national debt and gross domestic product business economics
TRANSCRIPT
What you should learn today:
• Define recession• Be able to express the entire GDP
equation, and what each component stands for
• Identify a final good• Identify an intermediate good• Identify inflation
EXPANSION AND CONTRACTION: THE BUSINESS CYCLE
A recession is a recurring period of decline in
total output, income, employment, trade,
Usually lasting from six months to a year, and marked by widespread contractions in many sectors of the economy.
Expansions can range in duration from several months to several years.
Double Dip Recession
Recession + recovery + recessionSlowdown in demand for goods & serviceLayoffs & spending cutbacks
GROSS DOMESTIC PRODUCT
• The market value of all final goods & services produced within a country in a given period of time
GROSS DOMESTIC PRODUCT
GDP = C + G + I + NXC - Consumption
G – Government Spending
I – Investments
NX – Net Exports
ConsumptionConsumption- Durable goods
• (jewelry, laptop, baseball glove)
- Nondurable goods• (food, gasoline, clothing)
- Services • (medical expenses, mechanic,
landscaper)
Government SpendingGovernment Spending- Defense
- Postal Service
- Roads
- Schools
- Doesn’t include social security or unemployment benefits
InvestmentsInvestments• Residential
• Single-family homes• Multi-family homes• Rental Property
• Non-Residential• Equipment (machines and tools)• Business Plants
• Business Inventories
Net ExportsNet Exports• Exports – Imports = NX
• Ship $128,000 worth of corn to Columbia
• Receive $115,000 worth of coffee beans from Columbia
• Net Exports?
Transfer Payments $54
Interest Income $150
Depreciation $36
Wages $67
Gross Private Investment $124
Business Profits $200
Indirect Business Taxes $74
Rental Income $75
Exports$118
Net Foreign Factor Income $12
Government Purchases$156
Household Consumption$304
Imports $95
GDP•Gross Private Investment- $124•Government Purchases- $156•Household Consumption- $304•Exports- $118•Imports- $95
124+156+304+(118-95)=?
GDP=$606GDP=$606
GROSS DOMESTIC PRODUCT
Final Goods•Intended for the end user
Intermediate Goods•Components of ingredients in the production of other goods
Tangible goods•DVDs, mountain bikes, soda
Intangible goods•Dry cleaning, concerts, cell phone service
Final Goods and ServicesManicuresBreadCruise missileNew factoryDresses Increase in automobile inventory
Intermediate Goods Window glass in new automobiles
Lumber in a new house
Screws used in a cruise missile
Flour for making bread
Cloth for making dresses
FINAL V. INTERMEDIATE GOODS
GDP GOODS & SERVICES AT FINAL DESTINATION
Who buys haircuts, bread & dresses?Who buys cruise missiles?Who buys a new factory or builds up an inventory of unsold products such as automobiles?
Households, families, individuals
Government Businesses