Factors Influencing Gross Domestic Product

Lesson by

Sherilyn Narker, economic and financial education specialist, Federal Reserve Bank of Atlanta

Lesson description

In this activity, students will explore how a country’s factors of production influence a country’s level of Gross
Domestic Product. In the lesson, they will be introduced to economic terminology, complete a graphic
organizer, and participate in a group card sorting activity. Students will use their understanding of the factors
influencing GDP to make and support a hypothesis about which GDP and GDP per capita goes with each
country. They will then write a short piece using evidence from the card sort to justify which factors they think
are most important in determining a country’s GDP.

Concepts

Entrepreneurship Literacy Rate

GDP per capita Natural Resources
Gross Domestic Product Physical Capital
Human Capital Standard of Living

Objectives

Students will be able to:

• define key terms such as entrepreneurship, GDP per capita, gross domestic product, human capital,
literacy rate, natural resources, physical capital, and standard of living.
• explain how changes in a particular factor will influence the GDP of a country.
• analyze economic data and identify to which type of resource the data refers.
• compose a written piece giving evidence to support which factors seem to have the most significant effect
on GDP.

Related Content Areas

Economics, World Studies, Current Events, Human Geography

Time Required

One 55 minute class period

Materials

• PowerPoint slides entitled Factors Influencing GDP

• Internet Access for Video (if possible)
• Handout #1 – Fed Explained Assessment (one per student if this was not assigned as Video Q & A
homework)
• Handout #2 - Factors Influencing Economic Growth and Standard of Living (one per student)
• Activity #1 - One set of cards laminated and cut out for each group of six students.
 Factors Influencing Gross Domestic Product

Preparation

Formative Assessment Option: Step 7 in the procedures suggests showing The Fed Explains Real vs. Potential
GDP video. Teachers have the option of assigning this video to students through the Fed’s Econlowdown Video
Q & A website. Teachers can use the instructions found on page 4 in this document to register their students for
Video Q & A. Teachers should register students at least two days prior to the lesson. The students will receive
login instructions from their teacher the day before the lesson and access the video on their home computer or
on a classroom device if available. After viewing the video, students will answer questions about the content.
The students’ scores will be automatically displayed in the teacher’s gradebook in Econlowdown. This will give
the instructor an idea of student understanding prior to implementing lesson.

Preparing for the lesson:

1. Copy the handouts.

2. Print, laminate, cut out, and bag one set of cards for each group of students.
3. If showing the video during class, make sure it will launch on your school computer. The hyperlink
connects to youtube.com. If you cannot access youtube.com from school, you can use your
Econlowdown account to show the video. That site does not pull it from youtube.com.

Procedures: Instructions for the PowerPoint have been put in italics. Content background is in regular type.

1. Open the PowerPoint and Display slide 2. Review the lesson objectives.

2. Introduce the lesson by asking the following question: "What do people mean when they say “the
economy”? Students will have a wide range of responses to this question. They may mention money,
businesses, jobs, prices, etc. Tell the students that some people would describe the economy as the
complex interactions among consumers, businesses, and government as each seeks to produce, consume,
and distribute resources, goods, and services.

3. Ask the students how they think we would measure whether or not the U.S. economy is doing well. If
you assigned the Fed Explained Video Q & A for homework, some students may say Gross Domestic
Product or they may just know the term already. Some will likely say we measure it by looking at
whether businesses succeed, people can find jobs, and /or citizens can afford to buy what they need. Tell
students that we usually use changes in our gross domestic product to measure whether our economy is
growing or shrinking. If you did not already assign the video for homework, tell them they will watch a
short video on GDP and work with their classmates to complete a short assessment.

4. Display slide 3 (or slide 4 if you assigned the video for homework). Click on each image to launch a
browser and the video.

5. (If you watched the video in class.) Give each student a copy of Handout #1, the video assessment and
ask them to complete the activity as a group. Ask the groups to share their responses and go over the
correct answers with the students. (The video Q & A questions are available in a print format in this
document and an answer key follows the student version.)

