2015 day 10

Bellringer Quiz7 minutes ½ sheet

1. Which of the three types of income taxes do wealthy people favor?

2. Which of the three types of income taxes do poorer people favor?

3. Which part of society is burdened most by the sales tax?

4. What does liquidity in finance measure?5. How is a traditional IRA different than a Roth

IRA?

BellRinger in your notes1. Who do you think the richest person on your street is?

2. How do you know?

3. Predict the country that has the world’s largest economy.

• Microeconomics – study of individuals and the economy

• Macroeconomics – study of large organizations and countries and the economy

• Finance – study of investment and credit

Finished with Microeconomics

Economic and financial indicators

• GDP• Consumer Prices• Unemployment Rate– Net importing country, + net

exporter• Budget Balance % of GDP• Interest rates• Currency exchange

Let me check your health

Comparing classes?• On your white boards, what 3 ways could I

compare the economies of my 5 economics classes?

Gross Domestic Product

• A measure of a country’s economy in a given time (usually a year or quarter)

2007 Top 10 World Economies

How do we calculate GDP?

Parts of GDP

• Write something new you bought last week

• All consumer spending on new items within a country in a certain year, month or quarter

• All investment within a country in a certain year, month or quarter

• IOW: business spending $$ on capital goods

• Interest rates?

Parts of GDP

Parts of GDP• All government

spending in a country in a certain year, month or quarter

• Examples: education, military, roads, healthcare, etc

Parts of GDP

• All net exports from a country in a certain year, month or quarter

• Exports = goods shipped to other countries

• Imports = goods brought into a country from another country

• USA? Mexico?

Net Exporters

• A country or territory whose value of exported goods is higher than its value of imported goods over a given period of time.

• A net exporter is the opposite of a net importer.

Net Importers

GDP Calculation

Y = C + I + G + E

where Y = GDP C = Consumer Spending I = Investment E = Exports - Imports G = Government Spending

United States GDP 2003Y = C + I + E + G$$ in BillionsConsumer Spending = $7605Investment = $1606Exports = $1021Imports = $1508Government Spending = $2017$7605 + 1606 + (1021-1508) + 2017 = $10,741 (2003)

GDP

• What economic activity did I leave out?

• 2 ways GDP might be misleading?

GDP = C + I + G + (Ex – Im)Assuming everything else stays equal, what happens if…

US consumers spend 5% more in 2015, than 2014 for the Winter Holidays.


US government passes $800 billion healthcare reform bill


US Students learn about the benefits of saving money


Bank business lending increases by 7% in 2015


Mexican citizens demand 15 % fewer US made cars


The internet is created


Americans demand 50% more Mexican baked goods


NBA plays a game in China, afterwards Chinese people demand more US made basketballs


US Government cuts income tax rates by 2 %


World Demand for American timber increases


US military invades Iran

Calculate the GDP for Portugal in 2008. (in millions)

Consumers spent: $90,000Investment: $40,000Exported $50,000Imports $90,000Government: $10,000

Portugal: 10 million peopleCurrency: Euro

Portugal

The Business Cycle

• Changes in GDP over time

recovery

prosperity

Recession• 6 + months of negative GDP growth

• 6+ months of positive GDP growth

Prosperity

Netherlands GDP 2013Y = C + I + E + G$$ in BillionsConsumer Spending = $400Investment = $104Government Spending = $131Exports = $339Imports = $305$400 + 104 + (339-305) + 131 = $669 (2003)Per capita: 669,000,000,000/16,000,000 = $41,812.50

16 million Dutch citizens

4. Calculate the GDP for the Netherlands5. Are they net exporters or net importers? How do you know?6. Which country has the largest economy in the world today?

7. Why are recessions usually caused by a decline in consumer spending?

http://upload.wikimedia.org/wikipedia/commons/2/20/Flag_of_the_Netherlands.svg

GDP Assignment1. Which part of the GDP formula is the largest? (It’s the part you are

the most involved in)2. How many recessions has Argentina had since 1900?3. When was their worst one?4. Why are recessions good for selling inferior goods?

5. Calculate US GDP 2010Consumers: $12 trillionInvestment: $1.5 trillionGovernment: $2 trillionExports: $1 trillionImports: $2 trillion

6. Describe US Trade (net….?)

On slates

1. Calculate the GDP of Mexico in 2009, where exports were $200 billion, imports were $250

billion, consumers spent $950 billion, $300 billion was invested in business, and

government spent $200 billion.2. Is Mexico a net exporter or net importer?

