Today we will study the concept of GDP. Specifically, we will distinguish between nominal GDP and real GDP and explain why real GDP is a better measure of economic performance. We will start class today with you working cooperatively with a partner to find a solution to the "Problem of the Day" and then there will be a lecture on our next topic. This page contains all the information you need for today's class: homework, the problem of the day, helpful resources (videos, podcasts, etc.) and an explanation of the activities we will do in class. Use the table of contents on the right to help you navigate.
Read Mankiw (Chapter 23).
Problem of the Day: You will work cooperatively with your partner to construct a response to the following prompt.
#1: The Bureau of Labor Statistics announced that in February 2008, of all adult Americans, 145,993,000 were employed, 7,381,000 were unemployed, and 79,436, 000 were not in the labor force. Use this information to calculate the:
Adult population
Labor force
Labor-force participation rate
Unemployment rate
#2: Suppose that the residents of Vegopia spend all of their income on cauliflower, broccoli and carrots. In 2008, they buy 100 heads of cauliflower for $200, 50 bunches of broccoli for $75, and 500 carrots for $100. In 2009, they buy 75 heads of cauliflower for $225, 80 bunches of broccoli for $120, and 500 carrots $100.
Calculate the price of each vegetable in each year.
Using 2008 as the base year, calculate the CPI for each year.
What is the inflation rate in 2009?
Watch the following videos:
Do the problem set I give you in class.
Freakonomics Podcast on the Shadow Economy: Official measures of GDP do not capture much of the activity that goes on in the economy. Much of what is missed takes place in black (illegal) markets or is just never reported to the government. This Freakonomics podcast discusses these activities.
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