The Measurement and Structure of the Economy

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28 Οκτ 2013 (πριν από 3 χρόνια και 11 μήνες)

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1
The Measurement and Structure of
the Economy

National Income Accounts – An accounting
framework to measure
current
economic
activity.


Three approaches to measure national
economic activities
1) Product Approach – The amount of goods
and services excluding intermediate goods
and services produced (Value Added).
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2) Income Approach – Income received by
factors of Production
3) Expenditure Approach – Amount of spending
by the ultimate purchasers/buyers
Fundamental Identity of National Accounts
Total Product = Total Income = Total
Expenditure
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Product Approach

Gross Domestic Product (GDP) – The market
value of
final
goods and services
newly
produced in a nation
within a
specified period
of time
.

Gross National Product (GNP) = GDP + Net
Factor Payment from Abroad (NFP)

NFP = Income paid to domestic factors of
production by the rest of the world – Income
paid to foreign factors of production in the
domestic economy.
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The Expenditure Approach

Gross Domestic Product (GDP) – Total
spending on
final
goods and services
produced
within a nation
during a
specified
period of time
.

Y = GDP = Consumption (C ) + Investment
(I) + Government Purchases (G) + Net
Exports (NX)

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Consumption:
1)
Consumer Durables
2)
Semi-Durable
3)
Non-Durable
4)
Services


Investment: Inventory Investment + Fixed Investment

Fixed Investment:
1)
Residential Construction
2)
Non-Residential Construction
3)
Machinery and Equipment Investment


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Government Purchases – Government
expenditure excluding
Transfer Payments

and
Interest Payments
on the government
Debt.

Net Exports = Exports – Imports
Income Approach

GDP – Total income received by factors of
production in a nation within a specified
period of time.

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1)
Labor Income
2)
Corporate Profits
3)
Interest and Investment Income
4)
Unincorporated Investment Income


Net Domestic Product at Factor Prices = 1+2+3+4

Net Domestic Product at Market Prices = Net
Domestic Product at Factor Price + Indirect Taxes -
Subsidies

GDP = Net Domestic Product at Market Price +
Depreciation

8

Private Disposable Income = Y +
NFP + TR + INT - T

Net Government Income = T – TR
– INT

GNP = Private Disposable Income
+ Net Govt. Income = Y + NFP

9

Saving = Current Income – Current
Spending

Private Saving (S
PVT
) = Private
Disposable Income – C = Y + NFP +TR
+ INT - T- C

Government Saving (S
GOVT
) = Net
Government Income – Government
Purchases = (T – TR – INT) – G =
Budget Surplus/Deficit

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Uses of Private Saving

S = I + (NX + NFP) = I +Current
Account Balance (CA)

S = S
PVT
+ S
GOVT
= I + CA

S
PVT
= I - S
GOVT
+ CA
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Nominal Vrs Real Variables

Real GDP = Nominal GDP / GDP
Deflator

GDP Deflator measures the overall level
of prices of goods and services included
in GDP.

Consumer Price Index (CPI) – Measure
of prices of consumer goods