1 chapter 7(23) Tracking the Macroeconomy Chapter Objectives Students will learn in this chapter: How economists use aggregate measures to track the performance of the economy. What gross domestic product, or GDP, is and the three ways of calculating it. The difference between real GDP and nominal GDP and why real GDP is the appropriate measure of real economic activity. What a price index is and how it is used to calculate the inflation rate. What some of the specific price indexes are and how economists use them. Chapter Outline Opening Example: Using an historical perspective of the tumultuous Portuguese economy in the mid-1970s, the example illustrates the importance of collecting and analyzing accurate data on the macroeconomy before instituting any economic or social policy measures. I. The National Accounts A. In the United States, the Bureau of Economic Analysis a division of the Commerce Department collects and calculates various types of economic data and compiles them in the national product and income accounts. B. Definition: The national income and product accounts, or national accounts, keep track of the flow of money between different sectors of the economy. C. The expanded circular flow diagram, shown in Figure 7-1 (Figure 23-1) in the text, illustrates the flow of funds through the four sectors of the economy households, firms, government, and the rest of the world via three types of markets factor markets, markets for goods and services, and financial markets. D. Households 1. Definition: Consumer spending is household spending on goods and services. 2. Most households receive the majority of their income from wages. However, some households also receive income from the ownership of stocks and bonds, which generate profit and interest income, respectively. 3. Definition: A stock is a share in the ownership of a company held by a shareholder. 4. Definition: A bond is borrowing in the form of an IOU that pays interest. 77
2 78 CHAPTER 7(23) TRACKING THE MACROECONOMY 5. Definition: Government transfers are payments by the government to individuals for which no good or service is provided in return. 6. Definition: Disposable income, equal to income plus government transfers minus taxes, is the total amount of household income available to spend on consumption and savings. 7. Definition: Private savings, equal to disposable income minus consumer spending, is disposable income that is not spent on consumption. 8. The total sum of flows of money out of households the sum of taxes paid, consumer spending, and private savings must equal the total flow of money into households the sum of wages, profits, interest, rent, and government transfers. E. Definition: The banking, stock, and bond markets, which channel private savings and foreign lending into investment spending, government borrowing, and foreign borrowing, are known as the financial markets. F. Government 1. Definition: Government borrowing is the amount of funds borrowed by the government in the financial markets. 2. Definition: Government purchases of goods and services are government expenditures on goods and services. G. International Sector 1. Definition: Exports are goods and services sold to residents of other countries. 2. Definition: Imports are goods and services purchased by residents of other countries. 3. Definition: Net exports are the difference between the value of exports and the value of imports. H. Business Investment 1. Definition: Investment spending is spending on productive physical capital, such as machinery and construction of structures, and on changes to inventories. 2. Definition: Inventories are the stocks of goods and services and raw materials that companies hold to enable their business operations. I. Gross Domestic Product 1. Definition: Final goods and services are goods and services sold to the final, or end, user. 2. Definition: Intermediate goods and services are goods and services bought from one firm by another firm that are inputs for production of final goods and services. 3. Definition: Gross domestic product, or GDP, is the total value of all final goods and services produced in the economy during a given year. 4. GDP is used as a measure of the size of an economy and can also be used to compare the economic performance in other countries. 5. There are three ways to measure GDP: As the value of production of final goods and services. As spending on domestically produced final goods and services. As factor income earned from firms in the economy. 6. Definition: Aggregate spending, the sum of consumer spending, investment spending, government purchases, and exports minus imports, is the total spending on domestically produced final goods and services in the economy.
