西方经济学原理Chap-5Week3课件

1、西方经济学原理Chap_5Week3西方经济学原理Chap_5Week3After studying this chapter you will be able toDefine GDP and use the circular flow model to explain why GDP equals aggregate expenditure and aggregate incomeExplain the two methods used by the Bureau of Economic Analysis to measure U.S. GDPExplain how the Bureau

2、of Economic Analysis measures real GDP and the GDP deflator to separate economic growth from inflationExplain the uses and limitations of real GDPAfter studying this chapter yoAn Economic BarometerWhat exactly is GDP?How do we use GDP to tell us whether our economy is in a recession or how rapidly o

3、ur economy is expanding?How do we take the effects of inflation out of GDP to reveal the rate of growth of our economic well-being?And how to we compare economic well-being across countries?An Economic BarometerWhat exacGross Domestic Product GDP DefinedGDP or gross domestic product is the market va

4、lue of all final goods and services produced in a country in a given time period.This definition has four parts: Market value Final goods and services Produced within a country In a given time periodGross Domestic Product GDP DefGross Domestic Product Market ValueGDP is a market valuegoods and servi

5、ces are valued at their market prices. To add apples and oranges, computers and popcorn, we add the market values so we have a total value of output in dollars.Gross Domestic Product Market Gross Domestic Product Final Goods and ServicesGDP is the value of the final goods and services produced. A fi

6、nal good (or service) is an item bought by its final user during a specified time period. A final good contrasts with an intermediate good, which is an item that is produced by one firm, bought by another firm, and used as a component of a final good or service.Excluding intermediate goods and servi

7、ces avoids double counting. Gross Domestic Product Final GGross Domestic Product Produced Within a CountryGDP measures production within a countrydomestic production.In a Given Time PeriodGDP measures production during a specific time period, normally a year or a quarter of a year.Gross Domestic Pro

8、duct ProduceGross Domestic Product GDP and the Circular Flow of Expenditure and IncomeGDP measures the value of production, which also equals total expenditure on final goods and total income. The equality of income and output shows the link between productivity and living standards.The circular flo

9、w diagram in Fig. 5.1 illustrates the equality of income, expenditure, and the value of production. Gross Domestic Product GDP andGross Domestic Product The circular flow diagram shows the transactions among households, firms, governments, and the rest of the world.Gross Domestic Product The cir西方经济

10、学原理Chap_5Week3Gross Domestic Product These transactions take place in factor markets, goods markets, and financial markets.Gross Domestic Product These tGross Domestic Product Firms hire factors of production from households. The blue flow, Y, shows total income paid by firms to households.Gross Dom

11、estic Product Firms hGross Domestic Product Households buy consumer goods and services. The red flow, C, shows consumption expenditure. Gross Domestic Product HousehoGross Domestic Product Households save, S, and pay net taxes, T. Firms borrow some of what households save to finance their investment

12、.Gross Domestic Product HousehoGross Domestic Product Firms buy capital goods from other firms. The red flow I represents this investment by firms.Gross Domestic Product Firms bGross Domestic Product Governments buy goods and services, G, and borrow or repay debt if spending exceeds or is less than

13、net taxes.Gross Domestic Product GovernmGross Domestic Product The rest of the world buys goods and services from us, X, and sells us goods and services, M. Net exports are X M.Gross Domestic Product The resGross Domestic Product And the rest of the world borrows from us or lends to us depending on

14、whether net exports are positive or negative.Gross Domestic Product And theGross Domestic Product The blue and red flows are the circular flow of expenditure and income. The green flows are financial flows.Gross Domestic Product The bluGross Domestic Product The sum of the red flows equals the blue

15、flow.Gross Domestic Product The sumGross Domestic Product That is: Y = C + I + G + X MGross Domestic Product That isGross Domestic Product The circular flow demonstrates how GDP can be measured in two ways.Aggregate expenditureTotal expenditure on final goods and services, equals the value of output

16、 of final goods and services, which is GDP.Total expenditure = C + I + G + (X M).Gross Domestic Product The cirGross Domestic Product Aggregate incomeAggregate income equals the total amount paid for the use of factors of production: wages, interest, rent, and profit.Firms pay out all their receipts

17、 from the sale of final goods, so income equals expenditure,Y = C + I + G + (X M).Gross Domestic Product AggregaGross Domestic Product Financial FlowsFlows through financial markets finance deficits and investment.Household saving S is income minus net taxes and consumption expenditure.That is, S =

18、Y (T + C).Saving flows into the financial markets.Gross Domestic Product FinanciGross Domestic Product If G exceeds T, the government has a budget deficit(G T) and the government borrows from the financial markets.If T exceeds G, the government has a budget surplus (T G) and this surplus flows to th

19、e financial markets.If U.S. imports exceed U.S. exports, the United States borrows an amount equal to (M X) from the rest of the world. Rest of world saving finances some investment in the United States.If U.S. exports exceed U.S. imports, the United States lends an amount equal to (X M) to the rest

