Is This Counted as Part of GDP?
1. Consumption (C). This is consumer spending on final goods and services sold to the end user, such as food,
education, computers, gasoline, and medical expenses.
2. Investment (I). This is business spending on capital goods—tools, equipment, and buildings. To be clear,
“investment” in this sense is not about buying stocks and bonds — economists refer to this activity as saving.
Investment spending refers to the purchase of physical capital. Investment also includes construction of new
structures such as factories and new homes.
3. Government spending (G). This is spending by all levels (federal, state, and local) of government on
goods and services. This component includes salaries of police and firemen, weapons for the military, and
infrastructure spending on new highways and bridges. It does not include spending on Social Security or
unemployment benefits—these are considered transfer payments.
4. Net exports (NX). These are calculated as exports (X) minus imports (M). Exports are goods and services
produced in the domestic (or home) country for consumption in another country. Imports are goods and
services produced in another country for consumption in the home country. Imports are subtracted so goods
produced elsewhere are not counted as part of GDP.
For each of the following items, write one of the following in the space provided:
C if the item is counted as consumption spending.
I if the item is counted as investment spending.
G if the item is counted as government spending.
NX if the item is counted as net exports.
NC if the item is not counted in GDP.
____ 1. You spend $7.00 to attend a movie.
____ 2. A family pays a contractor $100,000 for a new house he built for them this year.
____ 3. You buy General Motors Corp. stock for $1,000 in the stock market.
____ 4. A woman pays a tailor $175 to sew a suit for her.
____ 5. A student buys the first copy of Mr. Knoche’s third album, “I think you took my Doritos”
____ 6. The government makes a $300 Social Security payment to a retired person.
____ 7. Taco Bell buys delivery vans for their Va. Beach stores.
____ 8. The government’s purchase of a new submarine for the Navy
____ 9. A homemaker works hard caring for her spouse and two children.
____ 10. Ford Motor Co. buys new auto-making robots.
____ 11. You pay $200 a month for your cable bill.
____ 12. Apple Computer Co. builds a new factory in the United States.
____ 13. Virginia Beach buys three new light rail (TIDE) cars.
____ 14. Toyota ships in 1,000 new cars that were made in Japan.
____ 15. You pay tuition to attend college.
Current U.S. GDP =
(trillions)
C
+
I
+
G
+(X
-
M)
$18.035 = $12.364 + $2.992 + $3.202 + ($2.265 - $2.789)
Types of Unemployment
There are four types of unemployment:
Frictional unemployment includes people who are temporarily between jobs. They may have quit one
job to find another, or they could be trying to find the best opportunity after graduating from high school
or college.
Cyclical unemployment includes people who are not working because firms do not need their labor due
to a lack of demand or a downturn in the business cycle. For example, if people are not buying many
goods and services, workers are laid off.
Seasonal unemployment includes people who are unemployed because their jobs depend on the season.
For example, a national park ranger who loses her job when the park closes for the off-season
Structural unemployment involves mismatches between job seekers and job openings. Unemployed
people who lack skills or do not have sufficient education are structurally unemployed.
For each of the following situations, put the appropriate letter before the example.
F for an example of frictional unemployment.
C for an example of cyclical unemployment.
S for an example of seasonal unemployment
ST for an example of structural unemployment.
_____ 1. A computer programmer is laid off because of a recession.
_____ 2. A literary editor leaves her job in New York to look for a new job in San Francisco.
_____ 3. A teenager who worked at Ocean Breeze Water Park but can’t during the winter.
_____ 4. An unemployed college graduate is looking for his first job.
_____ 5. Advances in technology make the assembly-line worker’s job obsolete.
_____ 6. Slumping sales lead to the cashier being laid off.
_____ 7. An individual refuses to work for minimum wage.
_____ 8. A Beach lifeguard loses her job in September.
_____ 9. A high school graduate lacks the skills necessary for a particular job.
_____ 10. Workers are laid off when the local manufacturing plant closes because the product
made there isn’t selling.
_____ 11. A skilled glass blower becomes unemployed when a new machine does her job faster.
_____ 12. A man working as a mall Santa Clause doesn’t work in January.
_____ 13. A factory making typewriters closes costing 40 jobs.
_____ 14. Mr. Knoche quits teaching because FCHS has no Doritos in the vending machines.
_____ 15. _________ (your name) doesn’t pay attention in Economics, fails the class, never
graduates high school and therefore can’t find a job. _________ ends up living in a
box behind Taco Bell and forever regrets not making smart choices in school.
(Optional) Draw a picture below of question 15