3 CHAPTER 7(23) TRACKING THE MACROECONOMY 79 J. Measuring GDP as the value of production of final goods and services 1. GDP is calculated by summing the value of all final goods and services produced in an economy in a given year. 2. The value of intermediate goods is omitted from this calculation of GDP. This is because if the value of intermediate goods is included, this would result in double-counting or more, since the value of intermediate goods is already included in the value of final goods. For example, the value of the steel produced that is used in an automobile is not counted in GDP since this is an intermediate good. However, the value of this steel adds to the value of the automobile, a final good, which is included in GDP. 3. Definition: The value added of a producer is the value of its sales minus the value of its purchases of inputs. 4. An alternative approach to computing GDP is to sum the value added by all firms. 5. To avoid double-counting, only each producer s value added is counted in the calculation of GDP. K. Measuring GDP as spending on domestically produced final goods and services 1. GDP is calculated by summing spending on all final goods and services by all sectors of the economy households (C), businesses (I), governments (G), and foreigners (X) are added together and spending on imports (IM) is subtracted. 2. Mathematically stated: GDP = C + I + G + X IM L. Measuring GDP as factor income earned from firms in the economy 1. GDP is calculated by adding all of the income earned by factors of production from firms in the economy. This includes: Wages earned by labor Interest earned by those who lend their savings to firms and the government Rent earned by those who lease their land or structures to firms Profit earned by the owners of capital M. The components of GDP spending in 2007 included: 1. Consumer spending: $9,710 billion, or 70.3% of GDP 2. Government spending: $2,675 billion, or 19.4% of GDP 3. Investment spending: $2,130 billion, or 15.4% of GDP 4. Net Exports: $708 billion, or 5.1% of GDP The components of GDP are illustrated in Figure 7-3 (Figure 23-3) in the text. II. Real GDP and Aggregate Output A. Definition: Aggregate output is the total quantity of goods and services the economy produces. B. Definition: Real GDP is the total value of all final goods and services produced in the economy during a given year, calculated using the prices of a selected base year. C. Definition: Nominal GDP is the value of all final goods and services produced in the economy during a given year, calculated using the prices current in the year in which the output is produced.
4 80 CHAPTER 7(23) TRACKING THE MACROECONOMY D. To determine the actual growth in aggregate output, we calculate the change in real GDP using prices from some given base year, as in the following: Growth in real GDP = 1. Definition: Chained dollars split the difference in growth rates calcu - lated using early base years and the growth rates calculated using late base years. E. Definition: GDP per capita is GDP divided by the size of the population; it is equivalent to the average GDP per person. GDP per capita F. Real per capita GDP is not a sufficient measure of human welfare or the quality of life, which also depends on how the GDP is spent. III. Price Indexes and the Aggregate Price Level Real GDP in year 2 Real GDP in year 1 Real GDP in year 1 GDP = size of the population A. Definition: The aggregate price level is a single number representing the overall level of prices. B. Definition: A market basket is a hypothetical set of consumer purchases of goods and services. C. Definition: A price index measures the cost of purchasing a given market basket in a given year, where that cost is normalized so that it is equal to 100 in the selected base year. D. Formula for price index: (Cost of market basket in a given year) Price index in a given year = 100 (Cost of market basket in base year) E. Definition: The inflation rate is the percent change per year in a price index typically, the consumer price index. F. The inflation rate from year 1 to year 2 is computed as: (Price index in year 2) (Price index in year 1) Inflation rate = 100 (Price index in year 1) G. There are three measures of prices in the macroeconomy including: The Consumer Price Index, or CPI The Producer Price Index, or PPI The GDP Deflator H. Definition: The consumer price index, or CPI, measures the cost of the market basket of a typical urban American family. I. Definition: The producer price index, or PPI, measures changes in the prices of goods purchased by producers. J. Definition: The GDP deflator for a given year is 100 times the ratio of nominal GDP to real GDP in that year.
5 CHAPTER 7(23) TRACKING THE MACROECONOMY 81 Teaching Tips The National Accounts Creating Student Interest Ask students if they have ever heard of GDP they probably have. Ask them what the letters G, D, and P stand for. Again, they will probably know. Then ask them what GDP measures. Here you may find they are less certain. Explain each of the terms: Gross the total amount Domestic for the home country (e.g., United States) Product amount produced. So, GDP is a measure of the total amount of output produced by the United States (or whatever country is being considered). Have the students consider why we would want to keep track of the total amount produced in the economy. What does it mean if we produce more, or less? Link GDP to the business cycle and employment levels. Ask students what they think is the value of U.S. GDP (present the most current value which you can find on the web page listed under Web Resources). Presenting the Material Figure 7-1 (Figure 23-1) of the text, The Expanded Circular-Flow Diagram: The Flows of Money through the Economy, demonstrates the manner in which money flows from producers