Slides 4–36

3. Advance through Slides 4–5 and define gross domestic product (GDP). Point out that it is frequently abbreviated as GDP.
4. Display Slide 6. Explain that just as a physician looks to various indicators to determine a patient's health, economists do the same to determine the health of the economy — GDP is one key macroeconomic indicator. Emphasize that because each part of the economy is interdependent, there are many ways to measure GDP. Consider asking students to recall their circular flow simulation from Lesson 3.1 to illustrate this interdependence.
5. Proceed to Slide 7. Identify the current nominal and real GDP data for the United States. Tell students that in this lesson they will learn what contributes to these figures and the difference between nominal and real GDP.
6. Proceed to Slide 8. Distribute 1 copy of Student Handout to each student and instruct students to complete the "Initial Answer" column following the instructions on the slide. Emphasize that students should assume, unless otherwise stated, that all transactions occur within the U.S. in the current year. Allow 4 to 6 minutes. Reinforce that initial answers are not scored.
7. Display Slide 9. Review the usefulness of the circular flow model in illustrating economic interdependency. Explain that, as a result of this interdependency, GDP can be measured in several ways — in this course the focus is on the expenditure approach. Note: Students may add notes, examples, and drawings to the last page of Student Handout.
8. Proceed to Slide 10. Acknowledge that determining what does and does not contribute to GDP can be challenging. Click to identify the 3 questions students can use to more confidently determine whether an action contributes to U.S. GDP using the expenditure approach. Click to reveal the remaining prompt. Ask students to review their initial responses and discuss with a peer whether they would change any answers based on the 3 questions.
9. Display Slide 11. Poll the class to determine how students categorized the scenario. Click to reveal the correct answer and explain why the example does or does not contribute to GDP (additional explanations are in the notes section). Direct students to record the correct response in the "Actual Answer" column and add notes, drawings, and examples in the space below the scenario on Student Handout.
10. Progress through Slides 12–24 and repeat Steps 9–10 for each slide. Consider moving quickly through scenarios students correctly categorized. Note: Students typically struggle with the bakery and rent scenarios.
11. Display Slide 25 and click to review what is excluded when calculating GDP using the expenditure approach.
12. Proceed to Slide 26. Direct students to read the 2 questions on the slide and discuss their answers with a peer. Pro Tip: Consider assigning "What's Included in U.S. GDP?" from Marginal Revolution University as retrieval practice.
13. Progress through Slides 27–28. Introduce students to three key ways of presenting GDP and explain that each has its own benefits and costs — economists determine which is most appropriate given the circumstances.
14. Display Slide 29. Instruct students to read the question on the slide. Click to reveal the pictures one at a time and ask students to discuss their answers with a peer. After approximately 30 seconds, call on several students to explain their responses. Click to reveal the blue textboxes and present the analogy: nominal GDP is like a cropped picture while real GDP is like an un-cropped picture — nominal GDP lacks context whereas real GDP provides it.
15. Proceed to Slide 30. Define nominal GDP and explain when it is useful and its limitations. Click to define real GDP and explain that real GDP is more useful to economists when comparing economies. Encourage students to add notes, examples, and details to Student Handout throughout this portion.
16. Display Slide 31. Explain that real GDP is the default for economists and the public — students should assume sources are referring to real GDP unless otherwise stated.
17. Proceed to Slide 32. Define real GDP per capita.
18. Display Slide 33. Instruct students to discuss the prompt on the slide with a peer.
19. Proceed to Slide 34. Ask students to consider whether their prediction would change based on the additional information provided.
20. Display Slide 35. Identify Countries A and B as India and Switzerland respectively. Draw student attention to the process used to calculate real GDP per capita. Describe the importance of considering a country's population when determining the productivity of the economy.
21. Proceed to Slide 36. Explain why real GDP per capita is useful when comparing economies.