Econ Notes

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Econ 1/26/12
Lecture #4

Chapter 11
Mercantilism: A country’s wealth is measured by how much precious metal (gold, silver) it has.
Ex: searching for gold

Adam smith
“Coutnry’s wealth is measured by the amount of goofs and services its citizens have”

The best way to have a lot of goods/services is to be able to produce a lot of goods/services

The economy
Is STUFF IS OUTPUT IS GDP IS GROSS DOMESTIC PRODUCT

*GDP (GROSS DOMESTIC PRODUCT)=TOTAL MARKET VALUE OF ALL FINAL GOODS AND SERVICES PRODUCED IN A COUNTRY DURING A GIVEN PERIOD OF TIME..

$15,176,000,000,000.00- THIS is the economy
Who measured GDP

*Bureau of economic analysis BEA
Part of the department of commerce
They hire tons of economists and the pay is good

Goods and services-mcdonalds burgers starbucks etc, not STOCKS

The stock market measures the value of companies, what is apple worth? What is wal mart worth?

GDP measures the value of what companies produce and sell…
How many cars did ford produce how many lattes did starbucks sell?

GDP IS THE ECONOMY AND GDP IS NOT THE STOCK MARKET, The Stock market is NOT GDP…

*Purchasing Power Parity- Compares the value of what the money buys
Mexico 2 big macs= 48 pesos, in the US two big macs are $6 in the us 48 pesos converts to $4

GDP and GROWTH
GDP growing means the economy is growing
All countries want GDP to grow
Why does GDP growth matter to you?
When GDP stops growing unemployment goes up

GDP- it is both goods and services
Final goods and services- does not include intermediate goods…
Grapes sold at grocery store: Yes
Grapes used as input to Mondavi wine: No

Produced in a country…
Produced in a country…inside its Borders

Economy is growing at a 1.8% rate
Previous look, one month earlier said it was growing at 2%

What’s left out of GDP? Government payments like social security and unemployment…...

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