to households, governments, and the rest of the world, and vice versa. Since this figure is quite complex at first glance to students, break up the elements in the diagram and describe them individually. First, identify the major economic agents households, firms, governments, and the rest of the world and the markets product markets, factor markets, and financial markets. Afterward, concentrate on the flows of money, using the arrows in the diagram below. An Expanded Circular-Flow Diagram: The Flows of Money Through the Economy Government purchases of goods and services Government Government borrowing Consumer spending Taxes Households Government transfers Private savings Markets for goods and services Wages, profit, interest, rent Factor markets Financial markets Gross domestic product Firms Wages, profits, interest, rent Borrowing and stock issues by firms Investment spending Exports Foreign borrowing and sales of stock Rest of world Imports Foreign lending and purchases of stock
6 82 CHAPTER 7(23) TRACKING THE MACROECONOMY Present the definition of GDP in writing (write it on the board): the total value of all final goods and services produced in an economy during a given period. After showing the entire definition, highlight each component and explain its importance. Value we can t add apples and oranges (literally!) to find a meaningful number. Think of adding one car to one pair of socks and getting 2 it doesn t make sense. So, we add up the market value of the output (we can add dollars and dollars). This sets up the later discussion of the exclusion of non-market production from the calculation of GDP as well as the difference between real and nominal. Final explain that, to avoid double counting, we add up only final production (or we could use the value-added approach). Goods and services these are both included in GDP. The difference is that goods are tangible and can be stored in inventories (unlike a service, e.g. a haircut you can t buy two haircuts and save one for later!). However, both represent output and are included in GDP. An economy GDP can be calculated for any group of countries, individual country, state (gross state product), region, or whatever definition of an economy is of interest. A given period since we are continuously producing, we have to identify the period over which we are measuring output. Output is a flow variable (like a river) rather than a stock variable (like a lake). We don t all stop and count output on December 31, so we have to identify a time period and count only what was produced during that time period. GDP can be calculated annually, quarterly, monthly, etc. Real GDP: A Measure of Aggregate Output Creating Student Interest Present the following data (from the Bureau of Economic Analysis) to the class. In 2000, the value of output produced by the soft drink industry was $3,301,800,000. In 2006, that number was $4,057,500,000. Therefore, between 2000 and 2006, the United States GDP increased by 755,700,000 as a result of soft drink production. Ask the students what caused the increase in the value of soft drink output between 2000 and Students will likely realize that there were more soft drinks produced in 2006, but help them to also understand that the price of soft drink went up over that time (by approximately 13%). Therefore, the increase in (nominal) GDP reflects both the price and production increases. Presenting the Material Using the data presented in Table 7-1 (Table 23-1) of the text, first show students how to compute nominal GDP for year 1. Next, ask students to compute nominal GDP for year 2 independently. Follow a similar process when computing real GDP for years 1 and 2, assuming year 1 is the base year. Point out the differences in value in nominal and real GDP for year 2.
7 CHAPTER 7(23) TRACKING THE MACROECONOMY 83 Calculating GDP and Real GDP in a Simple Economy Year 1 Year 2 Quantity of apples (billions) 2,000 2,200 Price of apple $0.25 $0.30 Quantity of oranges (billions) 1,000 1,200 Price of orange $0.50 $0.70 GDP (billions of dollars) $1,000 $1,500 Real GDP (billions of year 1 dollars) $1,000 $1,150 Price Indexes and the Aggregate Price Level Creating Student Interest Present the following data to the class. In September 2008, a tank of gas for a car cost $58.40 (average price in the United States for regular gas, average size gas tank). In September 2007, the cost was $ The average size gas tank didn t change over that time so why does it cost more to fill the tank? Of course students will see that it is the increase in the price of a gallon of gas over that time. Use the web resources to calculate the average cost to fill a car s gas tank today. Ask students how much inflation they think the U.S. economy is currently experiencing. Present the most recent numbers (see Web Resources). Presenting the Material Explain the notion of a market basket and how it is used in the computation of price indexes. Afterward, use the data in Table 7-3 (Table 23-3) of the text to compute the prefrost cost of a market basket of citrus fruit on the board. Ask students to compute the cost of the post-frost market basket independently. After ensuring that students have completed their calculations correctly, compute the following as a class: The price index The rate of inflation Calculating the Cost of a Market Basket Pre-frost Post-frost Price of orange $0.20 $0.40 Price of grapefruit $0.60 $1.00 Price of lemon $0.25 $0.45 Cost of market basket (200 oranges, 50 grapefruit, 100 lemons) (200 x $0.20) + (50 x $0.60) + (100 x $0.25) = $95.00 (200 x $0.40) + (50 x $1.00) + (100 x $0.45) = $ It is also important that students understand the differences in the three measures of prices the consumer price index, the producer price index, and the GDP deflator as well as the appropriate uses of each.