20、 of the world. U.S. saving finances some investment in other countries.Gross Domestic Product If G exGross Domestic Product How Investment Is FinancedInvestment is financed from three sources:1. Private saving, S2. Government budget surplus, (T G)3. Borrowing from the rest of the world (M X).Gross D

21、omestic Product How InvGross Domestic Product We can see these three sources of investment finance by using the equality of aggregate expenditure and aggregate income.Start withY = C + S + T = C + I + G + (X M).Then rearrange to obtainI = S + (T G) + (M X)Private saving S plus government saving (T G

22、) is called national saving.Gross Domestic Product We can Gross Domestic Product Gross and Net Domestic Product“Gross” means before deducting the depreciation of capital. The opposite of gross is net. To understand this distinction, we need to distinguish between flows and stocks. Flows and Stocks i

23、n MacroeconomicsA flow is a quantity per unit of time.A stock is the quantity that exists at a point in time.Gross Domestic Product Gross aGross Domestic Product Wealth and SavingWealth, the value of all the things that people own, is a stock. Saving is the flow that changes the stock of wealth.Weal

24、th at the start of this year equals wealth at the start of last year plus saving during last year.Gross Domestic Product Wealth Gross Domestic Product Capital and InvestmentCapital is the plant, equipment, and inventories of raw and semi-finished materials that are used to produce other goods.Capita

25、l is a stock.Investment is the flow that changes the stock of capital.Gross Domestic Product CapitalGross Domestic Product Depreciation is the decrease in the capital stock that results from wear and tear and obsolescence.Gross investment is the total amount spent on purchases of new capital and on

26、replacing depreciated capital.Net investment is the change in the capital stock.Net investment = Gross investment Depreciation.Gross Domestic Product DepreciGross Domestic Product Figure 5.2 illustrates the relationships among the capital stock, gross investment, depreciation, and net investment.Gro

27、ss Domestic Product Figure 西方经济学原理Chap_5Week3Gross Domestic Product Back to Gross in GDPGross profits, and GDP, include depreciation. Similarly, gross investment includes that amount of purchases of new capital goods that replace depreciation.Net profits, net domestic product, and net investment sub

28、tract depreciation from the gross concepts.Gross Domestic Product Back toGross Domestic Product The Short Run Meets the Long RunCapital and investment play a central role in the understanding the growth and fluctuations in real GDP. Investment adds to the capital stock, so investment is one source o

29、f real GDP growth.Investment fluctuates, so investment is one source of fluctuations in real GDP.Gross Domestic Product The ShoMeasuring U.S. GDPThe Bureau of Economic Analysis uses two approaches to measure GDP: The expenditure approach The income approach Measuring U.S. GDPThe Bureau oMeasuring U.

30、S. GDPThe Expenditure ApproachThe expenditure approach measures GDP as the sum of consumption expenditure, investment, government expenditure on goods and services, and net exports. GDP = C + I + G + (X M)Table 5.1 in the textbook shows the expenditure approach with data for 2006.GDP = $9,079 + $2,2

31、15 + $2,479 $765= $13,008Measuring U.S. GDPThe ExpenditMeasuring U.S. GDPThe Income ApproachThe income approach measures GDP by summing the incomes that firms pay households for the factors of production they hire. Measuring U.S. GDPThe Income AMeasuring U.S. GDPThe National Income and Expenditure A

32、ccounts divide incomes into five categories:1. Compensation of employees2. Net interest3. Rental income4. Corporate profits5. Proprietors incomeThese five income components sum to net domestic income at factor cost. Measuring U.S. GDPThe NationalMeasuring U.S. GDPTwo adjustments must be made to get

33、GDP: 1.Indirect taxes minus subsidies are added to get from factor cost to market prices. 2.Depreciation (or capital consumption) is added to get from net domestic product to gross domestic product.Table 5.2 in the textbook shows the income approach with data for 2006.Measuring U.S. GDPTwo adjustmeR

34、eal GDP and the Price LevelReal GDP is the value of final goods and services produced in a given year when valued at constant prices.Calculating Real GDPThe first step in calculating real GDP is to calculate nominal GDP.Nominal GDP is the value of goods and services produced during a given year valu

35、ed at the prices that prevailed in that same year.Real GDP and the Price LevelReReal GDP and the Price LevelNominal GDP CalculationsThe table provides data for 2005 and 2006.In 2005, Expenditure on balls = $100Expenditure on bats = $100Nominal GDP = $200ItemQuantityPrice2005Balls100$1.00Bats20$5.002

36、006Balls160$0.50Bats22$22.50Real GDP and the Price LevelNoReal GDP and the Price LevelIn 2006, Expenditure on balls = $80Expenditure on bats = $495Nominal GDP = $575ItemQuantityPrice2005Balls100$1.00Bats20$5.002006Balls160$0.50Bats22$22.50Real GDP and the Price LevelInReal GDP and the Price LevelBas

37、e-Year Prices Value of Real GDPThis method of calculating real GDP is to value each years output at the prices of a base year.In the base year, real GDP equals nominal GDP.Suppose 2005 is the base year, then real GDP in 2005 is $200.This method is the traditional method.ItemQuantityPrice2005Balls100

