Day 10

283 views

Published on

Published in: Economy & Finance, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
283
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
2
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Day 10

  1. 1. Bellringer Quiz 7 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?
  2. 2. Traditional IRA • Individual Retirement Account • You have to set it up • You can deposit up to $5000 per year • (into mutual funds, stocks or bonds) • Tax loopholes (breaks) • Can’t touch until 60 • Not liquid At 10% interest, a $5000 IRA becomes $226,000 over 40 years! $10,000 is over $400,000!
  3. 3. Roth IRA • Individual Retirement Account • You have to set it up • You can deposit up to $5000 per year • (into mutual funds, stocks or bonds) • No tax break, but tax free when you retire • Can’t touch until 60 • Not liquid At 10% interest, a $5000 IRA becomes $226,000 over 40 years! $10,000 is over $400,000!
  4. 4. 401 K Plan • Set up by employer • Payroll deduction • Invested into stock market • Lowers tax incidence • Tax break for employee • Employee match • Not liquid
  5. 5. BellRinger in your notes 1. 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. We will take some notes today
  6. 6. • 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
  7. 7. 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
  8. 8. Comparing classes? • On your white boards, what 3 ways could I compare the economies of my 5 economics classes?
  9. 9. Gross Domestic Product • A measure of a country’s economy in a given time (usually a year or quarter)
  10. 10. 2007 Top 10 World Economies
  11. 11. How do we calculate GDP?
  12. 12. 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
  13. 13. • All investment within a country in a certain year, month or quarter • IOW: business spending $$ on capital goods • Interest rates? Parts of GDP
  14. 14. Parts of GDP • All government spending in a country in a certain year, month or quarter • Examples: education, military, roads, healthcare, etc
  15. 15. Parts of GDP • All net exports from a country in a certain year, month or quarter • Exports = goods shipped to other countries • Imports = goods brought into a country from another country • USA? Mexico?
  16. 16. Net Exporters • A country or territory whose value of exported goods is higher than its value of imported goods over a given period of time. • A net exporter is the opposite of a net importer.
  17. 17. Net Importers
  18. 18. GDP Calculation Y = C + I + G + E where Y = GDP C = Consumer Spending I = Investment E = Exports - Imports G = Government Spending
  19. 19. United States GDP 2003 Y = C + I + E + G $$ in Billions Consumer Spending = $7605 Investment = $1606 Exports = $1021 Imports = $1508 Government Spending = $2017 $7605 + 1606 + (1021-1508) + 2017 = $10,741 (2003)
  20. 20. GDP • What economic activity did I leave out? • 2 ways GDP might be misleading?
  21. 21. GDP = C + I + G + (Ex – Im) Assuming everything else stays equal, what happens if… US consumers spend 5% more in 2013, than 2012 for the Winter Holidays.
  22. 22. GDP = C + I + G + (Ex – Im) Assuming everything else stays equal, what happens if… US government passes $800 billion healthcare reform bill
  23. 23. GDP = C + I + G + (Ex – Im) Assuming everything else stays equal, what happens if… US Students learn about the benefits of saving money
  24. 24. GDP = C + I + G + (Ex – Im) Assuming everything else stays equal, what happens if… Bank business lending increases by 7% in 2013
  25. 25. GDP = C + I + G + (Ex – Im) Assuming everything else stays equal, what happens if… Mexican citizens demand 15 % fewer US made cars
  26. 26. GDP = C + I + G + (Ex – Im) Assuming everything else stays equal, what happens if… The internet is created
  27. 27. GDP = C + I + G + (Ex – Im) Assuming everything else stays equal, what happens if… Americans demand 50% more Mexican baked goods
  28. 28. GDP = C + I + G + (Ex – Im) Assuming everything else stays equal, what happens if… NBA plays a game in China, afterwards Chinese people demand more US made basketballs
  29. 29. GDP = C + I + G + (Ex – Im) Assuming everything else stays equal, what happens if… US Government cuts income tax rates by 2 %
  30. 30. GDP = C + I + G + (Ex – Im) Assuming everything else stays equal, what happens if… World Demand for American timber increases
  31. 31. GDP = C + I + G + (Ex – Im) Assuming everything else stays equal, what happens if… US military invades Iran