8 84 CHAPTER 7(23) TRACKING THE MACROECONOMY Common Student Pitfalls Three Ways to calculate GDP. Because GDP can be calculated three different ways summing income earned, summing expenditures, and summing the value of production students may mistakenly believe that these three methods yield different values for GDP in a given period. Emphasize to students that this is not the case, because ultimately the value of all final goods and services produced must equal the value of income earned in the production of all final goods and services in a given year. Real versus nominal GDP. Since students often think of output in physical terms rather than in monetized terms, they may not immediately see the need for measuring real GDP. Emphasize that all goods and services are measured in monetized terms, so the value of production of all goods and services can be summed together when calculating GDP. Ask students if the number of goods and services produced per year changes and if the prices of goods and services change each year. Suppose, for example that GDP is increasing from one year to another, we cannot determine if the reason GDP is rising is due to higher prices or a greater amount of output being produced. This is why we must look at real measures of monetized economic variables, such as GDP, when we compare their values over time. The price level versus ALL prices. Students may mistakenly believe that a reported increase in the CPI means that all prices of goods and services in the economy are increasing at the same stated rate. Emphasize that the CPI, or any price index, indicates the rate of change for the average of all prices included in the index. Case Studies in the Text Economics in Action Creating the National Accounts This EIA explains when, why, and by whom national income accounting was developed. Ask students the following questions: 1. When, why, and by whom were national income accounts first created? (Answer: during the Great Depression, the need for information to help understand/address the depression, Simon Kuznets) 2. When and why were the national income accounts expanded to focus on production? (Answer: 1942, World War II) Miracle in Venezuela? This EIA presents the growth rates of nominal GDP and real GDP for Venezuela between 1997 and Ask students the following questions: 1. By how much did Venezuelan nominal GDP grow between 1997 and 2007? Why? (Answer: an average of 28% per year. Inflation) 2. By how much did Venezuelan real GDP grow over the same period? (Answer: an average annual rate of 2.9%) Indexing to the CPI This EIA explains the practice of indexing payments to the CPI. Ask students the following questions: 1. What does it mean to index a payment to the CPI and why is it done? (Answer: tying the payment to the CPI so that it goes up and down with
9 CHAPTER 7(23) TRACKING THE MACROECONOMY 85 inflation and contraction, keeping the real value of the payment steady) 2. What are examples of important payments indexed to the CPI? (Answer: Social Security, tax payments through tax brackets) For Inquiring Minds Our Imputed Lives This FIM explains how economists try to impute the value of household work and how they include an imputation for the value of owning your own home (rather then renting) in GDP calculation. Gross What? This FIM explains the difference between GDP and GNP. Is the CPI Biased? This FIM presents several reasons some economists believe the CPI systematically overstates the actual rate of inflation. Global Comparison GDP and the Meaning of Life This Global Comparison presents data for real GDP per capita and a measure of satisfaction for a variety of countries. Activities What s In and What s Out? (15 minutes) Pair students and ask them to categorize the following items as either included in the calculation of GDP or excluded from it. Also ask students to indicate the reason for their choice in each case. Hamburger buns bought by McDonald s Corporation for making Big Macs (Answer: Excluded from GDP since they constitute an intermediate good.) A used macroeconomics textbook (Answer: Excluded from GDP since it is not a newly produced good.) A new pair of Levi s jeans (Answer: Included in GDP since it is a newly produced good.) Newly purchased shares of Google stock (Answer: Excluded from GDP since they are not a good or service that is produced.) A new Chrysler P.T. Cruiser automobile (Answer: Included in GDP since it is a newly produced good.) A new Lexus SUV (Answer: Excluded from GDP since it is not a domestically produced good.) A newly purchased $10,000 U.S. Treasury Bill (Answer: Excluded from GDP since it is not a good or service that is produced.) A cup of coffee purchased at Starbucks (Answer: Included in GDP as it is a newly produced good.) Who s Spending? (10 minutes) Ask students to rank, from highest to lowest, the following types of spending included in GDP: Government spending Consumer spending Business spending Net exports
