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Chapter Introduction Section 1 Measuring the
Nations Output and Income Section 2 Population
and Economic Growth Section 3 Poverty and the
Distribution of Income Visual Summary
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Chapter Intro 1
Have you ever thought about what it means when
someone is described as successful? Is the
person wealthy, happy, or well known? Work with a
partner and develop a list of the qualities or
characteristics for your definition of
successful. Share your list with the class and
listen carefully to what the other students
think. Is there a consensus among your
classmates? Read Chapter 12 to learn more about
how economists assess the success of a nations
economy by measuring its growth and performance.
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Chapter Intro 2
Economists look at a variety of factors to assess
the growth and performance of a nations economy.
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Chapter Intro-End
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Section 1-Preview
Section Preview
In this section, you will learn how we measure
the output and income of a nation.
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Section 1-Key Terms
Content Vocabulary

• macroeconomics
• gross domestic product (GDP)
• intermediate products
• secondhand sales
• nonmarket transactions
• underground economy

• base year
• real GDP
• current GDP
• GDP per capita
• gross national product (GNP)
• net national product (NNP)
• national income (NI)

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Section 1-Key Terms
Content Vocabulary (cont.)

• personal income (PI)
• disposable personal income (DPI)
• household
• unrelated individual

• family
• output-expenditure model
• net exports of goods and services

Academic Vocabulary

• excluded

• components

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Section 1
Is it really possible for a factory to keep track
of its total output when it produces a variety of
product lines? A. Yes B. No C. Not sure

1. A
2. B
3. C

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Section 1
Measuring the Nations Output and Income

• Macroeconomics deals with the economy as a whole
  in determining a nations growth rate.

• GDP is one of the most important macro measures.

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Section 1
GDPThe Measure of National Output
GDP measures national output.
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Section 1
GDPThe Measure of National Output (cont.)

• Gross domestic product (GDP) measures final
  output each year is estimated every three months
  and revised after that.

Estimating Total Annual Output
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Section 1
GDPThe Measure of National Output (cont.)

• Items excluded from GDP

• Intermediate products
• Secondhand sales
• Nonmarket transactions
• Underground economy

Estimating Total Annual Output
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Section 1
GDPThe Measure of National Output (cont.)

• GDP must be adjusted for inflation.

• Constant prices in a base year are tracked for
  this purpose.

• Real GDP
• Current GDP

Current GDP and Real GDP
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Section 1
GDPThe Measure of National Output (cont.)

• Economists calculate GDP per capita to determine
  how the output of one country compares to another.

Profiles in EconomicsJohn Kenneth Galbraith
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Section 1
GDPThe Measure of National Output (cont.)

• GDP has limitations.

• GDP tells us nothing about composition of output.
• GDP tells little about the impact of production
  on quality of life.
• Some GDP is produced to control activities with
  little utility.

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Section 1
GDPThe Measure of National Output (cont.)

• GDP is a measure of voluntary transactions and
  therefore an indicator of our overall economic
  health.

The Global Economy YOU
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Section 1
Why is GDP the single most important economic
statistic compiled? A. GDP changes can influence
national elections. B. Measures economic
health overall C. Illustrates productions
impact on quality of life D. Indicates
conditions of world economy

1. A
2. B
3. C
4. D

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Section 1
GNPThe Measure of National Income
National income can be measured in a number of
different ways.
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Section 1
GNPThe Measure of National Income (cont.)

• GDP has two sides.

• Represents output
• Represents equal amount of income

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Section 1
GNPThe Measure of National Income (cont.)

• Measures of national income

• Gross national product (GNP) focuses on total
  income rather than output.
• Net national product (NNP)
• National income (NI)
• Personal income (PI)
• Disposable personal income (DPI)

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Section 1
Which measure of income shows the actual amount
of money consumers are able to spend? A. Personal
income B. National income C. Disposable personal
income

1. A
2. B
3. C

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Section 1
Economic Sectors and Circular Flows
The production of output generates income which
flows through different sectors of the economy.
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Section 1
Economic Sectors and Circular Flows (cont.)

• Income generated by production flows to
  businesses, government, and consumer sectors.

