🗊Презентация The data of macroeconomics

THE DATA OF MACROECONOMICS

2.1 Measuring the Value of Economic Activity: Gross Domestic Product 2.1 Measuring the Value of Economic Activity: Gross Domestic Product 2-2 Measuring the Cost of Living: The Consumer Price Index 2-3 Measuring Joblessness: The Unemployment Rate 2-4 Conclusion: From Economic Statistics to Economic Models

02. The Data of Macroeconomics It is a capital mistake to theorize before one has data. Sherlock Holmes We focus on the three statistics: GDP tells us the nation’s total income and the total expenditure on its output of G&S. CPI measures the level of prices. U tells us the fraction of workers who are unemployed.

2.1 Gross Domestic Product

2.1 Gross Domestic Product There are 2 ways to view GDP statistics. Income must equal expenditure. When Baurzhan paints Gaukhar’s house for $1,000, that $1,000 is income to Baurzhan and expenditure by Gaukhar. To understand GDP more fully, we turn to national income accounting: the accounting system used to measure GDP and many related statistics.

2.1 Measuring the Value of Economic Activity: Gross Domestic Product Income, Expenditure, and the Circular Flow Rules for Computing GDP Real GDP Versus Nominal GDP;The GDP Deflator

STOCKS AND FLOWS A stock is a quantity measured at a given point in time, A flow is a quantity measured per unit of time. The bathtub contains 50 gallons of water but that Water is coming out of the faucet at 5 gallons per minute.

Questions A person’s wealth is a stock; his income and expenditure are flows. The number of unemployed people is a stock; the number of people losing their jobs is a flow. The amount of capital in the economy is a stock; the amount of investment is a flow. The government debt is a stock; the government budget deficit is a flow.

Answers A person’s wealth is a stock; his income and expenditure are flows. The number of unemployed people is a stock; the number of people losing their jobs is a flow. The amount of capital in the economy is a stock; the amount of investment is a flow. The government debt is a stock; the government budget deficit is a flow.

2.1 Gross Domestic Product GDP = (Price of Apples × Quantity of Apples) + (Price of Oranges × Quantity of Oranges) = ($0.50 × 4) + ($1.00 × 3) = $5.00. Used Goods GDP measures the value of currently produced G&S. The Treatment of Inventories If produced G&S spoil, it does not alter GDP. If produced G&S is put into inventory, GDP rises.

2.1 Measuring the Value of Economic Activity: Gross Domestic Product Intermediate Goods and Value Added GDP is the total value of final G&S produced. Examle A cattle rancher sells meat to McDonald’s for $1, and then McDonald’s sells you a hamburger for $3. The value added of the rancher is $1, and the value added of McDonald’s is $2 or $3 – $1, Total value added is $1 + $2 = $3.

2.1 Measuring the Value of Economic Activity: Gross Domestic Product Housing Services and Other Imputations Some G&S are not sold in the marketplace and do not have market prices. For GDP, we must use an estimate of their value. Such an estimate is called an IMPUTED VALUE.

2.1 Measuring the Value of Economic Activity: Gross Domestic Product

2.1 Measuring the Value of Economic Activity: Gross Domestic Product The imperfections are most PROBLEMATIC when comparing standards of living across countries. The imperfections remains fairly constant over time => GDP is USEFUL for comparing economic activity from year to year.

2.1 Measuring the Value of Economic Activity: Gross Domestic Product E x a m p l e Real GDP in 2011 would be Real GDP = (2011 Price of Apples × 2011 Quantity of Apples) + (2011 Price of Oranges × 2011 Quantity of Oranges). Real GDP in 2012 would be Real GDP = (_______ Price of Apples × _____ Quantity of Apples) + (2011 Price of Oranges × 2012 Quantity of Oranges). Real GDP in 2013 would be Real GDP = (_____ Price of Apples × _________ Quantity of Apples) + (_______ Price of Oranges × _______ Quantity of Oranges).

2.1 Gross Domestic Product GDP deflator or implicit price deflator for GDP, is the ratio of nominal GDP to real GDP: The GDP deflator measures the price of output relative to its price in the base year. A new base year updates about every 5 years.

2.1 Measuring the Value of Economic Activity: Gross Domestic Product Chain-weighted measures of real GDP, 1995 The base year changes continuously over time. This CWM of RGDP is better than the more traditional measure because - it ensures that the prices are never far out of date.

TWO ARITHMETIC TRICKS FOR WORKING WITH PERCENTAGE CHANGES

2.1 Gross Domestic Product The national income accounts divide GDP into four broad categories of spending:

WHAT IS INVESTMENT?

GDP AND ITS COMPONENTS

2.1 Measuring the Value of Economic Activity: Gross Domestic Product GNP Gross national product = GDP + Factor Payments from Abroad – Factor Payments to Abroad. GDP measures the total income produced domestically, GNP measures the total income earned by nationals (residents of a nation). NNP Net national product = GNP – Depreciation. The depreciation—the amount of the economy’s stock of plants, equipment, and residential structures that wears out during the year Depreciation is also called the consumption of fixed capital.