6. If students are not already in groups, divide them into groups of six or less students. Give each group of
students a stack of the cards you prepared before class.
 Factors Influencing Gross Domestic Product

7. Display slide 4.

8. Ask the groups to find the cards shown on slide 4. Tell them to organize the cards on the table top in
front of them in the format shown on the slide.

9. Distribute Handout #2. Tell students that they will be learning about some important factors countries
need to have good GDP. Tell them they will fill in their handout and complete their table top chart as
you discuss each factor.

10. Display slide 5. Ask a student to read the definition of “human capital”. Ask the students to give some
real life examples of human capital. Tell them to see if they can find two cards for each country which
seem to belong to the human capital category. Ask them to place the cards in the correct spot. Continue
this same process as you display slides 6 -8. Go around the room and check if the students are placing
cards correctly.

11. Display slide 9. Ask a student to read the definition. Tell students to find the literacy rate cards on their
chart.

12. Display slide 10. Read the definitions with the students and ask them to place the GDP and GDP per
capita cards beside Natural Resources on their chart. Ask the students to analyze the factors for each
country and try to place the GDP and GDP per capita cards with the correct country. Ask several
students to share why they places a particular card with a particular country.

13. Display slide 11. Ask if any group placed all the GDP numbers correctly. Encourage the students to
share how well they did and why they made particular placement. Ask them to correct their charts if
necessary.

14. Display slide 12. Discuss the debriefing questions with the students. Ask them to address these questions
on the space provided on Handout #2. Ask students to share their responses and ask other students to
comment on the explanations. Indicate whenever a student uses a good example of evidence to back
their opinions.

15. Optional Activity – Go to http://catalog.socialstudies.com/pdf/ZP219Psample.pdf and show your

students the photo collection from Material World. These are a bit dated, but each photo is accompanied
by the per capita income and literacy rate of the country. The photos depict a middle class family from
the country with all their possessions.
 Factors Influencing Gross Domestic Product

Preparation for Video Q & A: Econlowdown Instructor Management Set-Up

Use this paper to register yourself as an instructor for Econlowdown. It is recommended that you use a personal
email account since some district firewalls may reject your confirmation email. Please follow the instructions
below.

1. Go to https://bts.stlouisfed.org/econ_ed/online_learning/.
2. Click REGISTER on the left hand navigation.
3. Enter the required fields in the form and click “SUBMIT”.
4. Go to your email account.
5. If you do not see your confirmation email in your inbox, check your spam/junk folder. Usually, you will
find it in that location.
6. Follow the information provided in your confirmation email and log onto the Instructor Management
Panel.
7. Click on MY CLASSROOMS.
8. Enter the Class Name, Begin Date, and End Date. For example:
Class Name: Fall 2014 World Studies 1st Period
Begin Date: 08/11/14
End Date: 12/19/14
9. Click ADD NEW CLASSROOM. The classroom name should appear on the left hand navigation.
10. A dropdown box will appear for you to select how many students you are adding to your classroom.
There are three options for adding students:
a. Generate generic student names like Student A, Student B, etc.
b. “Import student list” allows you to pull from a spreadsheet saved on your computer. Your file
must be saved in the CSV format. You can save any excel document in this format by clicking
“save as” and using the drop down box to choose CSV.
c. Type student names directly into the program.
11. Click the ADD STUDENTS button under your classroom name to add your students.
12. Click “print student login” and you will be able to print documents with your students user names and
passwords to distribute to your class.
13. A new green button should appear called ADD COURSE/VIDEO. Click this button under your student
list.
14. You will see a list of all the course and video options.
15. Click The Fed Explains Real versus Potential GDP video.
16. Select ADD TO CLASSROOM.
17. When your students log into the site, they will see this video as an option. They will be instructed to
answer the questions after viewing the video.
18. If you click on this video title listed under your class name, you will be able to see each student’s
progress and the score they earned on the video questions.
 Factors Influencing Gross Domestic Product

