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People Are Free To Choose How To Direct Their Own Lives

Promotes Entrepreneurship

Calculated $ amount of all total goods & services produced within US Borders

US Bureau of Economic Analysis

Gross National Product

This is the market value of all goods and services produced by U.S. citizens both here and abroad.

• Balance of Trade Report
• U.S. Import / Export Bank

Are goods/services that are produced for final use or consumption.

Are goods/services that are purchased in order to help produce the final good or service.

• NO!
• Because the value of final goods includes the value of all intermediate goods. (want to avoid double counting or inflating the GDP result)

• Public Transfer Payments
• Private Transfer Payments
• Stock (and Bond) Market Transactions

Second Hand Sales (ex used car)

WHY? Because these transactions don't really add to the real GDP.

Expenditure & Income Approach

Net Investments

Gross Investments

Expenditure.

is a measure of actual production that takes out inflation.

is a defective measure because it doesn’t discount inflation.

• •The
• Increased Standard
• of Living and
• Improved Product Quality Is Not Measured

• •The Underground
• Economy Not
• Counted

• •Changes
• To The Environment Is
• Not Counted (e.g. Pollution)

• •Other
• Non-economic
• sources of Well-Being
• Not Measured (e.g. more leisure time, less crime and better schools.)

Defeceit Spending

• 1. Pension & Income Security
• 2. National Defense
• 3. Health
• 4. Interest on Public Debt

the rate at which tax is paid on each additional unit of taxable income.

• Ex: 80K
• 1-16,750   =          10%
• 16,751 - 68,000     15%
• 68,000 - 137,000   25%

Total tax paid divided by total taxable income.

• Taxes that go towards two Federal Programs
• Social Security & Medicare

Levied on a corporations profit

the difference between its total revenue and it total expenses.

Taxes on commodities or on purchases

alch,tobacco

Local gov get 71% from this!

of taxation asserts that households should purchase the goods and services of government in the same way they buy other commodities.

of taxation states that the tax burden should be spilt up according to income and wealth.

• Pro = More $ = more taxes
• Reg = Less$ = Less Taxes
• Proportional = flat taxes/flat rate

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• _Peak: Temporary Maximum
• _Recession: Decline in total output & employment
• _{Trough:Output & Employment Bottom out}
• _Expansion: Real GDP, Income, Employment Rises.

• Real GDP Divided by
• Total Population

Approx # of years to double REAL GDP

•           70
• =_________________
•    Annual % Growth

• Workers ability to increase production
• Personal motivation / Work Ethic

Also.... Land, labor, capital, Entper

• Leading Indicators – These tell us what to expect in the
• future.

• Coincident Indicators – These tell us what is happening now in
• the economy.

• Lagging Indicators – These usually are the last to change as
• the economic cycle progresses

Marginal workers who have not been able to find work for 12 months and are excluded from the official unemployment statistics.

Measures those who have jobs or are seeking jobs.

Employed + Unemployed

Employed + Unemployed + Under 16/Prison + Not in Labor Force

• Frictional Unemployment:
• These R ambitious workers who have good talents & R simply seeking better jobs.
• Structural U:
• These workers have skills that are no longer in demand and they haven’t been trained or educated themselves with new skills 
• Cyclical U:
• This is unemployment that is a
• result of the decline of the business cycle or the start of a recession

• when
• the number of job seekers = job openings

Difference between actual GDP and the potential GDP.

States that for every 1% of UE that exists over the natural rate of full-employment rate....... there will be a loss of 2

• Loss in self-esteem
• Increase in drugs, alcohol, crime, suicides
• Family breakups & DIvorce

• Inflation:
• is the rise of the general price level. Inflation reduces the purchasing power of the dollar. 

Measure by using Consumer Price Index (CPI)

• CPI = Price recent Market Basket -Last Yr
•          __________________________ X 100
•                Last Yr Market Basket

Excludes volatile food & energy prices

Demand Pull Inflation:^{_{price levels rise because of an imbalance in the aggregate supply and demand. When the aggregate demand in an economy strongly outweighs the aggregate supply, prices increase.}}

Cost-Push Inflation: develops because the higher costs of production factors decreases in aggregate supply (the amount of total production) in the economy. Because there are fewer goods being produced (supply weakens) and demand for these goods remains consistent, the prices of finished goods increase.

• Anticipated Inflation:
• –Nominal Interest Rate
• –Real Interest Rate
• –Inflation Premium

• Unanticipated Inflation:
• Inflation that catches people by surprise.