Economics/561

June 21, 2011

Learning Team Reflection: Week Four

Team A group discussion for week 4 focus on the first topic of Gross Domestic Product (GDP). GDP is the basic measure of an economy economic performance. This is the market value of the total quantity of final goods and services produced over the specified time period. The GDP is actually measured quarterly, but the number is then multiplied by four, so that the amount is in annual terms (Mankiw, 2010). In order for our team to understand this measure, we all agreed that it is necessary to first understand the concept of a final product. The GDP does not measure the market value of everything that is produced, because this would entail double counting. Each final product includes intermediate goods whose value is included in the value of the final product. Take, for example, a simple loaf of bread: the loaf is made from flour (and other ingredients), the flour is made from (say) wheat, and the wheat is grown from seeds. The value of the bread (the final product) includes the value of the flour, which includes the value of the wheat, which includes the value of the seeds. The GDP includes the market value of the bread — it does not then add the value of the flour, the value of the wheat and the value of the seeds. The value of a final product is also the value of the incomes of everyone involved in the production of both the final product and the intermediate goods that went into its production (Mankiw, 2010). Our next topic we elaborated on was the business cycle. The business cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real GDP and other macroeconomic variables. This cycle affects all sector of the economy though in varying way and degrees. The defining part of the business cycle is a recession. Without a