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N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or 1
posted to a publicly accessible website, in whole or in part.
Economics
• Microeconomics
– Study of how households and firms
• Make decisions
• Interact in markets
• Macroeconomics
– Study of economy-wide phenomena
• Including inflation, unemployment, and
economic growth
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or 2
posted to a publicly accessible website, in whole or in part.
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or 3
posted to a publicly accessible website, in whole or in part.
3
Economy’s Income & Expenditure, Part 2
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or 4
posted to a publicly accessible website, in whole or in part.
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or
posted to a publicly accessible website, in whole or in part. 5
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or 6
posted to a publicly accessible website, in whole or in part.
6
The Measurement of GDP, Part 2
• “… of all…”
– All items produced in the economy
• And sold legally in markets
– Excludes most items
• Produced and sold illicitly
• Produced and consumed at home
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or 7
posted to a publicly accessible website, in whole or in part.
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or 8
posted to a publicly accessible website, in whole or in part.
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or 9
posted to a publicly accessible website, in whole or in part.
9
The Components of GDP, Part 1
• Identity: Y = C + I + G + NX
• Y = GDP
• C = consumption
• I = investment
• G = government purchases
• NX = net exports
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or 10
posted to a publicly accessible website, in whole or in part.
10
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or 11
posted to a publicly accessible website, in whole or in part.
11
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or 12
posted to a publicly accessible website, in whole or in part.
12
The Components of GDP, Part 4
• Government purchases, G
– Government consumption expenditure
and gross investment
– Spending on goods and services
– By local, state, and federal governments
– Does not include transfer payments
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or 13
posted to a publicly accessible website, in whole or in part.
13
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or 14
posted to a publicly accessible website, in whole or in part.
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Table 1 GDP and Its Components
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or
posted to a publicly accessible website, in whole or in part. 16
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N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or 18
posted to a publicly accessible website, in whole or in part.
18
Table 2 Real and Nominal GDP
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or
posted to a publicly accessible website, in whole or in part. 19
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N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or 21
posted to a publicly accessible website, in whole or in part.
21
A Half Century of Real GDP, Part 1
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or
posted to a publicly accessible website, in whole or in part. 22
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• Recession
– Two consecutive quarters of falling GDP
– Real GDP declines
– Lower income
– Rising unemployment
– Falling profits
– Increased bankruptcies
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or
posted to a publicly accessible website, in whole or in part. 23
23
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or
posted to a publicly accessible website, in whole or in part. 24
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GDP, Part 1
• GDP – “the single best measure of the
economic well-being of a society”
– Economy’s total income
– Economy’s total expenditure
– Larger GDP
• Good life, better healthcare
• Better educational systems
– Measure our ability to obtain many of the
inputs into a worthwhile life
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or 25
posted to a publicly accessible website, in whole or in part.
25
GDP, Part 2
• GDP – not a perfect measure of well-
being
– Doesn’t include
• Leisure
• Value of almost all activity that takes place
outside markets
• Quality of the environment
– Nothing about distribution of income
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or 26
posted to a publicly accessible website, in whole or in part.
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International Differences: GDP & Quality of Life, Part 2
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or
posted to a publicly accessible website, in whole or in part. 28
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N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or
posted to a publicly accessible website, in whole or in part. 29
29
N. Gregory Mankiw, Principles of Economics, 9th Edition © 2021 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or
posted to a publicly accessible website, in whole or in part. 30
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