  32. 32. Calculate the GDP for Portugal in 2008. (in millions) Consumers spent: $90,000 Investment: $40,000 Exported $50,000 Imports $90,000 Government: $10,000 Portugal: 10 million people Currency: Euro
  33. 33. Portugal
  34. 34. The Business Cycle • Changes in GDP over time recovery prosperity
  35. 35. Recession • 6 + months of negative GDP growth • 6+ months of positive GDP growth Prosperity
  36. 36. Netherlands GDP 2013 Y = C + I + E + G $$ in Billions Consumer Spending = $400 Investment = $104 Government Spending = $131 Exports = $339 Imports = $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 Netherlands 5. 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?
  37. 37. GDP Assignment 1. 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 2010 Consumers: $12 trillion Investment: $1.5 trillion Government: $2 trillion Exports: $1 trillion Imports: $2 trillion 6. Describe US Trade (net….?)
  38. 38. Bellringer 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?
  39. 39. Per capita statistics • Latin for “per each head” • IOW: Per person • X per capta = • On your BR: 5. Calculate cellphones per capita 6. Bank accounts per capita 7. Household vehicles per capita X # of people
  40. 40. GDP per capita • Economic indicator: Wealth by country • Adjust for different population – Divide GDP by population GDP $ # of people
  41. 41. 2009-2012 Top 24 GDP richest countries
  42. 42. 2009 Mexico vs. Costa Rica GDP: $1.483 trillion ($1483 billion) Population: 111 million GDP per capita: $13,360 GDP: $48 billion Population: 4.2 million GDP per capita: $11,480
  43. 43. 2009 China vs. Germany GDP: $6 trillion ($6,000 billion) Population: 1.3 billion 1,300 million GDP per capita: $4,600 GDP: $3.6 trillion ($3,600 billion) Population: 81 million .081 billion GDP per capita: $38,000
  44. 44. 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.
  45. 45. Bellringer 1. Describe 4 reasons people lose their jobs? 2. Calculate the GDP per capita for Travistan where the GDP is $100 billion and the population is 10 million (.01 billion) 3. If the Mexico’s GDP per capita of $13,360, is Travistan richer or poorer? 4. What conclusion could you make from the graph on the right
  46. 46. Why Unemployment? • You may be unemployed • Problem for society • Can cause recessions
  47. 47. Think back to US history • Why was the “Great Depression” so bad? • How did the government try to fix it?
  48. 48. Economic Event’s Name? Effect on GDP?
  49. 49. 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?
  50. 50. Labor Force • All 16 years and older who can work • “LF”
  51. 51. Not included in Labor Force • Children • Fulltime Students • Military • Physically Disabled • Mentally Disabled • Prisoners (over 2 million right now!) • Discouraged Workers • Retirees
  52. 52. Unemployment Rate Calculation • Simple calculation • # unemployed in labor force • # in labor force Always a % Higher the % the worse it is for the country 100
  53. 53. Types of Unemployment • Why do people lose their jobs? – Or • Why can’t they find a new job?
  54. 54. Types of unemployment • Frictional Unemployment • Just entered the labor force
  55. 55. Types of unemployment • Seasonal Unemployment • “off season” In July When grapes are growing
  56. 56. Types of unemployment • Cyclical Unemployment • GDP decline • Job losses caused by business cycle • Layoffs during recessions
  57. 57. Types of unemployment • Structural Unemployment • changes to the economy (show clip) technology Changes in taste Lack of skills Global Competition
  58. 58. USA Unemployment
  59. 59. Arizona’s Unemployment Rate
  60. 60. Spongebob unemployment clip 1. 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.
  61. 61. Unemployment types Assignment 1. Divide your paper into fourths 2. Draw a picture or comic to show the four types of unemployment 3. 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.
  62. 62. Full Sheet of paper 1. 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?
  63. 63. The Economist indicators 2014 4. Which 3 countries are in a recession? explain 5. Which 3 countries have problems with inflation? explain 6. Which 5 countries have rapidly growing economies? Explain 7. Which 3 countries would be safe places to invest? Explain 8. Which 3 countries have problems with unemployment? explain 9. Which 2 countries do you think will grow in the future? Explain 10. Which 3 are net importers? explain

×