10 86 CHAPTER 7(23) TRACKING THE MACROECONOMY Answer: Largest: Consumer spending makes up 70.1% of GDP Government spending is 18.6% of GDP Investment spending is 16.4% of GDP Smallest: Net exports amount to 5.2% of GDP Calculating Nominal and Real GDP (20 minutes) Ask students to use the data in the following table, where it is assumed that only two goods, bread and cake, are produced in an economy, and 2004 is the base year Quantity of bread (billions) 5,000 6,000 Price of bread $2.50 $2.25 Quantity of cake (billions) 1,200 1,150 Price of cake $4.00 $3.80 Calculate the following: 1. Nominal GDP in 2004 and Real GDP in 2004 and 2005 Answers: 1. Nominal GDP in 2004 = (5,000 $2.50 ) + (1,200 $4.00) = $17,300 billion Nominal GDP in 2005 = (6,000 $2.25) + (1,150 $3.80) = $17,870 billion 2. Real GDP in 2004 = (5,000 $2.50) + (1,200 $4.00) = $17,300 billion Real GDP in 2005 = (6,000 $2.50) + (1,150 $4.00) = $19,600 billion Per Capita GDP in LDCs (10 minutes) Explain to students that a persistent problem plaguing less-developed countries is low per-capita GDP. Ask students for ways this problem can be alleviated. Answers may include: Increasing labor productivity, which will lead to greater output and hence higher levels of GDP Controlling population growth rates Improving the capital stock, which will lead to greater output and hence higher levels of GDP Improving the state of technology Which One? (20 minutes) Pair students and ask them to determine the most appropriate price index to use in each of the following situations and to provide justification for each answer. 1. Chris is writing a research paper on the automobile industry. She needs to include a discussion of how higher costs of production have affected American auto producers. What price index should she use? (Answer: Chris should use the Producer Price Index to measure changes in prices paid by producers of goods.) 2. Charles works as an economist for the United Mine Workers. He is developing the justification for the pay raise the union is seeking from man-
11 CHAPTER 7(23) TRACKING THE MACROECONOMY 87 agement in its new contract. What price index should he use? (Answer: Charles should use the Consumer Price Index to demonstrate that the union members wages should rise by at least the same rate as the increase in consumer prices.) 3. William is a television reporter. He is preparing a documentary on the status of the U.S. economy. His documentary will focus on all sectors of the economy. What price index should he use? (Answer: William should use the GDP deflator, since it measures inflation as it affects all sectors of the economy.) 4. In November, Lucy volunteered to compute the value of her grandmother s Social Security payments for the following year. What price index should she use? (Answer: Lucy should use the CPI, since this is the measure used to index Social Security payments for inflation each year.) Web Resources The following website provides information on GDP and inflation: Smart Money Economy Watch GDP: Bureau of Labor Statistics Inflation (CPI): Energy Information Administration average gas prices: html
GDP and National Accounts National accounts show technically no recession yeeah! 1 of 18 Accounting (I) Some Accounting Definitions A stock variable is measured at one specific time, and represents a quantity
Macroeconomics CHAPTER 7 Tracking the Macroeconomy What you will learn in this chapter: How economists use aggregate measures to track the performance of the economy. What gross domestic product, or GDP,
Unemployment Definition: Unemployment is the number of adults (16 years or older) who are willing and able to work and who are actively looking for work but have not found a job. Total Population Persons
2 The Data of Macroeconomics 1 Why do we need data? Observations of real world Theories to explain real world - based on data Theories are tested against new data Level of detail and simplifications in
Chapter 7 Practice Problems 1. The national accounts keep track of everything except: A) the spending of consumers and the government. B) the sales of producers. C) business investment. D) exchange rates.
Name: Date: 1. GDP is all of the following except the total: A) expenditure of everyone in the economy. B) income of everyone in the economy. C) expenditure on the economy's output of goods and services.
Macroeconomia Capitolo 7 Seguire l andamento della macroeconomia PowerPoint Slides by Can Erbil 2006 Worth Publishers, all rights reserved What you will learn in this chapter: How economists use aggregate
CHAPTER 8 GDP: Measuring Total Production and Income Chapter Summary and Learning Objectives 8.1 Gross Domestic Product Measures Total Production (pages 243 250) Explain how total production is measured.
CHAPTER 7 GDP: Measuring Total Production and Income Chapter Summary and Learning Objectives 7.1 Gross Domestic Product Measures Total Production (pages 211 218) Explain how total production is measured.
KrugmanMacro_SM_Ch07.qxp 11/9/05 4:47 PM Page 87 Tracking the Macroeconomy 1. Below is a simplified circular-flow diagram for the economy of Micronia. a. What is the value of GDP in Micronia? b. What is
Chapter 23. Measuring GDP Measuring a Nation s s Income Microeconomics Microeconomics is the study of how individual households and firms make decisions and how they interact with one another in markets.