3. If Costa Rica’s GDP is $48 billion, which country has a larger economy?

4. How many students are in class today?5. Do you think the world is getting richer or poorer?

Per capita statistics

• Latin for “per each head”• IOW: Per person• X per capta = • On your BR:5. Calculate cellphones per capita6. Bank accounts per capita7. Household vehicles per capita

X# of people

GDP per capita• Economic indicator: Wealth by country• Adjust for different population– Divide GDP by population

GDP $# of people

2009-2012

Top 24 GDP richest countries

2009 Mexico vs. Costa Rica

GDP: $1.483 trillion($1483 billion)

Population:111 millionGDP per capita:$13,360

GDP: $48 billion

Population:4.2 millionGDP per capita:$11,480

2015 China vs. Germany

GDP: $9.2 trillion($6,000 billion)

Population:1.3 billion1,300 millionGDP per capita:$7,600

GDP: $3.6 trillion($3,600 billion)

Population:81 million.081 billionGDP per capita:$38,000

Show video clip

8. In the last 200 years, describe world GDP per capita.

9. Do you think this will continue for another 200 years? Explain.

On slates1. Calculate the GDP per capita for Travistan

where the GDP is $100 billion and the

population is 10 million (.01 billion)

2. If the Mexico’s GDP per capita of $13,360, is Travistan richer or

poorer?3. What conclusion could

you make from the graph on the right

Why Unemployment?• You may be

unemployed• Problem for society• Can cause

recessions• Sort the

unemployed people into 4 reasons

Think back to US history

• Why was the “Great Depression” so bad?

• How did the government try to fix it?

Economic Event’s Name?Effect on GDP?

Unemployment’s effect on GDP• GDP = C + I + G+ (Exports-

Imports) • Lower Consumer Spending• Lower investments, causes lower capital for new

businesses• Lower Exports• Lower Imports• Lower Government spending because lower tax

revenues

•GDP per capita?

Labor Force

• All 16 years and older who can work• “LF”

Not included in Labor Force

• Children• Fulltime Students• Military• Physically Disabled• Mentally Disabled• Prisoners (over 2 million right now!)

• Discouraged Workers• Retirees

Unemployment Rate Calculation

• Simple calculation

• # unemployed in labor force• # in labor force

Always a %Higher the % the worse it is for the

country

100

Types of Unemployment

• Why do people lose their jobs?– Or

• Why can’t they find a new job?

Types of unemployment

• Frictional Unemployment• Just entered the labor force

Types of unemployment

• Seasonal Unemployment• “off season”

In July When grapes are growing

Types of unemployment• Cyclical Unemployment• GDP decline• Job losses caused by business cycle• Layoffs during recessions

Types of unemployment• Structural Unemployment• changes to the economy (show clip)

technologyChanges in taste

Lack of skills

Global Competition

USA Unemployment

Arizona’s Unemployment Rate

Spongebob unemployment clip1. What type of unemployment does he

experience?2. Using economic cost vocabulary, why does

the “Mr. Crab” Spongebob?3. Is Patrick the Starfish technically

unemployed?4. What is the opportunity cost to society if

there are many people like Patrick?5. Consider the benefits and costs to society if

the government offers payment to people like SpongeBob who are unemployed.

Unemployment types Assignment1. Divide your paper into fourths2. Draw a picture or comic to show the four

types of unemployment3. On the back of the paper, write a few

sentences on how you will guard yourself against each type of unemployment

• Quantitative Easing: find an article on one of the unemployment types, cite it and summarize its findings.

Full Sheet of paper1. Recessions cause which type of unemployment?2. After college if you don’t have a job, you will be

experiencing which type of unemployment.3. The late 90’s are called the “Lost Decade” in Japan,

why do you think they call it that?

The Economist indicators 20154. Which 3 countries are in a recession? explain5. Which 3 countries have problems with inflation?

explain6. Which 5 countries have rapidly growing

economies? Explain7. Which 3 countries would be safe places to invest?

Explain8. Which 3 countries have problems with

unemployment? explain9. Which 2 countries do you think will grow in the

future? Explain10. Which 3 are net importers? explain

2015 day 10

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