Macro 5

2. Lecture 5
Macroeconomics

3. Opening
Prayer

4. GDP
Gross Domestic Product
The market value of all
final goods and services
produced in a country in
a given time

5. GDP
How much stuff a
country makes

6. GDP per
Capita
GDP per Person
Average GDP

7. MarketValue
What something
would sell for

9. MarketValue
One Apple
plus
One Orange
= Three Dollars

10. All
Everything except...
Stuff you don’t sell

11. Final
Intermediate
Final

12. Final
Intermediate

13. Goods
and
Services

14. Goods
Services

15. Produced
New Stuff
Does not include the
sale of used goods

16. Within a
Country

17. In a given period
of time
Year Y/Y
Quarter Q/Q
Annualized: Q x 4

18. Percentage
Change
new number - old number
old number

19. ThisYear - LastYear
LastYear
ThisYear = 75
LastYear = 60
Percentage Change?

20. 75 - 60
60
15
60
.25 or 25%

21. How do you
calculate
GDP?

22. GDP =
C = Consumption
I = Investment
G = Government
X = Exports
M = Imports

23. GDP =
C + I + G + (X - M)

24. Consumption
Spending by
households on goods
and services, except
new housing

25. Investment
Spending on capital
equipment, inventories, and
structures, including new
housing

26. Government
Spending on goods
and services from
local, state, and
federal governments.

27. Net Exports
Exports minus
imports

28. Net Exports
Foreigners buying
exports minus
domestic residents
buying foreign goods

29. What is GDP?
C = 105
I = 40
G = 25
X = 30
M = 20

30. GDP
= C + I + G + (X - M)
= 105 + 40 + 25 +(30-20)
= 105 + 40 + 25 +10
= 180

31. GDP
GDP per Capita

32. GDP $75 trillion
Population 7.5 billion
GDP Per Capita $10,000

33. GDP $18.5 trillion
Population 323 million
GDP Per Capita $57,275
United States
Per Day $157

34. GDP $11 trillion
Population 1.4 billion
GDP Per Capita $7,857
Per Day $21
China

35. activated their entrepreneurs

36. https://fred.stlouisfed.org
Public Data Explorer

37. Review
GDP
GDP per Capita
Innovation

38. Real
vs.
Nominal

44. Prices
Nominal or Current
Real or Constant

45. Inflation
Cause:
Printing money faster than
making goods and services
Effect:
Rising prices

46. Nominal
Current prices
Current quantity

47. Real
will always have
a base year

48. Real
Constant prices
Current quantity

49. Pizza Soda
Year Price Qty Total Price Qty Total
Total
Total
%
Change
2010 $5 100 $500 $1.00 50 $50 $550
2011 $6 134 $804 $1.50 40 $60 $864 57.1%
2011* $5 134 $670 $1.00 40 $40 $710 29.1%
2012 $10 150 $1500 $2.00 30 $60 $1,560 80.6%
2012* $5 150 $750 $1.00 30 $30 $780 9.9%
* Prices adjusted to 2010 Rates
Real versus Nominal GDP

50. GDP Deflator
Nominal GDP
Real GDP
= x 100

51. GDP Deflator
$1,560
$780
= x 100
= 200 Prices have
doubled

52. If the the GDP Deflator is
178 and a Pizza cost $15,
what was the price in the
base year?
$15 ÷ 1.78 = $8.43

53. GDP Inflation Rate
GDP DeflatorYear 2 - GDP DeflatorYear 1
GDP DeflatorYear 1
= x 100

54. If the the GDP Deflator is
178 in 2010 and 192 in 2011,
what was the rate of
inflation?
192-178
178
x 100 =7.86%

55. Year Nominal Real
GDP
Deflator
2010 550 550
2011 864 710
2012 1560 780
GDP Deflator = (Nominal ÷ Real ) x 100

56. Problems with GDP
Inequality
Types of Goods and Services
Happiness
Others?