1) National Economy page 4

From Introductory Finance for English Learners – text 1

Gross Domestic Product

The definition of GDP as listed in the text (page 2, text 1) is

GDP; The total amount of goods and services produced within a national economy in a given year.

Please listen to the video and note any words you here that are included on page 2 of the text

An important measure of overall economic performance is the total amount of goods and services produced within a national economy, in a given year, called the Gross Domestic Product (GDP).

GDP is used here instead of an older and perhaps more familiar measure, Gross National Product (GNP). U.S G.D.P measures the production of goods and services by factories and offices located in the United States. GNP includes the income of foreign owned assets in the United States.

GDP continued

When the external portion of overall production was small, this distinction was unimportant; but since the 1980s, the growth of multinational companies and their associated investments overseas has led to a measurable difference between income received by households in the united States and production generated by US firm.

GDP continued pt2

. Since we want a measure that reflects the production of goods and services associated with the income we receive from domestic production, we need a measure of economic performance that measures domestic output. Thus, the replacement of GDP for GNP.

Which is a more important measure according to the text GDP or GNP ?

Let’s look at how GDP and GNP are actually different in simpler terms !

The difference between GDP and GNP can be basically explained by two factors:

1) Ownership and 2) Location

GDP measures economic output based on location. If economic output occurs in Japan then it is included in the Japan’s GDP.

Ownership vs. Location continued

GNP measures economic output based on ownership. If the resources that produce the economic output are owned by a Japanese corporation , they are included in GNP data.

GDP vs. GNP cont.

For example, Honda owns a plant in the USA.

The plant’s output is included in the GDP of the USA because the plant is located in The USA.

Because Honda plants are owned by a corporation in Japan. The output of a Honda plant in the USA would not be included in the GNP of the US.

Contraction vs Expansion

What factors determine the GDP ?

Can anybody remember from the video. We had;

C + G + I + NX = GDP

The GDP formula C for Consumption + G for Government spending + I for Investment + NX for Net Exports (Trade Balance) =

GDP

Discussion; Why is GDP an important figure ?

GDP is an important number because it indicates whether a country’s economy is growing and expanding (GDP expansion) or shrinking and contracting (GDP contraction).

2 Demand and Supply pg 4

Aggregate- Collective amount, total or sum arrived-at by adding or putting together all components, elements, or parts.

What is demand ? Demand is how much quantity of a

product or service is desired by sellers. www.investopedia.com/university/economics/economics3.asp

Two questions; What is demand?and What does demand represent?

Two answers:

Demand is how much quantity of a product (or service) is demanded by buyers.

Demand represents how much quantity of a product or service is demanded by buyers.

So, what is supply ?

Supply is how much the market can offer.

What does supply represent ?

Supply represents how much the market can offer.

What is another word for correlation in the sentence below?

The correlation between price and how much of a good or service is supplied to the market is known as the supply relationship.

correlation defined

Degree and type of relationship between a two or more variables.

The correlation between demand and supply underlies the forces behind the allocation of resources

The Consumer Price Index pg 8

You know what a Consumer is and what a price is but what is an index ?

In financial English, an index is a ratio that measures changes in price levels or values. It is used to describe how prices, costs, quantities, etc., change over time.

1995 200 Index 2000

(1995=100)

Alcohol 6.7 liters 7.1 liters 106

Tobacco 0.9 (kg) 0.9 (kg) 100

Sugar 35.4 (kg) 32.0 (kg) 90

Coffee 9.2 (kg) 8.7 (kg) 95

Shadowing of the content CPI pg 8

Then let's watch the investopedia video on CPI. http://www.investopedia.com/video/play/what-is-the-consumer-pri

ce-index-CPI#axzz1j1ACKime

Questions ; What is CPI considered the benchmar

k of ? What kinds of goods are included in th

e CPI ?

Work with your partner to complete exercise 1 on page 12

CPI Labor output Consumer confidence Labor productivity Household GDP GNP Consumer behavior

4) Inflation pg 20

How is it measured ? Why are politicians willing to risk its

problems ? What is the general consensus on

Inflation concerning how it affects the economy?

What does deflation threaten to do ?

Business Cycle Exercise 2/ pg 24

1. The Japanese Government is running a ____________ in recent years.

Therefore, what is the correlation or relationship between income and expenditure ?

How do Governments get most of their income anyway?

Business Cycle Exercise 2/ pg 24

2. The US business cycle during the late 2000’s is driven by___________ recently?

The US economy recovered from the current __________because of a recovery in consumer_____________.

Fiscal Policy def: Government actions concerning tax revenues,

transfers, and the amount of Government purchases

Measures employed by governments to stabilize the economy, specifically by adjusting the levels and allocations of taxes and government expenditures.

When the economy is contracting what will governments do?

Fiscal Stimulus pg 28

Fiscal Stimulus = deliberate changes in Government Spending and personal taxes in an attempt to achieve full-employment and steady prices.

This is decided on each year when the Government releases the__________.

Budget (Fiscal) Deficits A financial situation that occurs when an entity has more

money going out than coming in.

The term "budget deficit" is most commonly used to refer to ____________spending rather than business or individual spending.

When it refers to federal government spending, a budget deficit is also known as the "national debt."

The opposite of a budget deficit is a budget __________ and when inflows are equal to outflows, the budget is said to be ___________.

: http://www.investopedia.com/terms/b/budget-deficit.asp#ixzz1j2iSt9Ne

Questions on any terms/ concepts

Next week Mini test/ an example

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