Circular Flow of Economic Activity
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Section 1
Economic Sectors and Circular Flows (cont.)

• The largest sector in the economy is the
  household or consumer.

• Unrelated individual
• Family

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Section 1
Economic Sectors and Circular Flows (cont.)

• Business or investment sector

• Proprietorships, partnerships, and corporations

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Section 1
Economic Sectors and Circular Flows (cont.)

• Government or public sector

• Foreign sector

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Section 1
Which of the following sectors does not have a
specific source of income? A. Consumers
B. Government C. Foreign D. Business

1. A
2. B
3. C
4. D

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Section 1
The OutputExpenditure Model
The output-expenditure model is used to explain
aggregate economic activity.
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Section 1
The OutputExpenditure Model (cont.)

• The circular flow can be represented by the
  output-expenditure model.

• GDP C I G (X M)

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Section 1
The OutputExpenditure Model (cont.)

• Consumers spend income on goods and services used
  by households.

• Income that is not spent appears as personal
  saving and borrowed by the business and
  government sectors.

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Section 1
The OutputExpenditure Model (cont.)

• Investment sector spends income on labor,
  factories, equipment, inventories, and other
  investment goods.

• Government sector spends income on national
  defense, income security, roads, etc.
• Foreign sector buys U.S. goods that make up our
  GDP.
• Foreign sector purchases are called net exports
  of goods and services.

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Section 1
What effect do you think the health-care industry
has on GDP? A. Positive effect B. Negative
effect C. Balances out

1. A
2. B
3. C

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Section 1-End
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Section 2-Preview
Section Preview
We are interested in population because it makes
up the economys largest sector, the consumer
sector, and affects the economic performance of
a nation.
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Section 2-Key Terms
Content Vocabulary

• census
• urban population
• rural population
• center of population

• infrastructure
• baby boom
• population pyramid
• dependency ratio

• demographers
• fertility rate
• life expectancy
• net immigration

Academic Vocabulary

• residence

• projected

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Section 2
Do you know how often the United States conducts
a census? A. Yes B. No

1. A
2. B

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Section 2
Population and Economic Growth

• The U.S. Constitution requires the government to
  take a census that includes place of residence.

• Official census

• Taken every 10 years
• Used to apportion number of representative that
  each state elects to Congress

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Section 2
Population in the United States
The countrys population has shifted from a
fast-growing, mostly rural population to a
slower-growing, mostly urban one.
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Section 2
Population in the United States (cont.)

• Congress permanently established the U.S. Census
  Bureau in 1902.

• Census data are presented in a number of ways

• Urban population
• Rural population
• Household trends

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Section 2
Population in the United States (cont.)

• Regional changes

• Population shift is indicated by the center of
  population.

• GDP per capita and GNP per capita for comparisons
  with other countries

Center of Population, 17902000
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Section 2
Population in the United States (cont.)

• If population grows faster than its output, a
  country could end up with more mouths than it can
  feed.

• If population grows too slowly there, may not be
  enough workers to sustain economic growth with
  more demand on resources.
• Modest shifts in the population can cause major
  infrastructure problems in the future.

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Section 2
What is the most significant impact that
population changes have brought about in your
area? A. Housing prices have increased/decreased.
B. Traffic congestion has increased/decreased.
C. Recreation areas have been
lost/gained. D. Cost of living has
increased/decreased.

1. A
2. B
3. C
4. D

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Section 2
Projected Population Trends
Fertility, life expectancy, and net immigration
influence population trends.
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Section 2
Projected Population Trends (cont.)

• Political, community, and business leaders are
  all interested in population trends.

• Age and gender

• Baby boom
• Population pyramid
• Dependency ratio

Projected Distribution of the Population by Age
and Gender, 2010
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Section 2
Projected Population Trends (cont.)

• Race and ethnicity

• Population growth as determined by demographers

• Changes in fertility rates
• Life expectancy
• Immigration and net immigration

Projected Change in U.S. Population by Race and
Ethnic Origin, 20002050
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Section 2
Projected Population Trends (cont.)

• Demographics examined here point to a population
  that is likely to grow more slowly in the future.