The Fed Explained Assessment – Student Version

1. The two main economic goals pursued by the Federal Reserve are

A Economic security and economic growth

B Price stability and maximum employment

C Economic stability and economic freedom

D Maximum employment and economic security

2. How often do government statisticians compute our country’s GDP?

A every month

B every six months

C one time per year

D every three months

3. All of the following activities would be included in the country’s GDP except

A cutting someone’s hair at a hair salon

B washing the dishes after dinner at home

C fixing a customer’s car at the auto repair shop

4. Select all of the following items that would lower the potential GDP of a country.

A Production machinery is damaged and cannot be used.

B A large percentage of workers become elderly and can no longer work.

C Fewer people complete high school and college leading to lower worker productivity.

D A national recession lowers the number of goods and services produced in the economy.

5. When the economy is operating below potential GDP, the Federal Reserve is most likely concerned with

A rising price level

B increasing inflation

C high levels of unemployment

D shortages of necessary goods like energy and food

 Factors Influencing Gross Domestic Product

6. The Federal Reserve goals of price stability and maximum employment are sometimes called

A monetary policy

B the dual mandate

C open market operations

D supervision and regulation

7. Real Gross Domestic Product (RGDP) can best be defined as

A the average of all the prices of goods and services produced in the economy.

B the percent change in the price level of all goods and service produced in an economy in a given time period.

C the total value of all final goods and services produced in an economy in a given time period adjusted for inflation.

D the value of all final goods and services that could be produced in an economy in a given time period if all its capacity
was utilized.

8. An economy producing below its potential GDP most often results from

A High prices of production inputs.

B corrupt government policies that stifle economic growth.

C low consumer demand for goods and services in the economy.

D loss of consumer purchasing power due to a high inflation rate in the economy.

9. Production done at home is not counted in gross domestic product because

A economists want people to work at companies not at home.

B there is no market price to calculate for work done for oneself.

C production done at home is not valuable to anyone except the person doing it.

D goods produced at home lack the quality control found in the commercial market.

10. When the economy is operating above its potential GDP, the Federal Reserve will most likely

A Increase the amount of dollars in circulation to boost economic activity.

B Decrease the amount of dollars in circulation to keep inflation under control.

C Pursue policies designed to decrease the unemployment rate in the economy.

D Do nothing since the economy is performing even better than everyone expected.
 Factors Influencing Gross Domestic Product

The Fed Explained Assessment – Answer Key

1. The two main economic goals pursued by the Federal Reserve are

A Economic security and economic growth

B Price stability and maximum employment*

C Economic stability and economic freedom

D Maximum employment and economic security

2. How often do government statisticians compute our country’s GDP?

A every month

C every six months

D one time per year

B every three months*

3. All of the following activities would be included in the country’s GDP except

A cutting someone’s hair at a hair salon

B washing the dishes after dinner at home*

C fixing a customer’s car at the auto repair shop

4. Select all of the following items that would lower the potential GDP of a country.

A Production machinery is damaged and cannot be used.*

B A large percentage of workers become elderly and can no longer work.*

C Fewer people complete high school and college leading to lower worker productivity.*

D A national recession lowers the number of goods and services produced in the economy.

5. When the economy is operating below potential GDP, the Federal Reserve is most likely concerned with

A rising price level

B increasing inflation

C high levels of unemployment*

D shortages of necessary goods like energy and food

 Factors Influencing Gross Domestic Product

6. The Federal Reserve goals of price stability and maximum employment are sometimes called

A monetary policy

B the dual mandate*

C open market operations

D supervision and regulation

7. Real Gross Domestic Product (RGDP) can best be defined as

A the average of all the prices of goods and services produced in the economy.

B the percent change in the price level of all goods and service produced in an economy in a given time period.