Chapter 24 Measuring the Wealth of Nations 2014 by McGraw-Hill Education 1 What will you learn in this chapter? How to calculate gross domestic product (GDP). Why each component of GDP is important. What
Chapter 7 (19) GDP: Measuring Total Production and Income Chapter Summary While microeconomics is the study of how households and firms make choices, how they interact in markets, and how the government
National Product National product is the value of all the goods and services produced in the nation. National income is the total income created by producing the national product. 1 2 Equals National Product
ECON 3020 MACROECONOMICS: MEASUREMENT AND STRUCTURE OF THE NATIONAL ECONOMY Karel Mertens CORNELL UNIVERSITY 1. Introduction to Macroeconomics This chapter the defines some of the main objects of interest
R. GLENN HUBBARD ANTHONY PATRICK O BRIEN Macroeconomics FOURTH EDITION CHAPTER 8 GDP: Measuring Total Production and Income Chapter Outline and Learning Objectives 8.1 Gross Domestic Product Measures Total
GDP AND THE STANDARD OF LIVING C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to 1 2 3 4 Define GDP and explain why the value of production, income,
1 of 33 2 of 33 CHAPTER19 CHAPTER 19 GDP: Measuring Total Production and Income In the more than 100 years that Ford Motor Company has been in business, its experiences have often mirrored those of the
Measuring the Macroeconomy Chapter 2 Measuring the Macroeconomy Monetary measure of value Monetary Measure of Value GDP versus GNP Omissions from GDP - does not measure social welfare Quantity times Price
Chapter 6 1. The reason economists include only the value of final goods and services when they calculate GDP is that intermediate goods A) do not create value added. B) do not add to economic welfare.
Exam 1 Review 1. When a firm sells a product out of inventory, GDP: A) increases. B) decreases. C) is not changed. D) increases or decreases, depending on the year the product was produced. 2. An economy's
INTRODUCTION Chapter 2 The Data of Macroeconomics September 11, 2012 1 THERE ARE THREE KEY AGGREGATES 1. Measures of economic activity or income: GDP and GNP 2. Price level 3. Unemployment 2 1. MEASURES
Measuring National Output and National Income 6 C H A P T E R O U T L I N E Gross Domestic Product Final Goods and Services Exclusion of Used Goods and Paper Transactions Exclusion of Output Produced Abroad
Name: Class: Date: Modules 10-11 Worksheet: Measurement of Economic Performance (GDP) Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The simplest circular-flow
Chapter 8: GDP: Measuring Total Production and Income Yulei Luo SEF of HKU January 14, 2017 Luo, Y. (SEF of HKU) ECON1002CD/1220CD January 14, 2017 1 / 20 Learning Objectives 1 Gross Domestic Product Measures
Macroeconomic Measurements, Part II: GDP and Real GDP 7 CHAPTER An Economic Barometer What exactly is GDP? How do we use it to tell us whether our economy is in a recession or how rapidly our economy is
MEASURING GDP AND ECONOMIC GROWTH CHAPTER Objectives After studying this chapter, you will able to Define GDP and use the circular flow model to explain why GDP equals aggregate expenditure and aggregate
SUMMARY Chapter Summary Podcast Summary PowerPoint National income accounting measures annual output and income flows. The national income accounts provide a basis for assessing our economic performance,
MEASURING NATIONAL INCOME Instructor: Ghislain Nono Gueye 1 Microeconomics vs Macroeconomics Microeconomics is concerned with the study of individual households, firms and markets. Macroeconomics, on the
Chapter 20 The Measurement of National Income In this chapter you will learn to 1. Use the concept of value added to solve the problem of double counting when measuring national income. 2. Describe the
Chapter 8: GDP: Measuring Total Production and Income Yulei Luo SEF of HKU January 25, 2016 Luo, Y. (SEF of HKU) ECON1220F/G January 25, 2016 1 / 20 Learning Objectives 1 Gross Domestic Product Measures
Instructions: This is the on-line Multiple Choice Quiz for Chapter 4. Please do the following. Step I - Go to the special codes section on your score sheet Write your section number (1, or 4, or 5) under
Macroeconomics Topic 1: Define and calculate GDP. Understand the difference between real and nominal variables (e.g., GDP, wages, interest rates) and know how to construct a price index. Reference: Gregory
National Income Accounting introduction national income accounting -- the study of the methods of measuring the aggregate output and aggregate income of an economy taking the nation's economic pulse --
ECONOMICS (20 TH EDITION), McConnell, Brue, and Flynn Chapter 25 Study Guide The subject of Chapter 25 is national income accounting. The first measure that you will learn about in the chapter is the gross
ECO 2302 Principle of Macroeconomics TEST I Ibrahim Ozayturk Name: R: ID: MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The can change the quantity
ANSWERS TO END-OF-CHAPTER QUESTIONS 7-1 In what ways are national income statistics useful? National income accounting does for the economy as a whole what private accounting does for businesses. Firms
Measuring a Nation s Income 10 The Data of Macroeconomics The rest of the quarter: Macroeconomics. Looking at GDP, inflation, unemployment Chapter 10: Measuring a Nation s Income Principle 8: A Country
Name: Date: 1. GDP is all of the following except the total: A) expenditure of everyone in the economy. B) income of everyone in the economy. C) expenditure on the economy's output of goods and services.
