🗊Презентация Macroeconomics. GDP. Income. Economic Growth

Macroeconomics GDP Income Economic Growth Zharova Liubov

GDP = is the monetary value of all the finished goods and services produced within a country's borders in a specific time period Includes all domestic production in a boarders Monetary measurement of value To avoid multiple counting – must include ONLY new production (sold to consumers) Does NOT include: intermediate goods (ex: tires for new auto) public transfer payments (welfare payment) private transfer payments (cash gifts) stock market transactions (stocks & bonds) secondhand sales (used books, cars, homes)

Approaches to calculate GDP Expenditure & Income Methods Expenditure Method – count all new goods & services that are purchased by: consumers, businesses, government, & net exports (X – M = Xn) GDPExpenditure =C + I + G + NX

Expenditure approach for 1 product economy Roaster Wages $15,000 Taxes $5,000 Revenue $35,000 beans sold to public $10,000 beans sold to coffee bar $25,000 Coffee bar Wages $10,000 Taxes $2,000 Beans bought from roaster $25,000 Revenue from coffee sold to public $40,000

Expenditure approach for 1 product economy Winegrower Wages $20,000 Taxes $7,000 Revenue $50,000 sold to public $20,000 sold to wine-maker $30,000 Wine-maker Wages $18,000 Taxes $8,000 Grapes from winegrower $30,000 Revenue from wine sold to public $40,000

Product approach GDP is the sum of the value added created in all the sectors of the economy. Value added is sales minus materials, intermediate inputs and energy costs. The value of a final good is equal to the value added at each stage of production. Expenditure method = Production Method

Product approach for 1 product economy Roaster Wages $15,000 Taxes $5,000 Revenue $35,000 beans sold to public $10,000 beans sold to coffee bar $25,000 Coffee bar Wages $10,000 Taxes $2,000 Beans bought from roaster $25,000 Revenue from coffee sold to public $40,000

Expenditure approach for 1 product economy Winegrower Wages $20,000 Taxes $7,000 Revenue $50,000 sold to public $20,000 sold to wine-maker $30,000 Wine-maker Wages $18,000 Taxes $8,000 Grapes from winegrower $30,000 Revenue from wine sold to public $40,000

Income method Income Method – count all earnings received by those who produce the goods & services Workers, owners of property, interest earned on savings, profit earned by business owners (proprietors, partners & corporation stockholders) Requires some accounting adjustments =＞ Expenditures = Income (must balance) National income =＞ all citizens supplied resources (here & abroad)

Consumption (C) Consumption (C) Investment (I) Government purchases (G) Exports (X) Imports (M) Taxes (T) Saving (S) (I - S) + (G - T) + (X - M) = 0

Income approach for 1 product economy Roaster Wages $15,000 Taxes $5,000 Revenue $35,000 beans sold to public $10,000 beans sold to coffee bar $25,000 Coffee bar Wages $10,000 Taxes $2,000 Beans bought from roaster $25,000 Revenue from coffee sold to public $40,000

Income approach for 1 product economy Winegrower Wages $20,000 Taxes $7,000 Revenue $50,000 sold to public $20,000 sold to wine-maker $30,000 Wine-maker Wages $18,000 Taxes $8,000 Grapes from winegrower $30,000 Revenue from wine sold to public $40,000

GDP – by sum of Spending, Factor Incomes or Output

GDP (BEA commentaries) The entries on the right side of account 1 show the approach used by BEA for deriving GDP: It is measured using the expenditures approach – that is, as the sum of purchases by final users. The left (income) side – the sum of all the incomes earned and costs incurred in production. Specifically, the left side shows GDI as the sum of the income earned by labor, governments and entrepreneurs and the consumption of fixed capital. In theory, GDI should be equal to GDP. In practice, differences in the source data used to estimate the two measures result in a “statistical discrepancy,” which, in the NIPAs ( national income and product accounts), is calculated as GDP less GDI. Because the source data used to develop the product-side estimates of the account are based on more comprehensive surveys and censuses, BEA considers them more reliable. Therefore, the statistical discrepancy appears as a component on the income side of the account to equate GDI with GDP.

GDP – Nominal vs. Real Nominal = current year prices Real = prices adjusted for inflation Nominal ＞ Real (in the most cases) Nominal GDP is used when comparing different quarters of output within the same year. When comparing the GDP of two or more years, real GDP is used because, by removing the effects of inflation, the comparison of the different years focuses solely on volume.

USA GDP Nominal and Real

Example

Deflator GDP GDP deflator is an index of the price level relative to some base year. It is the cost of purchasing the goods that represent GDP relative to the cost of purchasing the exact same goods if they had been sold at the prices prevailing in the base year

What is the relationship between GDP deflator & CPI?

Example

Inflation