C the total value of all final goods and services produced in an economy in a given time period adjusted for inflation.*

D the value of all final goods and services that could be produced in an economy in a given time period if all its capacity
was utilized.

8. An economy producing below its potential GDP most often results from

A High prices of production inputs.

B corrupt government policies that stifle economic growth.

C low consumer demand for goods and services in the economy.*

D loss of consumer purchasing power due to a high inflation rate in the economy.

9. Production done at home is not counted in gross domestic product because

A economists want people to work at companies not at home.

B there is no market price to calculate for work done for oneself.

C production done at home is not valuable to anyone except the person doing it.

D goods produced at home lack the quality control found in the commercial market.

10. When the economy is operating above its potential GDP, the Federal Reserve will most likely

A Increase the amount of dollars in circulation to boost economic activity.

B Decrease the amount of dollars in circulation to keep inflation under control.*

C Pursue policies designed to decrease the unemployment rate in the economy.

D Do nothing since the economy is performing even better than everyone expected.
 Factors Influencing Gross Domestic Product

Handout #2 - Factors Influencing Economic Growth and Standard of Living

Define each of the following terms as your teacher discusses them. You will complete the boxes on the right
after you have participated in an activity.

Human capital is…

 can ___ GDP

 can ___ GDP

Physical capital is…

 can ___ GDP

 can ___ GDP

Entrepreneurship is…
 can ___ GDP

 can ___ GDP

Natural Resources are…

 can ___ GDP

 can ___ GDP

Literacy rate is …  can ___

Standard of Living

 can ___
Standard of Living
 Factors Influencing Gross Domestic Product

In the chart below, predict which GDP and GDP per capita you think goes with each country you analyzed.

India

China

Japan

Germany

United Kingdom

Russia

In the chart below, write the correct GDP and GDP per capita you think goes with each country you analyzed.

India

China

Japan

Germany

United Kingdom

Russia
In the space below, discuss which factors influencing GDP seem to be the most important in determining GDP
in the countries you analyzed.

_________________________________________________________________________________________

_________________________________________________________________________________________

_________________________________________________________________________________________

_________________________________________________________________________________________

_________________________________________________________________________________________

_________________________________________________________________________________________
 Factors Influencing Gross Domestic Product

Handout #2 - Factors Influencing Economic Growth and Standard of Living

Define each of the following terms as your teacher discusses them. You will complete the boxes on the right
after you have participated in an activity.

Human capital is…

 can ___ GDP
A measure of the economic value
of an employee’s skill set.  can ___ GDP

Physical capital is…

 can ___ GDP
Any manufactured asset that is
applied to production, such a  can ___ GDP
machinery, buildings, or vehicles

Entrepreneurship is…
The process of identifying and starting a new  can ___ GDP
business, bringing together resources, and
taking both the risks and rewards associated  can ___ GDP
with the business.

Natural Resources are…

 can ___ GDP
The gifts of nature available for
the production of goods and  can ___ GDP
services

Literacy rate is …  can ___

Standard of Living
Percentage of the adult
population who can read, write,  can ___
and use printed material Standard of Living
 Factors Influencing Gross Domestic Product

In the chart below, predict which GDP and GDP per capita you think goes with each country you analyzed.

Answers will vary.

India

China

Japan

Germany

United Kingdom

Russia
In the chart below, write the correct GDP and GDP per capita for each country you analyzed.

$4.962 Trillion $4,000

India
$13.37 Trillion $9,800
China
$2.378 Trillion $37,300
Japan
$4.729 Trillion $37,100
Germany
$2.378 Trillion $37,300
United Kingdom
$2.553 Trillion $18,100
Russia
In the space below, discuss which factors influencing GDP seem to be the most important in determining GDP
in the countries you analyzed. Also discuss the relationship between Literacy Rates and Standard of Living.