Chapter 24 Measuring Domestic Output and National Income QUESTIONS 1. In what ways are national income statistics useful? LO1 Answer: National income accounting does for the economy as a whole what private
NATIONAL INCOME AND PRODUCT ACCOUNTING MEASURING THE MACROECONOMY 1. NIPA: GNP and GDP 2. Saving and Wealth 3. Prices and Inflation 4. Unemployment 5. Problems with Measuring the Macroeconomy There are
Mod 3 top 2: GDP Student: Assume an economy that makes only one product and that year 3 is the base year. Output and price data for a five-year period are as follows. Answer the question on the basis of
11.1 Estimating Gross Domestic Product (GDP) Objectives Describe what the gross domestic product measures. Learn two ways to calculate the gross domestic product, and explain why they are equivalent. 11.1
Name: Date: 1. GDP is all of the following except the total: A) expenditure of everyone in the economy. B) income of everyone in the economy. C) expenditure on the economy's output of goods and services.
Lecture 7: Measuring a Nation s Wealth Rob Godby University of Wyoming Macroeconomics Macroeconomics is the study of the economy as a whole. Its goal is to explain the economic changes that affect many
CHAPTER 20 These are some practice questions for CHAPTER 20. Each question should have a single answer. But be careful. There may be errors in the answer key! 19. Total value added in an economy is equal
Gross Domestic Product Objective: What is gross domestic product (GDP)? What are durable goods? What is the difference between nominal and real GDP? What are other measures of income and output? *Be sure
CHAPTER 20 GROSS DOMESTIC PRODUCT ACCOUNTING Chapter in a Nutshell Gross domestic product was introduced in the previous chapter as a basic measure of macroeconomic performance. This chapter identifies
CHAPTER 5: MEASURING GDP AND ECONOMIC GROWTH Learning Goals for this Chapter: To know what we mean by GDP and to use the circular flow model to explain why GDP equals aggregate expenditure and aggregate
National Income Accounting Courtesy : www. Introduction to Economy of Ghana Measuring the Economy - National Income Accounting Structure of the Economy and Sectoral Outlook Economic History of Ghana: preindependence,
10 MEASURING A NATION S INCOME WHAT S NEW IN THE FIFTH EDITION: There is more clarification on the GDP deflator. The Case Study on Who Wins at the Olympics? is now an FYI box. LEARNING OBJECTIVES: By the
Chapter 2 The Measurement and Structure of the National Economy Chapter Outline National Income Accounting: The Measurement of Production, Income, and Expenditure Gross Domestic Product Saving and Wealth
HOSP 2207 (Economics) Learning Centre Macroeconomics: GDP, GDP Deflator, CPI, & Inflation Macroeconomics is the big picture view of an economy. Microeconomics looks at the market for a specific good, like
Measuring Economic Performance This lecture examines how output, inflation, and employment are measured. Gross Domestic Product (GDP) A. GDP measures the market value of all final goods and services produced
Economics for Managers by Paul Farnham Chapter 11: Measuring Macroeconomic Activity 11.1 Measuring Gross Domestic Product (GDP) GDP: the market value of all currently yproduced final goods and services
Lesson Five National Income Accounting Introduction National Income Accounting broadly refers to all the methods used to measure and evaluate economic activity. This diagnostic information about the health
Chapter 2 The Measurement and Structure of the National Economy Chapter Outline National Income Accounting: The Measurement of Production, Income, and Expenditure Real GDP, Price Indexes, and Inflation
Measuring Economic Performance Chapter 2 Outline Gross Domestic Product Measuring GDP Through Spending Measuring GDP Through Production Measuring GDP Through Income Saving and Investment Transactions with
Data and Questions of Macroeconomics Key Macroeconomic Variables National Income Unemployment Inflation Stock market index Interest rates Exchange rates Government budget balance Trade balance For each
Measuring a Nation s Income I. Review of the Definitions of Microeconomics and Macroeconomics A. Definition of microeconomics: the study of how households and firms make decisions and how they interact
MACROECONOMIC VARIABLES Measurement and definition. 0 What this course is about: 1 2 WHAT IS THIS VARIABLES (GDP): part I WHAT DETERMINES THE BLUE LINE: part II WHAT DETERMINES THE RED LINE: part III HOW
What Is Gross Domestic Product? Economists monitor the macroeconomy using national income accounting, a system that collects statistics on production, income, investment, and savings. Gross domestic product
Unit 4: Measuring GDP and Prices ECO 120 Global Macroeconomics 1 1.1 Reading Reading Module 10 - pages 106-110 Module 11 1.2 Goals Goals Specific Goals: Understand how to measure a country s output. Learn
CHAPTER 25 Measuring the Aggregate Economy The government is very keen on amassing statistics... They collect them, add them, raise them to the n th power, take the cube root and prepare wonderful diagrams.
