04/01/16
Lesson 1: Macro goals, flow model and GDP
Learning Objective: I can list the five main macroeconomic goals.
DA: Define microeconomics.
DA: Define microeconomics.
Review Questions:
1. What are the two basic assumptions that economist make about individuals?
2. What does it mean to “maximize your utility?
3. What are some “barriers to entry” that make it so only seller can provide a good or service? Why are barriers to entry important?
4. What is the role and significance of price in a market economy?
5. Besides prices, what is another way that firms can compete in order to outperform their competition?
6. According to Wheelan, what makes markets a good way to organize economic activity?
7. What does Wheelan mean when he says the market economy operates as an “amoral force?”
8. Identify a particular concept you found most interesting and briefly explain why.
Macroeconomics=The study of a national economy
- Allocation of a nation's resources and is concerned with five main variables:
We will discuss each of these goals separately throughout the semester.
Before we introduce the next topic, the basic circular flow model needs to be reintroduced.
Activity: Working with a partner try to complete the circular flow model-
Leakages and Injections:
Leakages:
1. Savings-Foregoing current consumption to allow for consumption in the future.
3. Taxes-Income earned by households must be paid to the government in the form of taxes. |
Injections:
1. Investment-Borrowing money from financial institutions such as banks. Money is used to increase their stock of capital and expand output.
3. Government spending-Schools, roads, campaigns to reduce smoking, and hospitals. |
How is national income measured?
1. Output method: Measures the actual value of goods/services produced. (3)
- Grouped by production sectors: agriculture/mining (primary), manufacturing (secondary), and services (tertiary).
3. Expenditure method: Measures the value of all spending on goods and services in the economy. (4)
- Spending by households, consumption (C)
- Spending by firms, investment (I)
- Spending by governments (G)
- Spending by foreigners on exports-imports, net exports (X-M)
GDP=Total value of all final goods and services produced in an economy in a year.
Activity:
- GDP = C + I + G + (X - M)
Activity:
HW: Using the following source below, identify two countries, one that has increased and decreased in GDP. Research and summarize why this increase or decrease occurred. Include your sources.
http://www.tradingeconomics.com/country-list/gdp