3.1 Measuring National Income

1 / 16

3.1 Measuring National Income - PowerPoint PPT Presentation

3.1 Measuring National Income. Circular Flow of Income. National income Sum of all final goods and services produced in an economy during a given time period. (1yr) E=O=Y. Simple Two-Sector Model. Leakages? Injections? What is missing? Total injections= Total Leakages. Transfer Payments.

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.

PowerPoint Slideshow about '3.1 Measuring National Income' - reuel

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.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript

3.1 Measuring National Income

Circular Flow of Income
• National income
• Sum of all final goods and services produced in an economy during a given time period. (1yr)
• E=O=Y
Leakages?

Injections?

What is missing?

Total injections= Total Leakages

Transfer Payments
• How are welfare, education, social programs accounted for?
• Rule: Only expenditure flows which have a corresponding output are counted.
Methods of Measurement
• Factor Income: Total payments for FOP
• Employment
• Rental Income
• Profits
• Interest
• Subtract stock appreciation
• =GDP at factor cost
Expenditure Method: Total Expenditure
• Consumtion (C)
• Investments (I)
• Government Expend. (G)
• Exports (X)
• Subtract Imports (M)
• =GDP(same as factor cost)
Output Method
• Value-added at each level of output (to avoid double counting)
National and Domestic Product
• GDP=output created using Domestic FOP
• How do you deal with foreign owned companies within economy?
• GNP (Gross National Product)

= GDP+Net property income from abroad

LDC= GDP>GNP Why?
• They have few companies abroad that are repatriating income.
• MDC=GNP>GDP
Gross and Net National Product
• NNP= GNP-Depreciation
Nominal vs. Real
• Nominal= face value
• GDPr= GDPnom/CPI X 100
Consumer Price Index (CPI)
• Base Line= 100
• CPI of 106 = 6% increase in prices
GDP Deflator
• CPI: only consumer goods
• GDP Deflator: All goods in GDP
• GDPreal = GDP nom / Deflator X 100
Total and Per Capita
• Income per capita = GDP/population
• Real Income per capita: adjusted for inflation
• Which countries do you think are in the top ten by GDP per capita?
GDP by Country

USA 32.9% 4.65% Japan 13.4% 2.09% Germany 6.0% 1.36% Britain 4.6% 0.99% France 4.2% 0.97% China 3.7% 20.84% Italy 3.5% 0.95% Canada 2.3% 0.51% Mexico 2.0% 1.62% Spain 1.9% 0.65%