Economics 13-1

Measuring the Nation’s Output

Pages 341-348

Measuring the Nation’s Output

ESSENTIAL QUESTION:• How and why does the United States measure economic growth?

•How is Gross Domestic Product (GDP) measured?

•What are the limitations of the use of GDP as a measurement tool?

pages 341-348

Measuring the Nation’s Output pages 341-348

GPS STANDARDS:

SSEMA1- Describe the means by which economic activity is measured.

b.) Define Gross Domestic Product……

l Measuring the Nation’s Output l pages 341-348

• A growing economy means an expanding economy, one that continues to provide more people with what they want or need.

• The nation’s economic growth is the key to a better future for everyone.

l Measuring the Nation’s Output l pages 341-348• The Gross Domestic Product (GDP)–the dollar amount of all final goods and services produced within a country’s national borders in a year–is the single most important measure of the economy’s overall economic performance.

• When GDP does not do well, neither does the rest of the economy.

•Economists devised national income accounting–a system of statistics and accounts that keeps track of production, consumption, saving, and investment–to track overall economic performance.

l Measuring the Nation’s Output l pages 341-348

• This data becomes part of the National Income and Product Accounts (NIPA) kept by the U.S. Department of Commerce.

• Even with our expanding debt, the United States has the highest Gross Domestic Product in the world.

•In 2001 its GDP reached $9.4 trillion, up from $9.1 trillion in 2000.

l Measuring the Nation’s Output l pages 341-348

• Gross Domestic Product (GDP), a measure of national output is computed by multiplying all final goods and services produced in a 12-month period by their prices.

GDP–The Measure of National Output (cont.)

Figure 13.1Estimating Gross Domestic Product

l Measuring the Nation’s Output l pages 341-348

• GDP tells nothing about the composition of output or the impact of production on quality of life.

• Despite its limitations, GDP is still the best measure of overall economic health.

• When national economists realized we were in a recession, they knew it because GDP (economic growth) moved into the negative numbers.

l Measuring the Nation’s Output l pages 341-348

What does an increase in GDP indicate?

That the country has experienced economic growth.

GNP–The Measure of National Income

• Gross National Product (GNP) is equal to GDP plus all payments that Americans receive from outside the United States minus all payments made to foreign-owned resources inside the United States.•

GNP–The Measure of National Income

• Which measure of national income would you be interested in if you were trying to forecast sales of consumer goods?

•Disposable personal income, which reflects the amount of money individuals have to spend.

l Measuring the Nation’s Output l pages 341-348

• What would be the effects of a decline in the GDP?

• There would be a decline in manufacturing, spending, or both.

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• Why is GDP important?

• It is the best measure of economic health.

Drawing Circular Flow of Economic Activity

Figure 13.3Circular Flow of Economic ActivityFigure 13.3Circular Flow of Economic Activity

p. 347

• draw figure 13.3 The Circular Flow of Economic Activity

• color the drawing using crayons or markers

• Define or EXPLAIN the following terms below the drawing on your paper:

1.) GDP

2.) GNP

3.) Net National product

4.) National Income

5.) Personal Income

6.) Disposable personal income

7.) (C) Consumer sector

8.) (G) Government sector

9.) (I) Investment sector

Pages 341-348