The CPI and the Cost of Living Chapter 7 CHAPTER IN PERSPECTIVE Chapter 7 explores how the cost of living is measured. It discusses the Consumer Price Index, CPI, explains how it is constructed, and examines
Lecture 6 Economics 202 Principles Of Macroeconomics Measuring GDP Professor Yamin Ahmad Real GDP and the Price Level Economic Growth and Welfare Big Concepts Ways to Measure GDP Expenditure Approach Income
Name (Please print) Assigned Seat ECO202: PRINCIPLES OF MACROECONOMICS FIRST MIDTERM EXAM SPRING 2011 Prof. Bill Even FORM 1 Directions 1. Fill in your scantron with your unique id and form number. Doing
Macroeconomics, 6e (Abel et al.) Chapter 2 The Measurement and Structure of the National Economy 2.1 National Income Accounting 4) The Bigdrill company drills for oil, which it sells for $200 million to
Chapter 8. GDP : Measuring Total Production and Income Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 203 502 Principles of Macroeconomics Related Economic Terms Macroeconomics:
Practice Midterm 1 Fall 2013 ECO 3203 Intermediate Macroeconomics MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Suppose nominal GDP increases
Chapter 12 Gross Domestic Product and Growth 1. Gross Domestic Product 2. Business Cycles 3. Economic Growth How do we know if the economy is healthy... Economists measure Gross Domestic and Gross National
Chapter 20 The Measurement of National Income National Output and Value Added -many production processes involve multiple stages, only some which are done within the same firm -this raises an important
CHAPTER2 The Data of Macroeconomics Modified for ECON 2204 by Bob Murphy 2016 Worth Publishers, all rights reserved IN THIS CHAPTER, YOU WILL LEARN:... the meaning and measurement of the most important
The CPI and the Cost of Living Chapter CHAPTER CHECKLIST Chapter 7 explores how the CPI and other price level indices are measured. Explain what the Consumer Price Index (CPI) is and how it is calculated.
Chapter 5: GDP and Economic Growth Be Mean Green! Please consider the environment before printing this Chapter Outline. It ll be available online throughout the semester. For Firms private accounting measures
Name (Please print) Assigned Seat ECO202: PRINCIPLES OF MACROECONOMICS FIRST MIDTERM EXAM SPRING 2010 Prof. Bill Even FORM 1 Directions 1. Fill in your scantron with your unique id and form number. Doing
1 Objectives for Chapter 10 The Circular Flow Model At the end of Chapter 10, you will be able to answer the following: 1. Explain the basic circular flow model. 2. Define "consumption" and "saving" 3.
PRINCIPLES OF MACROECONOMICS Chapter Introduction to Macroeconomics & Measuring the Economy s Performance Overview So far in the course, we dealt with the following issues: the laws of supply and demand
Unit II: Measurements of Economic Performance Main Topics: A. National income accounts 1. Circular flow (Top half = expenditure/bottom half = income) Leakages vs. injections from circular flow 2. Gross
CHAPTER 7 Measuring Domestic Output, National Income, and the Price Level Topic Question numbers 1. GDP concept 1-15 2. C, I, G, and X n components 16-43 3. Investment and the capital stock 44-57 4. GDP
Chapter 2 The Measurement and Structure of the National Economy Multiple Choice Questions 1. The three approaches to measuring economic activity are the (a) cost, income, and expenditure approaches. (b)
GDP and the Standard of Living Chapter 20 CHAPTER IN PERSPECTIVE Chapter 20 explains GDP and how it is measured. It shows why GDP is the same whether measured as income, as expenditure, or as the value