Friday business cycle AP Macro

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Friday business cycle AP Macro

  1. 1. In your notes 1. Draw 2 graphs showing Mexico’s GDP over the past 10 years. (nominal GDP and % change) 2. How would you describe their economy? Year GDP Percent change 2000 1065.207 8.27 % 2001 1079.214 1.31 % 2002 1097.527 1.70 % 2003 1135.984 3.50 % 2004 1231.841 8.44 % 2005 1297.514 5.33 % 2006 1408.444 8.55 % 2007 1496.239 6.23 % 2008 1547.597 3.43 % 2009 1467.581 -5.17 % 2010 1564.872 6.63 %
  2. 2. 2 goals of Macroeconomic Policy   Long Term Growth Stability
  3. 3. Mexico’s Economy
  4. 4. US GDP Changes   Write down 3 events that might have either negatively or positively affected the US GDP For example: 1890’s Railroad connections increased consumer spending and investment
  5. 5. The Business Cycle  Changes in GDP over time
  6. 6.  “downturn” Recession “slump” 6 + months of negative GDP growth • Decreased Spending • Lack of trade Prosperity  “boom” “Expansion” 6+ months of positive GDP growth • Technology • Productivity
  7. 7. Label recession on Mexico BR graph
  8. 8. Klein draw recession on PPF
  9. 9. In your notes Calculate the GDP for Portugal in 2008. (in millions) Consumers spent: $131,300 Investment: $42,000 Exported $56,000 Imports $87,000 Portugal: 10 million people Government: $90,000 Currency: Euro What is Portugal’s GDP per Capita?
  10. 10. Portugal
  11. 11. Great Depression 1929-1933 27% drop in GDP 25% Unemployment 36% drop in World trade 43 straight months of declining spending !!!! Great Recession 2007-2009 5 % drop in GDP 10% Unemployment 20% drop in World trade 18 straight months of declining spending Source Yoram Bauman, World Bank
  12. 12. Fiscal Cliff Y = C + I + G + X >>>> (exports-imports) Short Run 5% reduction in Government spending Significant tax increases affect on I and C What would a ________ say about this in SR and LR? Keynesian Classical Perspective (Hayek)
  13. 13. GDP = C + I + G + (Ex – Im) Assuming everything else stays equal, what happens if… US consumers spend 5% more in 2012, than 2011 for the Winter Holidays.
  14. 14. GDP = C + I + G + (Ex – Im) Assuming everything else stays equal, what happens if… Banks report 3 % increase in business spending
  15. 15. GDP = C + I + G + (Ex – Im) Assuming everything else stays equal, what happens if… US government passes $800 billion healthcare reform bill
  16. 16. GDP = C + I + G + (Ex – Im) Assuming everything else stays equal, what happens if… Mexican citizens demand 15 % fewer US made cars
  17. 17. GDP = C + I + G + (Ex – Im) Assuming everything else stays equal, what happens if… The internet is created
  18. 18. GDP = C + I + G + (Ex – Im) Assuming everything else stays equal, what happens if… US students learn about the benefits of saving money
  19. 19. GDP = C + I + G + (Ex – Im) Assuming everything else stays equal, what happens if… Free trade zone extends from Canada to Argentina
  20. 20. GDP = C + I + G + (Ex – Im) Assuming everything else stays equal, what happens if… US military invades Iran
  21. 21. GDP = C + I + G + (Ex – Im) Assuming everything else stays equal, what happens if… World Demand for US timber increases
  22. 22. Assignment What would happen to the GDP of the US if…(assume only 1 variable changes) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. The government increases education spending by $12 billion Russians demand more US made cars The US government decides the border fence is too expensive and cuts its funding US government places a tax on all Japanese imports Consumers get easier access to credit cards and buy 35 % more video games this year High school graduates get excited about the stock market and invest 10% of their future incomes. The price of food increases by 14% in 2010 US business become fearful of the coming recession and slow spending by 4% New modern warfare game released Make up an example of your own, show GDP change.
  23. 23. Assignment Create an assignment for the regular students to do #1 12 realistic scenarios for students to choose the component. 3 for each part of GDP. For example: 1965 US creates Medicare (govt spending) #2 2 GDP problems (C + I + G + X) #3 Why is GDP per capita a better measure of wealth than GDP? 

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