Slide 1: Ques=ons Ques%ons to Ponder: What is GDP? What is real GDP? What is a final good or service? What does not directly affect real GDP? Slide 2: Answers What is GDP? What is real GDP ? • 
GDP is the market value of all final goods and services produced in a country in a calendar year. Real GDP is GDP adjusted for infla=on. What is a final good or service? • 
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A final good or service is sold to an end user and not an intermediate good which is used in the process of making a final good. An example of a final good would be a sandwich from a restaurant whereas the bread that the restaurant bought would be considered an intermediate good used in the process of producing the sandwich. What does not directly affect Real GDP? •  Goods and services produced in another country •  Goods and services that are used as intermediate goods and services •  Goods and services produced and consumed at home Slide 3 Scenario 1 Ea=ng out at your favorite local restaurant Slide 4 Scenario 2 Service sta=on aMendant changes your flat =re. Slide 5 Scenario 3 Dad helping his child change a flat =re Slide 6 Scenario 4 An Italian vaca=oning in New York City Slide 7 Scenario 5 An American vaca=oning in Italy Slide 8 Scenario 6 Buying a bracelet while vaca=oning in Japan Slide 9 Scenario 7 Buying a chair from a factory in the US Slide 10 Scenario 8 Bread sold at the Family Bakery in Kansas Slide 11 Scenario 9 The bread sold to McDonald’s to use for hamburgers in Kansas Slide 12 Scenario 10 Buying your prom dress Slide 13 Scenario 11 Catering for your prom Slide 14 Scenario 12 Your first brand new car Slide 15 Scenario 13 The =res installed on a car at t he factory Slide 16 Scenario 14 Going to the movie theater Slide 17 Scenario 15 Geang snacks at the movie theater Slide 18 Headlines 1. 
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New Home Construc=on Falls for 3rd Quarter Investment Spending Con=nues to Grow Consumer Spending Increases State Government Cuts Spending on Educa=on 5.  Businesses Watch Interest Rates Rise 6.  Consumer Confidence Con=nues to Grow. Slide 19 Y-­‐axis 70 60 50 40 30 20 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 X-­‐axis Slide 20 Piecewise Func=on Y-­‐axis 70 60 50 40 30 20 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 X-­‐axis Slide 21 Piecewise Func=on Y-­‐axis 70 60 50 (3, 40) 40 30 (2, 30) 20 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 X-­‐axis Slide 22 Piecewise Func=on Y-­‐axis 70 60 50 40 30 20 (5, 15) 10 (7, 5) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 X-­‐axis Slide 23 Piecewise Func=on Y-­‐axis 70 (14, 70) 60 50 40 30 (11, 30) 20 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 X-­‐axis Slide 24 Piecewise Func=on Y-­‐axis 70 (14, 70) 60 𝟏𝟑​𝟏/𝟑 𝒙−𝟏𝟏𝟔​𝟐/𝟑 50 (3, 40) 40 30 20 (2, 30) 𝟐​𝟏/𝟐 ​𝒙↑𝟐 −𝟑𝟓𝒙+𝟏𝟐𝟕​𝟏/𝟐 (11, 30) (5, 15) 10 −𝟏𝟎​𝒙↑𝟐 +𝟔𝟎𝒙 −𝟓𝟎 (7, 5) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 X-­‐axis Slide 25 Business Cycle Example Real Gross Domes%c Product (In Billions of Dollars) 2,000 1,800 1,600 (1940, 1500) 1,400 1,200 (1937, 1100) (1929, 1050) (1936, 1000) 1,000 (1938, 1000) 800 (1932, 750) 1 9 3 0 1
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4 Year 5 1 9 3 6 1 9 3 7 1 9 3 8 1 9 3 9 Slide 26 Business Cycle from FRED® Slide 27 Business Cycle Example (2013, 15600) 15,600 Real Gross Domes%c Product (In Billions of Dollars) 15,200 (2007, 14800) 14,800 14,400 (2009, 14400) (2005, 14400) 14,000 13,600 (2004, 13600) 13,200 12,800 2 0 0 5 2 0 0 6 2 0 0 7 2 2 0 0 0 0 8 Year 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 Slide 28 Business Cycle from FRED® Slide 29