38、$1.00Bats20$5.002006Balls160$0.50Bats22$22.50Real GDP and the Price LevelBaReal GDP and the Price LevelUsing the traditional base-year prices method to calculate real GDP in 2006:Expenditure on balls in 2006 valued at 2005 prices is $160.Expenditure on bats in 2006 valued at 2005 prices is $110.So r

39、eal GDP in 2006 would be recorded as $270.ItemQuantityPrice2005Balls100$1.00Bats20$5.002006Balls160$0.50Bats22$22.50Real GDP and the Price LevelUsReal GDP and the Price LevelThe new method of calculating real GDP, which is called the chain-weighted output index.The chain-weighted output index method

40、, uses the prices of two adjacent years to calculate the real GDP growth rate.This calculation has four steps described on the next slide.Real GDP and the Price LevelThReal GDP and the Price LevelStep 1: Value last years production and this years production at last years prices and then calculate th

41、e growth rate of this number from last year to this year.Step 2: Value last years production and this years production at this years prices and then calculate the growth rate of this number from last year to this year.Step 3: Calculate the average of the two growth rates. This average growth rate is

42、 the growth rate of real GDP from last year to this year.Step 4: Apply the growth rate this year to last years real GDP to calculate this years real GDP.Real GDP and the Price LevelStReal GDP and the Price LevelWeve done step 1. Value of 2005 quantities at 2005 prices (GDP in 2005) is $200. Value of

43、 2006 quantities at 2005 prices is $270.At 2005 prices, the value of production increased from $200 to $270an increase of 35 percent. ItemQuantityPrice2005Balls100$1.00Bats20$5.002006Balls160$0.50Bats22$22.50Real GDP and the Price LevelWeReal GDP and the Price LevelStep 2. Value of 2005 quantities a

44、t 2006 prices is $500. Value of 2006 quantities at 2006 prices (GDP in 2006) is $575.At 2006 prices, the value of production increased from $500 to $575an increase of 15 percent. ItemQuantityPrice2005Balls100$1.00Bats20$5.002006Balls160$0.50Bats22$22.50Real GDP and the Price LevelStReal GDP and the

45、Price LevelStep 3. At 2005 prices, the 2006 growth rate is 35 percent. At 2006 prices, the 2006 growth rate is 15 percent.The average of these two growth rates is 25 percent.ItemQuantityPrice2005Balls100$1.00Bats20$5.002006Balls160$0.50Bats22$22.50Real GDP and the Price LevelStReal GDP and the Price

46、 LevelStep 4. So with 2005 as the base year, real GDP in 2006 is $25025 percent more that $200 in 2005. Real GDP in 2005 is $200Real GDP in 2006 is $250ItemQuantityPrice2005Balls100$1.00Bats20$5.002006Balls160$0.50Bats22$22.50Real GDP and the Price LevelStReal GDP and the Price LevelCalculating the

47、Price LevelThe average level of prices is called the price level. One measure of the price level is the GDP deflator, which is an average of the prices of the goods and services in GDP in the current year expressed as a percentage of the base-year prices.The GDP deflator is calculated in the table o

48、n the next slide.Real GDP and the Price LevelCaReal GDP and the Price LevelNominal GDP and real GDP are calculated in the way that youve just seen.GDP Deflator = (Nominal GDP Real GDP) 100.In 2005, the GDP deflator is ($200 $200) 100 = 100.In 2006, the GDP deflator is ($575 $250) 100 = 230.YearNomin

49、al GDPReal GDPGDP deflator2005$200$2001002006$575$250230Real GDP and the Price LevelNoReal GDP and the Price LevelDeflating the GDP BalloonNominal GDP increases because productionreal GDP increases. Real GDP and the Price LevelDe西方经济学原理Chap_5Week3Real GDP and the Price LevelNominal GDP also increase

50、s because prices rise.Real GDP and the Price LevelNoReal GDP and the Price LevelWe use the GDP deflator to let the inflation air out of the nominal GDP balloon and reveal real GDP.Real GDP and the Price LevelWeThe Uses and Limitations of Real GDPWe use real GDP to calculate the economic growth rate.

51、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 across time International comparisons across countries Business cycle forecastsThe Uses and Limitations of

52、 ReThe Uses and Limitations of Real GDPEconomic Welfare Comparisons Over TimeEconomic welfare measures the nations overall state of economic well-being. Real GDP is not a perfect measure of economic welfare for seven reasons:1. Inflation rate tends to be overestimated because quality improvements ar

53、e neglected, so real GDP is underestimated.2. Real GDP does not include household productionproductive activities done in and around the house by members of the household.The Uses and Limitations of ReThe Uses and Limitations of Real GDP3. Real GDP, as measured, omits the underground economy, which

54、is illegal economic activity or legal economic activity that goes unreported for tax avoidance reasons.4. Health and life expectancy are not directly included in real GDP.5. Leisure time, a valuable component of an individuals welfare, is not included in real GDP.6. Environmental damage is not deducted from real GDP.7. Political freedom and social ju