• Increases in productivity can offset the negative
  effects of a declining population growth.
• A larger concern is age compositionas the
  population matures, there is a greater demand for
  health-care related products and services along
  with retirement funds.

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Section 2
What is the life expectancy at birth
today? A. 82.1 years B. 75.9 years C. 68.4
years D. 79 years

1. A
2. B
3. C
4. D

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Section 2-End
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Section 3-Preview
Section Preview
In this section, you will learn about the factors
that contribute to income inequality and the
programs that have been implemented to reduce
poverty.
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Section 3-Key Terms
Content Vocabulary

• poverty threshold
• poverty guidelines
• Lorenz curve

• welfare
• food stamps
• Medicaid
• Earned Income Tax Credit (EITC)

• enterprise zone
• workfare
• negative income tax

Academic Vocabulary

• impact

• uniform

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Section 3
Are you familiar with the term working poor?
A. Yes B. No

1. A
2. B

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Section 3
Poverty
A portion of the U.S. population lives in
poverty, and the gap in the distribution of
income is widening every year.
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Section 3
Poverty (cont.)

• Individuals classified as living in poverty have
  incomes that fall below the poverty threshold.

• Simplified poverty thresholds appear as poverty
  guidelines and are used to determine eligibility
  for federal programs.

Poverty Guidelines
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Section 3
Poverty (cont.)

• Economists are interested in how income is
  distributed among households.

• Lorenz curveshows how the actual distribution of
  income varies from an equal distribution.

The Distributed Income
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Section 3
In 2006, a household of four with an annual
income under what amount would be eligible for
certain federal programs? A. 23,400
B. 20,000 C. 18,500

1. A
2. B
3. C

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Section 3
Reasons for Income Inequality
Lack of education and uneven distribution of
wealth are among the reasons for poverty.
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Section 3
Reasons for Income Inequality (cont.)

• Reasons for varied income

• Education
• Wealth
• Tax law changes
• Decline of unions

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Section 3
Reasons for Income Inequality (cont.)

• More service jobs

• Monopoly power
• Discrimination
• Changing family structure

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Section 3
Is income inequality specific to the United
States? A. Yes B. No C. Applies only to
industrialized nations D. Affects all nations

1. A
2. B
3. C
4. D

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Section 3
Antipoverty Programs
Since the 1960s, the government has experienced
modest success with a number of anti-poverty
programs.
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Section 3
Antipoverty Programs (cont.)

• Welfare programs designed to help the needy

• Income assistance
• General assistance

• Food stamps
• Medicaid

Poverty in the United States Total Number and
Rate
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Section 3
Antipoverty Programs (cont.)

• Social service programs

• Tax credits

• Earned Income Tax Credit (EITC)

• Enterprise zones
• Workfare programs
• Negative income tax

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Section 3
Antipoverty Programs (cont.)

• Economic growth by itself is not sufficient to
  reduce poverty.

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Section 3
What can you do to help yourself stay out of
poverty? A. Get an education B. Make wise
choices and investments C. Work hard D. All of
the above

1. A
2. B
3. C
4. D

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Section 3-End
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VS 1
National Output and Income Gross domestic
product (GDP) measures the nations output, while
gross national product (GNP) measures the
nations income.
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VS 2
Population Governments count the population and
project population trends to plan the use of
resources and to prepare infrastructure.
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VS 3
Poverty People are described as living in
poverty if they live below an income level called
the poverty threshold. Poverty has a number of
causes, and governments have established some
programs to reduce it.
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VS-End
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Figure 1
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Figure 2
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Figure 3
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Figure 4
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Figure 5
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Figure 6
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Figure 7
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Figure 8
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Figure 9
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Figure 10
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Profile
John Kenneth Galbraith (19082006)

• advocated public works funding in The Affluent
  Society
• served as economic adviser to five presidents

