Content Standard 18: Economic Fluctuations

Grade 8 Benchmarks

1. Gross Domestic Product (GDP) is a basic measure of a nation’s economic output and income. It is the total market value, measured in dollars, of all final goods and services produced in the economy in one year.

2. GDP can be computed by summing household consumption spending, investment expenditures, purchases by federal, state, and local governments, and net exports.

3. Net exports equal the value of exports (goods and services sold to other countries) minus the value of imports (goods and services bought from other countries). Net exports can be either positive (trade surplus) or negative (trade deficit).

4. GDP per capita is GDP divided by the population of a country.

Grade 12 Benchmarks

1. An increase in nominal GDP may reflect increases in the production of goods and services and also increases in prices. GDP adjusted for price changes is “real GDP.” Real GDP per capita is a basis for comparing material living standards over time and among different countries.

2. The potential level of real GDP for a nation is determined by such things as the size and skills of its labor force, the size and quality of its stock of capital goods, the quantity and quality of its natural resources, its technological capabilities, and its legal and cultural institutions.

3. A business cycle involves fluctuations of real GDP around its potential level.

4. Fluctuations of real GDP around its potential level occur when overall spending declines, as in a recession, or when overall spending increases rapidly, as in recovery from a recession or in an expansion.

• The Castaways Discover GDP Lesson
• The Productivity Puzzle (Page One Economics)
• How Do Imports Affect GDP? (Page One Economics)
• GDP: How Does it Measure Up? (Page One Economics)