measuring a nation s income n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Measuring a Nation’s Income PowerPoint Presentation
Download Presentation
Measuring a Nation’s Income

Loading in 2 Seconds...

play fullscreen
1 / 20

Measuring a Nation’s Income - PowerPoint PPT Presentation


  • 339 Views
  • Uploaded on

Measuring a Nation’s Income. Chapter 10 or 23. The Economy’s Income and Expenditure. When judging whether the economy is doing well or poorly, it is natural to look at the total income that everyone in the economy is earning.

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

PowerPoint Slideshow about 'Measuring a Nation’s Income' - stu


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.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
the economy s income and expenditure

The Economy’s Income and Expenditure

When judging whether the economy is doing well or poorly, it is natural to look at the total income that everyone in the economy is earning.

To have this number make sense, it is also best to look at income per person.

the economy s income and expenditure1
The Economy’s Income and Expenditure
  • For an economy as a whole, income must equal expenditurebecause:
    • Every transaction has a buyer and a seller.
    • Every dollar of spending by some buyer is a dollar of income for some seller.
    • Say’s Law-Supply creates it’s own demand
    • This process can be seen using a Circular Flow Diagram.
gross domestic product
Gross Domestic Product
  • Gross domestic product (GDP) is a measure of the income and expenditures of an economy.
  • It is the total market value of all final goods and services produced within a country in a given period of time.
  • How much is the current GDP?
the circular flow diagram

Revenue

Spending

Goods & Services sold

Goods & Services bought

Inputs for production

Labor, land, and capital

Wages, rent, and profit

Income

The Circular-Flow Diagram

Market for

Goods

and Services

Firms

Households

Market for

Factors

of Production

the measurement of gdp
The Measurement of GDP

GDP is:

  • the market value
  • of all final goods and services
  • produced within a country
  • in a given period of time.
what is counted and not counted in gdp

What Is Counted and Not Counted in GDP?

GDP includes all items produced in the economy and sold legally in markets.

GDP excludes services that are produced and consumed at home and that never enter the marketplace.

Caring labor, the work that is normally produced by women.

Because GDP does not count it, it diminishes its importance.

GDP also excludes black market items, such as illegal drugs.

other measures of income
Other Measures of Income
  • Gross National Product (GNP)
  • Net National Product (NNP)
  • National Income
  • Personal Income
  • Disposable Personal Income
the components of gdp
The Components of GDP

GDP (Y ) is the sum of the following:

  • Consumption (C)
  • Investment (I)
  • Government Purchases (G)
  • Net Exports (NX)

Y = C + I + G + NX

gdp and its components 19981
GDP and Its Components (1998)

Government Purchases

18%

Investment

16%

Net Exports

-2 %

Consumption

68 %

measuring economic growth
Measuring Economic Growth
  • We use real GDP to calculate the economic growth rate.
  • The economic growth rate is the percentage change in the quantity of goods and services produced from one year to the next.
  • We measure economic growth so we can make:
  • Economic welfare comparisons
  • International welfare comparisons
  • Business cycle forecasts
measuring economic growth1
Measuring Economic Growth
  • Business Cycle Forecasts
    • Real GDP is used to measure business cycle fluctuations.
    • These fluctuations are probably accurately timed but the changes in real GDP probably overstate the changes in total production and people’s welfare caused by business cycles.
real versus nominal gdp
Real versus Nominal GDP
  • Nominal GDP values the production of goods and services at current prices.
  • Real GDP values the production of goods and services at constant prices.
real gdp and the price level
Real GDP and the Price Level
  • Deflating the GDP Balloon
    • Nominal GDP increases because production—real GDP– increases.
real gdp and the price level1
Real GDP and the Price Level
  • Nominal GDP also increases because prices rise.
  • Deflating the GDP Balloon
real gdp and the price level2
Real GDP and the Price Level
  • We use the GDP Deflator to take the air out of Nominal GDP.
real gdp in the united states

(Periods of falling real GDP)

Real GDP in the United States

Billions of 1992 Dollars

8,000

7,000

6,000

5,000

4,000

3,000

1970

1975

1980

1985

1990

1995

2000

hawaii gsp 1997
Hawaii GSP (1997)
  • This pie chart shows how Hawaii’s Gross State Product is broken down.
  • Notice how the visitor industry is relatively high (21%).
  • Refer to Time Series of Hawaii GSP.
  • Refer to comparison of USA and Hawaii GDP and GSP.