Macroeconomics

Motivation How many students

live in a household with one parent at home?

What are the advantages and disadvantages of having this type of arrangement?

Objective The students will learn the three

macroeconomic goals. Students will know the characteristics

of the the Gross National Product (GNP).

Students will distinguish the GNP from the GDP.

Objective (Continued)Students will know the

limitations of the GDP.Students will know the

characteristics of the business cycle.

3 Macroeconomic Goals

Gross National Product

The total dollar value of all final goods and services produced in the economy during one year’s time.

Business Cycle

Business Cycle

Gross Domestic ProductThe total dollar value of all

final goods and services produced by resources in the United States (regardless of who owns them) during one year’s time.

Composition of the GNP

1. Consumer goods (Personal Consumption) 60%

Composition of the GNP

2.Physical Investment (Business) 20%

Composition of the GNP

3) Governmental Purchases 20%

Composition of the GNP

4) Foreign Investment ?%

Limitations of the GDP http://

hanseconomics.com/2012/01/29/the-shortcomings-of-gdp-as-a-measure-of-economic-growth/ and http://econperspectives.blogspot.com/2008/08/limitations-of-using-gdp-as-measure-of.html.

Limitations of the GDP1. GDP

Doesn’t Consider the Kinds of Items Produced.

Limitations of the GDP2) GDP

Doesn’t Measure Amount Produced Per Person.

Limitations of the GDP3) GDP

Doesn’t Measure How Goods are Distributed.

4) GDP Doesn’t Allow for Changing Price Levels.

Limitations of the GDP

Limitations of the GDP5. GDP Doesn’t Include Unpaid House Work.

6. GDP Doesn’t Include Barter.

Limitations of the GDP

Limitations of the GDP

7. GDP Doesn’t Measure Quality of Items.

Limitations of the GDP8. GDP Doesn’t Recognize the Value of Leisure Time.

Closure Handout 12.1

The Gross National Product and 15.2 The Case Against Economic Growth