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For Teachers: Lessons on Gross Domestic Product

The Stock Market Game Program

Friday, Feb. 29: Leap Day. This extra day is added to the calendar every four years to help synchronize the calendar year to the astronomical or seasonal year, or the length of time it takes the earth to complete its orbit around the sun, which is approximately 365 ¼ days.

While some view this date as Sadie Hawkins Day with women given the "right" to propose to men, most view it as just another work day. Many on Wall Street, however, wished this leap day was an opportunity for the markets to "adjust" themselves into positive territory as it was another rough week.

Last week, the U.S. dollar dipped further, reaching a new low against the euro, after data confirmed the U.S. economy nearly screeched to a halt at the end of last year, limiting the Fed's options as it tries to steer through the housing and credit crises. The Commerce Department report stated the U.S. economy, or gross domestic product (GDP), grew at a scant 0.6% pace during the October to December quarter, compared with a much healthier 4.9% during the previous quarter.

GDP measures the value of all goods and services produced in the United States and many believe it is the best barometer of the country's overall economic health. Economists anticipated the fourth-quarter GDP would have been bumped up to a 0.8% growth rate, but the housing report looked even bleaker in the new report. The finding helped push the 15-nation euro to a record high of $1.5229, while also pushing crude oil prices up more than $2 a barrel on Thursday, Feb. 28.

Concerned the current problems could intensify and further hurt the U.S. economy, Federal Reserve Chairman Ben Bernanke made it clear again last week he stands ready to lower a key interest rate once again. In eight days in January, the Fed slashed rates by 1.25 percentage points, but Bernanke remains hopeful the previous rate reductions and the $168 billion economic aid plan of tax rebates for individuals and businesses will energize the economy in the second half of 2008.

For more information about the GDP, have your students check out the "Jee D. Pea" issue of "In the News." It explains how the growth of stock prices over time is related to the long-term growth of the GDP. And for those students who are having difficulty locating correct ticker symbols, the "Ticker's Tale" issue of "Stock Talk" will be helpful. The issue examines the origin of ticker symbols and their value while helping students learn how to locate them. Both newsletters are accessible in the Teacher Support Center under "Publications."