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Concepts Trans
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DFS Trans 1
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DFS Trans 2
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DFS Trans 3
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Vocab1
macroeconomics part of economics that deals with
the economy as a whole and uses aggregate
measures of output, income, prices, and employment
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Vocab2
gross domestic product (GDP) the dollar value of
all final goods, services, and structures
produced within a countrys national borders
during a one-year period
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Vocab3
intermediate products products that are
components of other final products included in GDP
89
Vocab4
secondhand sales sales of used goods not included
in GDP
90
Vocab5
nonmarket transaction economic activity not
taking place in the market and, therefore, not
included in GDP
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Vocab6
underground economy unreported legal and illegal
activities that do not show up in GDP statistics
92
Vocab7
base year year serving as point of comparison for
other years in a price index or other statistical
measure
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Vocab8
real GDP gross domestic product after adjustments
for inflation
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Vocab9
current GDP gross domestic product measured in
current prices, unadjusted for inflation
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Vocab10
GDP per capita gross domestic product on a per
person basis can be expressed in current or
constant dollars
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Vocab11
gross national product (GNP) total dollar value
of all final goods, services, and structures
produced in one year with labor and property
supplied by a countrys residents, regardless of
where the production take place
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Vocab12
net national product (NNP) GNP less depreciation
charges for wear and tear on capital equipment
98
Vocab13
national income (NI) net national product less
indirect business taxes
99
Vocab14
personal income (PI) total amount of income going
to the consumer sector before individual income
taxes are paid
100
Vocab15
disposable personal income (DPI) personal income
less individual income taxes
101
Vocab16
household basic unit of consumer sector
consisting of all persons who occupy a house,
apartment, or separate living quarters
102
Vocab17
unrelated individual person living alone even
though that person may have relatives living
elsewhere
103
Vocab18
family two of more persons living together who
are related by blood, marriage, or adoption
104
Vocab19
output-expenditure model macroeconomic model
describing aggregate demand by the consumer,
investment, government, and foreign sectors
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Vocab20
net exports of goods and services net
expenditures by the foreign sector equal to
total exports less total imports
106
Vocab21
excluded  not counted or included
107
Vocab22
components  parts of something
108
Vocab23
census complete count of population, including
place of residence
109
Vocab24
urban population those persons living in
incorporated cities, towns, and villages with
2,500 or more inhabitants
110
Vocab25
rural population those persons not living in
urban areas
111
Vocab26
center of population point where the country
would balance if it were flat and everyone
weighed the same
112
Vocab27
infrastructure the highways, mass transit,
communications, power, water, sewerage, and other
public goods needed to support a population
113
Vocab28
baby boom historically high birthrate years in
the United States from 1946 to 1964
114
Vocab29
population pyramid diagram showing the breakdown
of population by age and gender
115
Vocab30
dependency ratio number of children and elderly
people in the population for every 100 persons in
the 18 to 64 working-age bracket
116
Vocab31
demographer person who studies growth, density,
and other characteristics of the population
117
Vocab32
fertility rate number of births that 1,000 women
are expected to undergo in their lifetime
118
Vocab33
life expectancy average remaining life span in
years for persons who attain a given age
119
Vocab34
net immigration net population change after
accounting for those who leave as well as enter a
country
120
Vocab35
residence  the place where a person lives
121
Vocab36
projected  calculated as a future outcome
122
Vocab37
poverty threshold  annual dollar income used to
determine the number of people in poverty
123
Vocab38
poverty guidelines  administrative guidelines
used to determine eligibility for certain federal
programs
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Vocab39
Lorenz Curve  graph showing how the actual
distribution of income differs from an equal
distribution
125
Vocab40
welfare  government or private agency programs
that provide general economic and social
assistance to needy individuals
126
Vocab41
food stamps  government-issued coupons that can
be exchanged for food
127
Vocab42
Medicaid  joint federal-state medical insurance
program for low-income people
128
Vocab43
Earned Income Tax Credit (EITC)  federal tax
credits and cash payments for low-income workers
129
Vocab44
enterprise zone  area free of tax laws and other
operating restrictions
130
Vocab45
workfare  program requiring welfare recipients to
work in exchange for benefits
131
Vocab46
negative income tax  tax system that would make
cash payments to individuals with incomes below
certain levels
132
Vocab47
impact  effect
133
Vocab48
uniform  even or consistent
134
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