_________Answers will vary__________________________________________________________________

_________________________________________________________________________________________

_________________________________________________________________________________________

_________________________________________________________________________________________

_________________________________________________________________________________________

_________________________________________________________________________________________
 Factors Influencing Gross Domestic Product

Activity #1 – Cards for Group Card Sort

Human Capital Human Capital

Physical Capital Physical Capital

Entrepreneur Entrepreneur
ship ship

Natural Natural
Resources Resources
 Factors Influencing Gross Domestic Product

Activity #1 – Cards for Group Card Sort (page 2 of 9)

Children have guaranteed As of 2011, 74% of Indian

right to free education adults could read and write
until the age of 14

Crops grown in India India has 3.3 million square

include rice, wheat, cotton, kilometers of territory and
tea, sugarcane, and lentils 48% of the land can be
farmed

Workers in India – In 2013, 30% of India’s GDP

49% work in farming came from investment in
20% work in industry physical capital
31% work in services

Small and medium size

businesses were 16% of Indian adults own
responsible for 8.7% of their own business
India’s GDP.
 Factors Influencing Gross Domestic Product

Activity #1 – Cards for Group Card Sort (page 3 of 9)

94% of Japanese children As of the most recent

attend high school census, 99% of Japanese
adults could read and
write

Crops grown in Japan Japan has .37 million

include rice, sugar beets, square kilometers of
vegetables, and fruit territory and 11.8% of the
land can be farmed

Workers in Japan – In 2013, 21.6% of Japan’s

3.9% work in farming GDP came from
26.2% work in industry investment in physical
70% work in services capital

31% of Japanese adults

Small and medium size report being
businesses were entrepreneurs or self-
responsible for 50% of employed
Japan’s GDP.
 Factors Influencing Gross Domestic Product

Activity #1 – Cards for Group Card Sort (page 4 of 9)

80% of Chinese children As of the most recent

finish middle school; census, 95.1% of Chinese
high school is not adults could read and
required write

Crops grown in China China has 9.6 million

include rice, wheat, square kilometers of
potatoes, corn, peanuts, territory and 11.6% of
tea, and cotton the land can be farmed

Workers in China – In 2013, 46% of China’s

34.8% work in farming GDP came from
29.5% work in industry investment in physical
35.7% work in services capital

Small and medium size 7% of Chinese workers

businesses were report being
responsible for 60% of entrepreneurs
China’s GDP.
 Factors Influencing Gross Domestic Product

Activity #1 – Cards for Group Card Sort (page 5 of 9)

The average German child As of the most recent

attends some kind of census, 99% of German
formal schooling for 16 adults could read and write
years.

Crops grown in Germany Germany has .36 million

include wheat, potatoes, square kilometers of
sugar beets, barley, and territory and 33.25% of the
fruit land can be farmed

Workers in Germany – In 2013, 17.5% of

1.6% work in farming Germany’s GDP came from
24.6% work in industry investment in physical
73.8% work in services capital

Small and medium size 7% of German workers

businesses were report being entrepreneurs
responsible for 42.5% of or self-employed
Germany’s GDP.
 Factors Influencing Gross Domestic Product

Activity #1 – Cards for Group Card Sort (page 6 of 9)

The average Russian child As of the most recent

attends some kind of census, 99% of Russian
formal schooling for 14 adults could read and write
years.

Crops grown in Russia Russia has 17 million square

include grain, sugar beets, kilometers of territory and
sunflower seed, 7.11% of the land can be
vegetables, and fruits farmed

Workers in Russia – In 2013, 22% of Russia’s

9.7% work in farming GDP came from investment
27.8% work in industry in physical capital
62.5% work in services

Small and medium size 11.6% of Russian workers

businesses were report being entrepreneurs
responsible for 10.5% of or self- employed
Russia’s GDP.
 Factors Influencing Gross Domestic Product

Activity #1 – Cards for Group Card Sort (page 7 of 9)

The average United As of the most recent

Kingdom child attends some census, 99% of United
kind of formal schooling for Kingdom adults could read
16 years. and write

