1 / 33

National Income Accounting

Chapter 5. National Income Accounting. Measures of Output:. Help us understand how the economy works or how well (or poorly) it is performing. Provide a useful perspective on the way the economy works. Gross Domestic Product (GDP).

clancy
Download Presentation

National Income Accounting

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Chapter 5 National Income Accounting

  2. Measures of Output: • Help us understand how the economy works or how well (or poorly) it is performing. • Provide a useful perspective on the way the economy works. Chapter 5

  3. Gross Domestic Product (GDP) • The total dollar value of final output produced within a nation’s borders in a given time period. Chapter 5

  4. The Circular Flow • Four different groups purchase things in our economy: • Consumers • Business firms • Government • Foreigners Chapter 5

  5. GDP as Consumption • GDP = C + I + G + X • Consumption • Investment • Government Spending • Net Exports • Exports - Imports Chapter 5

  6. U.S. GDP in 2008 • GDP = $14.41 trillion • Consumption = $10.13 trillion • Investment = $2.14 trillion • Government Spending = $2.88 trillion • Federal = $1.08 trillion • State & local = $1.80 trillion • Net Exports = -707.8 billion • Exports = $1.83 trillion • Imports = $2.54 trillion Source: www.bea.gov table 1.1.5 Chapter 5

  7. GDP as Income • GDP= (wages + interest + rent + profit) – (net factor income from abroad + depreciation + indirect taxes) • Indirect business taxes • Sales tax, excise tax, property tax, licensing fees, custom duties Chapter 5

  8. GDP Comparisons: 2011 GDPs • 1. U.S. $15.2 Trillion • 2. China $6.5 Trillion • 3. Japan $5.8 Trillion • 4. Germany $3.5 Trillion • 6. Britain $2.5 Trillion • 9. California $1.9 Trillion • 10. Canada $1.7 Trillion • 14. Mexico $1.2 Trillion • 20. Saudi Arabia $578 Billion • 27. Virginia $408 Billion • 132. Haiti $7.7 Billion Source: International Monetary Fund www.imf.org Chapter 5

  9. Per Capita GDP • The dollar value of GDP divided by total population. • How much output the average person would get if all output were divided up evenly among the population. • Commonly used as a measure of a country’s standard of living. Chapter 5

  10. Per Capita GDP: 2008 • U.S. $46,859 • Japan $38,559 • Canada $45,428 • Saudi Arabia $19,345 • Mexico $10,234 • China $3,315 • India $1,016 • World Average $7,350 • Haiti $791 Source: International Monetary Fund www.imf.org Chapter 5

  11. Measurement Problems • Non-Market (unpaid) Activities • Stay-at-home moms • Second hand sales • Used cars • Financial Transactions • Gifts, SS payments • Unreported Income • Underground economy • Paid in cash • Illegal activity Chapter 5

  12. Two Ways to Calculate GDP as Income • Compute the value of the final output. • Cake • Count only the value addedat each stage of production. • Intermediate goods: • Ingredients: Eggs, flour, sugar • Dough • Baked cake • Decorated cake • Boxed cake Chapter 5

  13. Value Added • Flour, eggs, water = $1.00 • Labor = $2.00 • Electricity = 25¢ • Box = 25¢ • Delivery to store = $1.00 • Shelf space & sales person = $3.00 • All this leads to a $7.50 cake Chapter 5

  14. GDP Growth • Economic growth is the increase in output (real GDP) • an expansion of production possibilities. • On average, U.S. output has grown by roughly 3 percent per year. Chapter 5

  15. GDP Growth Chapter 5

  16. Poor Nations • The populations of rich countries are growing slowly so that gains in per capita GDP are easily achieved. • The populations of the poorest countries are still growing rapidly, making it difficult to raise living standards. Chapter 5

  17. The U.S. Mix of Output • 75% services, not goods. • 24% is Manufacturing, mining and construction • < 2% is Agriculture Data Source: www.bea.gov publication BEA 08-45 Chapter 5

  18. The Four Major Uses of Total Output: • Consumption 70.1% • Investment 14.8% • Government services • State & local 12.5% • Federal 7.5% • Net exports -4.9% Source: www.bea.gov table 1.1.5 Chapter 5

  19. Net Exports • Exports are goods and services sold to foreign buyers. • Imports are goods and services purchased from foreign sources. • Net Exports= Exports - Imports. Chapter 5

  20. U.S. Exports to: (2008) • Total: $1.3 Trillion • 8% of world Exports • Canada $261 billion • Mexico $152 billion • China $ 71 billion • Japan $ 67 billion • Germany $ 55 billion • United Kingdom $ 54 billion • Rest of the world $640 billion Source: International Monetary Fund www.imf.org Chapter 5

  21. U.S. Imports from: (2008) • Total: $2.1 Trillion • 13.5% of world Imports • China $338 billion • Canada $336billion • Mexico $216 billion • Japan $139 billion • Germany $ 98 billion • United Kingdom $ 59 billion • Rest of the world $914 billion Source: International Monetary Fund www.imf.org Chapter 5

  22. Comparative Advantage • The motivation for international trade • quest for more output. Chapter 5

  23. Comparative Advantage • The ability of a country to produce a specific good at a lower opportunity cost than its trading partners. • Small nations are most in need of specialization because they lack the ability to produce the whole array of goods and services consumers want. Chapter 5

  24. Real Versus Nominal GDP • Nominal GDPis the value of final output produced in a given period, measured in the prices of that period. • GDP in current prices • Real GDPis the value of final output produced in a given period, adjusted for changing prices. • GDP in constant prices Chapter 5

  25. Real GDP AS AD Real GDP Chapter 3

  26. Real GDP • Shows work that was done, not money that was made. Chapter 5

  27. Computing Real GDP • The base periodis the time period used for comparative analysis. • It is the basis for the indexing of price changes. Chapter 5

  28. Computing Real GDP • Real GDP = Nominal GDP Price index Chapter 5

  29. Inflation • The increase in the average level of prices of goods and services. • Tends to obscure actual declines in real output. Chapter 5

  30. Changes in GDP: Nominal Versus Real • 2011 • Make 1,000 • Price = $5 • Revenue = $5,000 • 2012 • Make 1,000 • Price = $6 • Revenue = $6,000 • Change is nominal: • Gain came only from price change • No extra items were produced. • No extra jobs were created. Chapter 5

  31. Changes in GDP: Nominal Versus Real • 2011 • Make 1,000 • Price = $5 • Revenue = $5,000 • 2012 • Make 1,100 • Price = $5 • Revenue = $5,500 • Change is real: • Gain came from more stuff being made. • More items were produced. • More jobs may be created. (more work done) Chapter 5

  32. Changes in GDP: Nominal Versus Real • 2011 • Make 1,000 • Price = $5 • Revenue = $5,000 • 2012 • Make 800 • Price = $6.25 • Revenue = $5,000 • Revenue doesn’t change: • Lower production hidden by higher price. • fewer items were produced. • Jobs may be lost. (less work done) Chapter 5

  33. Changes in GDP: Nominal Versus Real • 2011 • Make 1,000 • Price = $5 • Revenue = $5,000 • 2012 • Make 800 • Price = $7 • Revenue = $5,600 • Revenue gain is nominal Real production is lower: • Extreme price increase hides lower production. • Less items were produced. • Jobs may be Lost. (less work done) Chapter 5

More Related