2.1 Measuring the Value of Economic Activity: Gross Domestic Product NI national income ≈NNP They two differ by a small correction called the statistical discrepancy, which arises because different data sources may not be completely consistent. National income measures how much everyone in the economy has earned. National income includes 6 components, depending on who earns the income.

2.1 Gross Domestic Product I - Workers 1 Compensation of employees (63%). II -Firms 2 Corporate profits (14%). The income of corporations 3 Proprietors’ income (8%). The income of noncorporate businesses 4 Rental income (3%). The income that landlords receive 5 Net interest (4%). The interest domestic businesses pay minus the interest they receive, plus interest earned from foreigners. III - Government 6 - Indirect business taxes (8%).

2.1 Measuring the Value of Economic Activity: Gross Domestic Product Personal Income = National Income − Indirect Business Taxes − Corporate Profits + Dividends − Social Insurance Contributions + Government Transfers to Individuals − Net Interest + Personal Interest Income. Disposable Personal Income = Personal Income – Personal Tax and - Nontax Payments.

2.1 Measuring the Value of Economic Activity: Gross Domestic Product Most of the economic statistics reported in the newspaper are seasonally adjusted. This means that the data have been adjusted to remove the regular seasonal fluctuations. => when you observe a rise or fall in real GDP or any other data series, you must look beyond the seasonal cycle for the explanation.

2-2 Measuring the Cost of Living: The Consumer Price Index The increase in the overall level of prices, called inflation. The most commonly used measure of the level of prices is the consumer price index (CPI). For example, The typical consumer buys 5 apples and 2 oranges every month. Then the basket of goods consists of 5 apples and 2 oranges, and the CPI is The index tells us how much it costs now to buy 5 apples and 2 oranges relative to how much it cost to buy the same basket of fruit in 2011.

2-2 Measuring the Cost of Living: The Consumer Price Index The PRODUCER price index, a typical basket of goods bought by firms. price indexes for SPECIFIC TYPES of goods, food, housing, and energy. CORE INFLATION STATISTIC a consumer basket that excludes food and energy products.

2-2 Measuring the Cost of Living: The Consumer Price Index The Price of a Basket of Goods The CPI Versus the GDP Deflator Does the CPI Overstate Inflation?

The GDP Deflator and the CPI This figure shows the % change in the GDP deflator and in the CPI for every year from 1948 to 2010. Although these two measures of prices diverge at times, they usually tell the same story about how quickly prices are rising.

2-2 Measuring the Cost of Living: The Consumer Price Index The Price of a Basket of Goods The CPI Versus the GDP Deflator Does the CPI Overstate Inflation?

2-2 Measuring the Cost of Living: The Consumer Price Index Why the CPI Overstate Inflation? One problem is the substitution bias we have already discussed. A second problem is the introduction of new goods. A third problem is unmeasured changes in quality economists have suggested revising laws to reduce the degree of indexation For example Social Security benefits could be indexed to CPI inflation minus 1%.

THE BILLION PRICES PROJECT Cavallo and Rigobon collect data on the prices charged by ONLINE retailers. From their offices in Cambridge, Massachusetts, they track about 5 million items sold in 70 countries by 300 online retailers.

2-3 Measuring Joblessness: The Unemployment Rate The unemployment rate is the statistic that measures the % of those people wanting to work who do not have jobs. The U comes from a survey of households. age 16 and older three categories: Employed worked as paid employees, worked in their own business, Worked as unpaid workers in a family member’s business not working but who had jobs from which they were temporarily absent vacation, illness, or bad weather. Unemployed were not employed, were available for work, had tried to find employment during the previous 4 weeks. waiting to be recalled to a job from which they had been laid off. Not in the labor force fit neither of the first two categories full-time student, homemaker, retiree.

2-3 Measuring Joblessness: The Unemployment Rate Who wants a job but has given up looking—a discouraged worker— is counted as not being in the labor force. The labor force is defined as the sum of the employed and unemployed, Labor Force = Number of Employed + Number of Unemployed The unemployment rate is defined as the percentage of the labor force that is unemployed. Unemployment Rate = Number of Unemployed × 100/Labor Force A related statistic is the labor-force participation rate, the percentage of the adult population: Labor -Force Participation Rate = Labor Force × 100/Adult Population

TRENDS IN LABOR-FORCE PARTICIPATION

2-3 Measuring Joblessness: The Unemployment Rate

2-4 Conclusion: From Economic Statistics to Economic Models The three statistics quantify the performance of the economy: gross domestic product, The consumer price index, the unemployment rate. These statistics is used to monitor changes in the economy to formulate appropriate policies to develop and test theories about how the economy works. We will examine some of these theories, build models that explain how these variables are determined and how economic policy affects them.