Crops grown in United The United Kingdom has .24

Kingdom include cereals, million square kilometers of
oilseed, potatoes, and territory and 24.8% of the
vegetables land can be farmed

Workers in United Kingdom In 2013, 13.8% of United

1.4% work in farming Kingdom GDP came from
18.2% work in industry investment in physical
80.4% work in services capital

Small and medium size 14.6% of United Kingdom

businesses were responsible workers report being
for 50.45% of United entrepreneurs or self-
Kingdom GDP. employed
 Factors Influencing Gross Domestic Product

Activity #1 – Cards for Group Card Sort (page 8 of 9)

India Japan

China Germany

United Kingdom Russian Federation

 Factors Influencing Gross Domestic Product

GDP = GDP =
$4.962 Trillion $4.729 Trillion
GDP = GDP =
$13.37 Trillion $3.227 Trillion
GDP = GDP =
$2.378 Trillion $2.553 Trillion
GDP/Capita = GDP/Capita =
$4,000 $37,100
GDP/Capita = GDP/Capita =
$9,800 $39,500

GDP/Capita = GDP/Capita =
$37,300 $18,100
 Factors Influencing Gross Domestic Product

Key - Do not print and laminate.

India Japan
GDP = GDP =
$4.962 Trillion $4.729 Trillion
GDP/Capita = GDP/Capita = $37,100
$4,000

China Germany
GDP = GDP =
$13.37 Trillion $3.227 Trillion
GDP/Capita = GDP/Capita =
$9,800 $39,500

United Kingdom Russian Federation

GDP = GDP =
$2.378 Trillion $2.553 Trillion
GDP/Capita = $37,300 GDP/Capita = $18,100

**Based on PPP 2013 from CIA World Factbook**

 Factors Influencing Gross Domestic Product

Standards and Benchmarks

National Standards for Economic Education

Content Standard 13: Income

a. Students will understand that: Income for most people is determined by the market value of the
productive resources they sell. What workers earn primarily depends on the market value of what
they produce.

Content Standard 14: Entrepreneurship

a. Students will understand that: Entrepreneurs take on the calculated risk of starting new
businesses, either by embarking on new ventures similar to existing ones or by introducing new
innovations. Entrepreneurial innovation is an important source of economic growth.
b. Students will be able to use this knowledge to: Identify the risks and potential returns to
entrepreneurship, as well as the skills necessary to engage in it. Understand the importance of
entrepreneurship and innovation to economic growth, and how public policies affect incentives
for and, consequently, the success of entrepreneurship in the United States.

Content Standard 15: Economic Growth

a. Students will understand that: Investment in factories, machinery, new technology, and in the
health, education, and training of people stimulates economic growth and can raise future
standards of living.
b. Students will be able to use this knowledge to: Predict the consequences of investment decisions
made by individuals, businesses, and governments.

Common Core Standards

Grades 6-8 Students Grades 9-10 students Grades 11-12 students

Integration of Knowledge and Ideas

7. Integrate visual information (e.g., in 7. Integrate quantitative or technical analysis 7. Integrate and evaluate multiple
charts, graphs, photographs, videos, or (e.g., charts, research data) with qualitative sources of information presented in
maps) with other information in print and analysis in print or digital text. diverse formats and media
digital texts.
Writing Standards for Literacy in History/Social Studies 6 – 12 Research to Build and Present Knowledge

7. Support claim(s) with logical 7. Conduct short as well as more sustained 7. Conduct short as well as more
reasoning and relevant evidence, using research projects to answer a question sustained research projects to answer a
accurate, credible sources and (including a self-generated question) or solve question (including a self-generated
demonstrating an understanding of the
a problem; narrow or broaden the inquiry question) or solve a problem; narrow or
topic or text.
when appropriate; synthesize multiple sources broaden the inquiry when appropriate;
on the subject, demonstrating understanding synthesize multiple sources on the
of the subject under investigation. subject, demonstrating understanding
of the subject under investigation.