BellRinger 3/23/2009

1. What do you think is the richest country in the

world today?
2. How do you think economists should measure
a countrys wealth?
We will take some notes today
Microeconomics study
of individuals and the
economy

Macroeconomics study
of large organizations and
countries and the
economy

Finance study of
investment and credit
Finished with Microeconomics
Gross Domestic Product
A measure of a countrys economy





GDP
All consumer spending
within a country in a
certain year, month or
quarter
GDP
All private investment
within a country in a
certain year, month or
quarter

IOW: (saving)
GDP
All net exports from a
country in a certain year,
month or quarter

Exports = goods shipped
to other countries
Imports = goods brought
into a country from
another country

GDP
All government
spending in a
country in a certain
year, month or
quarter

Examples:
education, military,
welfare, social
security, roads,
healthcare, etc
GDP
What economic activity did I leave out?


2 ways GDP might be misleading?
GDP per capita
Population measuring:
Divide GDP by population
GDP per capita $s GDP per capita $s
Luxembourg 57 704 EU (established
15 countries)
28 741
United States 39 732 Germany 28 605
Norway 38 765 Italy 27 699
Ireland 35 767 Spain 25 582
Switzerland 33 678 Korea 20 907
United Kingdom 31 436 Czech Republic 18 467
Canada 31 395 Hungary 15 946
Australia 31 231 Slovak Republic 14 309
Sweden 30 361 Poland 12 647
Japan 29 664 Mexico 10 059
France 29 554 Turkey 7 687

Source: OECD World Economic Factbook, 2006 edition

GDP Calculation
Y = C + I + E + G

where
Y = GDP
C = Consumer Spending
I = Investment
E = Exports - Imports
G = Government Spending
United States GDP 2003
Y = C + I + E + G
$$ in Billions
Consumer Spending = $7605
Investment = $1606
Exports = $1021
Imports = $1508
Government Spending = $2017
$7605 + 1606 + (1021-1508) + 2017 = $10,741 (2003)
Netherlands GDP 2003
Y = C + I + E + G
$$ in Billions
Consumer Spending = $400
Investment = $104
Exports = $339
Imports = $305
Government Spending = $131
$400 + 104 + (339-305) + 131 = $669 (2003)
Per capita: 669,000,000,000/16,000,000 = $41,812.50
16 million Dutch citizens
3. Calculate the GDP for the Netherlands
4. Calculate the GDP/capita
5. How can GDP be a limited measurement?