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Gross Domestic Pizza
by Irena Zaleskiene (Lithuania), Anatoly Venger (Ukraine),
Rich MacDonald and
Debbie Davis (USA)
LESSON DESCRIPTION
This lesson explores how gross domestic product (GDP) is
determined. The major components of GDP are described. Students create
and compare GDP pie
charts for the countries of Pepperonia and Anchovia.
AGE LEVEL
12-14 years old
CONCEPTS
- gross domestic product
- consumer goods
- investment goods
- government spending
CONTENT STANDARDS
A nation’s overall levels of income, employment, and
prices are determined by the interaction of spending and production decisions
made by all households,
firms, government agencies, and others in the economy.
BENCHMARKS
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.
OBJECTIVES
- Students will define gross domestic product.
- Students will describe the
difference between final and intermediate goods.
- Students will identify three major spending components used in measuring
GDP.
- Students will give examples of the GDP components.
- Students will make comparisons of the components of GDP of different countries.
TIME REQUIRED
One class period
MATERIALS
- transparency of Visual 1
- one copy of Activities one (1) and two
(2),
cards cut apart
-
red, blue, and green clay — enough to cover two paper circles, one 8" diameter
and one 11½" diameter — about 60% red, 30% blue, and 10%
green
-
one 11 ½"-diameter paper circle (representing a pizza pan) marked
into a pie graph with one 238º wedge labeled “C” and two 61º wedges
with one labeled “I” and one labeled “G”
-
one 8"-diameter paper circle with a 180º wedge labeled “C,” a
144º wedge labeled “G” and a 36º wedge labeled “I”
- copy of Activity 3 for each student
PROCEDURE
- Write the following definition of gross domestic product (GDP) on the
board.
Gross domestic product is the total market value of all
final goods and services produced within the borders
of a country in one year.
- Explain that GDP is measured and calculated as an indicator of the
economy’s
health. One way that it can be measured is by looking at
the purchases of the goods and services produced.
- Point out that final goods and services are newly produced goods that
have reached their final consumer; that is, they will not be resold
to anyone else.
- Display Visual 1, explaining that the first list provides examples of
goods and services that have reached their final buyer during the year.
Ask the following
questions.
- Who buys haircuts, bread, and dresses?
(households, families, and individuals)
- Who buys cruise missiles?
(government)
- Who buys a new factory
or builds up an inventory of unsold products, such as automobiles?
(businesses)
- Using the second list, ask what the word “intermediate” means.
(in the middle)
- Why might window glass used in producing automobiles
be called an “intermediate” good?
(An automobile manufacturer uses the window glass for a car that
will be sold to a final buyer, so it is not a final good. It is
used to produce the car that
will become a final good.)
- Have students explain why the other
products are intermediate goods.
(All products are used to
produce something else that will be sold
to a final buyer.)
- Explain that three major components in calculating GDP are household
purchases of consumer goods and services, government purchases of goods
and services,
and purchases of businesses of capital goods (also called investment).
(Note to teacher: Another component of GDP is exports minus imports.
International trade is not included in this lesson.) Write C, G, and
I on the board. Define
the three components as follows.
- C = household purchases of consumer goods and services
- G = government purchases of goods and services
- I = purchases of businesses of capital goods, such as factories, tools,
and new houses.
- Have students categorize the final goods and services
listed on Visual 1 according to the three components.
(Haircuts, bread,
and dresses are C — consumer
goods and services. A cruise missile is an example of G —government purchases
of goods. A new factory and an increase in automobile inventories are examples
of I — investment.)
- Divide the class into two equal groups, one representing the country
of Pepperonia, the other representing the country of Anchovia. Give
a card from
Activities 1 or 2 to each student in each country. Explain that “parms” is
the currency of these fictitious countries.
- Have students determine the GDP component (C, G, or I) for their cards.
Check for accuracy.
- Pepperonia: C — compact discs, family minivan, bread, manicures, concerts,
butter, doctor’s services, candy bars, apples; I — new factory,
increase in toy inventory; G = cruise missile, new roads,
police protection
- Anchovia: C — compact discs, bread, manicures, concerts, doctor’s
services, candy bars, butter; I — construction equipment, increase in
toy inventory; G — new roads, cruise missile, police protection, education,
national parks, state courts
- Have each team calculate GDP for the country and then calculate each
component’s
percentage share of total GDP.
- Pepperonia: GDP = 150,000 parms where C = 100,000 parms (66%);
G = 25,000 parms (17%); I = 25,000 parms (17%)
- Anchovia: GDP = 75,000 parms where C = 37,500 parms (50%); G =
30,000 parms (40%); I = 7,500 parms (10%)
- Give each student a handful of clay of the appropriate color where red
is C, blue is G, and green is I. Tell students to create a clay
model of the good or service on their cards. When students have completed
their creations,
have each student stand and show his or her good/service and explain
why it is an example of C, G, or I.
- Have students assemble in their groups and combine their clay creations
to create a pie chart. Hold up the two paper circles and explain that
the circles represent GDP. Ask which circle should represent Pepperonia,
and have students
explain their answers.
(Pepperonia will receive the 11 ½"-diameter
paper circle because it has a higher GDP. The area of the circle represents
GDP.)
Note to teacher: This is convenient time to review Br2 as the area
of a circle. The area of the 8"-diameter circle is 3.14159(4)2 = 3.14159(16) = 50.26
square inches. The area of the 11 ½" circle is 3.14159(5.5)2 = 3.14159(30.25)
= 95 square inches which is about twice the size of the 8"-diameter circle.
Pepperonia’s GDP is twice as large as Anchovia’s GDP — 150,000
parms and 75,000 parms, respectively.
- Display the two pie charts. Have students compare them, and draw conclusions.
(Pepperonia spends a larger portion (percentage) of its GDP on
consumer goods and investment than Anchovia. Anchovia spends a larger percentage
of its GDP
on government purchases than Pepperonia.)
CLOSURE
Review the main points of the lesson.
- What is GDP?
(Gross domestic product is the total market value of all
final goods and services produced within the borders of a country
in one year.)
- Name the three components of GDP learned in this lesson.
(consumer goods
and services, government purchases of goods and services, and
investment goods)
- What is the difference between a final and an intermediate good?
(A final
good is a good that has reached its final buyer. An intermediate
good, such as steel, is used to produce another good, such as automobiles.)
- Give examples of consumer goods and services.
(clothes, food, furniture,
jewelry, dental checkups, dry cleaning)
- Give examples of government purchases of goods and services.
(new roads
and bridges, police and fire protection, national defense, education)
- Give examples of investment goods.
(factories, equipment, tools, new
houses, changes in inventories)
ASSESSMENT
Assign Activity 3.
Answers:
- C = B, C, D, F, G, K, O
I = H, I, L, N
G = A, E, J, M
- GDP = 121,000 rolas
- C = 79,400 rolas (66%)
G = 25,300 rolas (21%)
I = 16,300 rolas (13%)
EXTENSION
- Explain that the complete definition of GDP includes exports and
imports.
Exports are added to GDP and imports are subtracted.
- Have students search on the Internet to find the Gross Domestic Product
for their country and others.
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