Naked Economics Chapter 2 Study Guide
https://www.thebalance.com/what-is-gdp-definition-of-gross-domestic-product-3306038
The definition of GDP:
Gross domestic product is how we can measure a nation’s economy
GDP can refer to the size of an economy, and it’s a great tool for comparing economies of different countries
GDP is separated into quarters at the beginning of the year. In the last quarter, GDP usually endures a sharp increase. Why?
How does GDP affect you?
People are more likely to spend when GDP is higher--consumers have more money
GDP is like a mountain range- it goes up and down sometimes
Components of GDP:
Consumption- spending by households on goods and services
Investment- purchase of goods that will be used in the future to produce more goods and services (ex:
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“I am from Consumerville. We are a country of very small people. We live on this flower in peace.”
They lived in peace until Alex started to pick their petals.
“Please teach me about the economy.”
“Put the flower down. Let’s talk about GDP.”
Chapter 2: GDP
Alex did not know what GDP meant.
“GDP? Gigantic dinosaur party?”
All the Consumers of Consumerville laughed.
“NO, silly! Let’s start with economy. The economy is all the riches in a land.”
Alex imagined a big pile of gold and pizza.
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“Like money? And fancy things?”
“Yes, money! And all the things we buy and sell. From rye to bells and pies to shells!
Alex started to like economy a little bit more.
“So, Coco, where is the gigantic dinosaur party?”
“Oh silly elephant
“GDP is gross domestic product. Not nasty domestic product, gross.”
“GDP is how we see, how awesome a land can be!
It shows us all the riches we’ve got
From gold and silver to apricots.
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GDP is split in four
To show us all we have and more.”
“What’s GDP like in quarter 4?”
“Christmas time! No one is poor!”
Alex loved presents.
Alex: “I want to learn more!”
Coco: “Let me introduce you to two of my good friends who know a lot about the
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( an alligator that deflates nominal gdp with its sharp jaws)
Deflator-gator: Do you see my super-sharp jaws?
They’re just as bad as my extra-long claws!
Alex: I’m scared!
Deflator-gator: You don’t need to be.
I don’t attack anything but nominal GDP.
Your parents use me to see through inflation,
To find the real growth of a nation!
Alex: whew!
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Deflator-gator: Put nominal and real GDP in my mouth,
And the GDP deflator will come out way down south!
Alex: Eww, that’s Gross!
Jaylen: Why don’t we see this up close!
Alex: Let’s put a nominal GDP of f10 and a real GDP of 5 in his jaws.
(Picture shows $ signs.)
Deflator gator (looking all fat): I’m working on it, let’s pause.
(Picture shows a 1...2...3...then the rate of inflation flies out of its butt.)
Alex: Wow, thank YOU!
I never could’ve known the rate of inflation was actually TWO!
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Coco: So, Alex, what have you learned?
Alex: GDP is a way to see all the parts of economy.
It shows its size and knows its shape
On items as small as seedless grapes
We buy and sell, export and spend make sure our riches have an upward trend.
Compare different years to see our growth,
GDP is how helpful? The MOST!
R: And with that, Alex never got an F on an economics test again.
Or an A.
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