, unemployment, Consumer Price Index (CPI), inflation, stagflation, and aggregate supply and aggregate demand.

c. Explain how economic growth, inflation, and unemployment are calculated.

N.B. #25- Economic Indicators• Add the new vocab words to your list• Read and take 2-column notes on Lesson

9 (pp.72-77) of the EOCT Coach• Be sure to answer the following questions

in your notes:

1.How are GDP, the CPI, and the unemployment rate calculated?

2.What are the characteristics of the four types of unemployment?

Economic Indicators

Quiz Time!!!!!!!!

Question 1What type of unemployment?

• Construction workers are laid off for the winter, but plan to return to work when the weather is better.


• Workers are laid off at a Pog factory. A downturn in the economy has lowered demand for luxury items.


• The United States has lost manufacturing jobs as a result of a change to a service-oriented economy.


• A fast-food worker graduates from college and quits his job to look for a better career.

Question 5

True or False?

Unemployment in the U. S. has recently been higher than 8 percent.

Quiz!!1. In your own words, describe what

GDP attempts to measure.

2. Explain the formula for calculating GDP.

Naked Econ

Read from the bottom of p. 177-the top of p. 181

1. Why do dollars have value?2. What is the best way to think about

inflation?3. What does it mean if I receive 5%

interest in an investment while the inflation rate is 3%?

MACROECONOMIC GOALS

LOW UNEMPLOYMENT

LOW INFLATION

STABILITY

GROWTH

ECONOMIC GROWTH

Defined by sustained increases in GDP adjusted for inflation

The Business Cycle

• The ups and downs of the economic activity

• The good times and bad times

• P. 310

The Business Cycle

4 phases1. Expansion- increasing

GDP and growth

2. Peak- the top of the expansionary period- lowest unemployment

3. Contraction- decreasing GDP-increasing unemployment

4. Trough- “the bottom” of the contraction

The Business Cycle

PeakPeak

ExpansionExpansion

TroughTrough

contractioncontraction

The Business Cycle

Recession

Decline in real GDP for 6+ months

The Business Cycle

Recession• Worst in 1929-1933 (33%

decline in GDP)• 10 in US since 1945

The story of Peorgia

• Work with a partner who has the same numbered handout as you do.

• Calculate all the economic indicators for Peorgia

• We will work with this more soon!

The story of Peorgia

• Work with your group to determine which phase of the business cycle Peorgia is in

• Create a skit involving all group members that shows what life might be like during this phase of the bussiness cycle.

Overview

• Aggregate Supply and Demand• Supply and Demand at the MACRO

level

Aggregate Supply

The amount of GDP an economy will produce at each and every price level

Aggregate Supply

AS

Price levelPrice level

OutputOutput

Aggregate Demand

Amount of GDP that will be demanded at different price levels

Aggregate Demand

P

AD

O


OutputOutput

Aggregate Supply and Demand

AS

P

AD

O


OutputOutput

Equilibrium!Equilibrium!

Key learning: When aggregate demand is equal to aggregate supply at a level that just employs all available productive resources with no change in price level, the economy is at full-employment, non-inflationary equilibrium

Aggregate Supply Determinants

1. Cost of inputs (ex.the cost of oil falls!)

2. Productivity (ex. we get better computers!)

3. Government regulations (ex. We have to spend money to clean up pollution!)

Aggregate Supply Shifters:

Change in cost of inputs (domestic or imported)Change in productivityGovernment regulations

AS1 AS2


OutputOutput

Aggregate Demand Determinants1.Consumer Spending2.Investment Spending3.Government Spending

Aggregate Demand Shifters:

Change in Consumer SpendingChange in Investment SpendingChange in Government Spending

P

AD1 AD2

O


OutputOutput

Aggregate Supply and Demand and the Business

Cycle• Complete the chart on your paper• For AD and AS, predict if there will be

an increase, a decrease, or no change.• Also, state if the curve will shift to the

right or to the left.


Cycle

We can try to stimulate the economy by manipulating the AD and AS curves.

When AD is below full-employment production falls and unemployment results

AS

P

AD

O


OutputOutput


AS

P

AD

O


OutputOutput

Unemployment!!


AS

P

AD

O


OutputOutput



Cycle

We want to move the curves back to the full-employment non-inflationary equilibrium!

How Can We Shift the Curves and Help (Hopefully) the

Economy?

Two Tools:

1. Fiscal Policy

2. Monetary Policy

Expansionary Policy Increases Demand

AS

P

AD

O O2


OutputOutput

Warning!!!

•Demand-Pull Inflation: Rise in the price level when agg. Demand exceeds agg. Supply.

Demand-Pull Inflation

AS

P2

P AD2

AD

O O2


OutputOutput

Warning!!!

• Cost-Push Inflation: Rise in the price level due to increase in costs of production (shifts agg.supply curve left).

Cost-Push Inflation

AS2

AS

P2

P

AD

O2 O


OutputOutput



AS

P

AD

O


OutputOutput


The Business Cycle

1. Be sure to label all points on the B. C. graph

2. During which phase is production increasing?

3. During which period is unemployment likely to be lowest? Why?

The Business Cycle

As an economy moves from recession to expansion, what is likely to happen to

Wages?Investments?Employment?Profits?

PeakPeak

TroughTrough

Warm-up: Get a yellow text 1.What does GDP stand for? 2.How do we calculate GDP? 3.What do we use to...

Documents

Transcript of Warm-up: Get a yellow text 1.What does GDP stand for? 2.How do we calculate GDP? 3.What do we use to...