曼昆第10版讲义mankiw10e-irm-ch02

LectureNotes

Introduction

Animmenseamountofeconomicdataisgatheredonaregularbasis.Everyday,newspapers,radio,television,andtheInternetinformusaboutsomeeconomicstatisticorother.Althoughwecannotdiscussallthesedatahere,itisimportanttobefamiliarwithsomeofthemostimportantmeasuresofeconomicperformance.

2-1 MeasuringtheValueofEconomicActivity:GrossDomesticProduct

Thesinglemostimportantmeasureofoveralleconomicperformanceisgrossdomesticproduct(GDP),whichaimstosummarizealleconomicactivityoveraperiodoftimeintermsofasinglenumber.GDPisameasureoftheeconomy’stotaloutputandoftotalincome.Macroeconomistsusethetermsoutputandincomeinterchangeably,whichseemssomewhatmysterious.Thereasonisthat,fortheeconomyasawhole,totalproductionequalstotalincome.Ourfirsttaskistoexplainwhy.

Income,Expenditure,andtheCircularFlow

Figure2-1

Supposethattheeconomyproducesjustonegood—bread—usinglaboronly.(Noticewhatwearedoinghere:Wearemakingsimplifyingassumptionsthatareobviouslynotliterallytruetogaininsightintotheworkingoftheeconomy.)Weassumethattherearetwosortsofeconomicactors—householdsandfirms(bakeries).Firmshireworkersfromthehouseholdstoproducebreadandpaywagestothosehouseholds.Workerstakethosewagesandpurchasebreadfromthefirms.Thesetransactionstakeplaceintwomarkets—thegoodsmarketandthelabormarket.

Supplement2-1MeasuringOutput

GDPismeasuredbylookingattheflowofdollarsinthiseconomy.Thecircularflowofincomeindicatesthatwecanthinkoftwowaysofmeasuringthisflow—byaddingupallincomesorbyaddingupallexpenditures.Thetwowillhavetobeequalsimplybytherulesofaccounting.Everydollarthatafirmreceivesforbreadeithergoestopayexpensesorelseincreasesprofit.Inourexample,expensessimplyconsistofwages.Totalexpenditurethusequalsthesumofwagesandprofit.

FYI:StocksandFlows

Goodsarenotproducedinstantaneously;productiontakestime.Therefore,wemusthaveaperiodoftimeinmindwhenwethinkaboutGDP.Forexample,itdoesnotmakesensetosayabakeryproduces2,000loavesofbread.Ifitproducesthatmanyinaday,thenitproduces4,000intwodays,10,000ina(five-day)week,andabout130,000inaquarter.Becausewealwayshavetokeepatimedimensioninmind,wesaythatGDPisaflow.IfwemeasuredGDPatanytinyinstantoftime,itwouldbealmostzero.

Figure2-2

Othervariablescanbemeasuredindependentoftime—werefertotheseasstocks.Forexample,economistspayalotofattentiontothefactoriesandmachinesthatfirmsusetoproducegoods.Thisisknownasthecapitalstock.Inprinciple,youcouldmeasurethisatanyinstantoftime.Overtimethiscapitalstockwillchangebecausefirmspurchasenewfactoriesandmachines.Thischangeinthestockiscalledinvestment;itisaflow.Flowsarechangesinstocks;stockschangeasaresultofflows.Inunderstandingthemacroeconomy,itisoftencrucialtokeepthedistinctionbetweenstocksandflowsinmind.Aclassicexampleofthestock–flowrelationshipisthatofwaterflowingintoabathtub.

RulesforComputingGDP

Naturally,themeasurementofGDPintheeconomyismuchmorecomplicatedinpracticethanoursimplebreadexamplesuggests.ThereareanumberoftechnicaldetailsofGDPmeasurementthatweignore,butafewimportantpointsshouldbementioned.

First,whathappensifafirmproducesagoodbutdoesnotsellit?WhatdoesthismeanforGDP?Ifthegoodisthrownout,itisasifitwereneverproduced.Ifonefewerloafofbreadissold,thenbothexpenditureandprofitsarelower.Thisisappropriate,sincewewouldnotwantGDPtomeasurewastedgoods.Alternatively,thebreadmaybeputintoinventorytobesoldlater.Thentherulesofaccountingspecifythatitisasifthefirmpurchasesthebreadfromitself.Bothexpenditureandprofitarethesameasifthebreadweresoldimmediately.

Second,whathappensifthereismorethanonegoodintheeconomy?Weaddupdifferentcommoditiesbyvaluingthemattheirmarketprice.Foreachcommodity,wetakethenumberproducedandmultiplybythepriceperunit.AddingthisoverallcommoditiesgivesustotalGDP.

Manygoodsareintermediategoods—theyarenotconsumedfortheirownsakebutareusedintheproductionofothergoods.Sheetmetalisusedintheproductionofcars;beefisusedintheproductionofhamburgers.TheGDPstatisticsincludeonlyfinalgoods.Ifamillerproducesflourandsellsthatflourtoabaker,thenonlythesaleofbreadisincludedinGDP.AnalternativebutequivalentwayofmeasuringGDPistoaddupthevalueaddedatallstagesofproduction.Thevalueaddedofthemilleristhedifferencebetweenthevalueofoutput(flour)andthevalueofintermediategoods(wheat).Thesumofthevalueaddedateachstageofproductionequalsthevalueofthefinaloutput.

Finally,weneedtotakeaccountofthefactthatnotallgoodsandservicesaresoldinthemarketplace.Toincludesuchgoodsitisnecessarytocalculateanimputedvalue.Animportantexampleisowner-occupiedhousing.SincerentpaymentstolandlordsareincludedinGDP,itwouldbeinconsistentnottoincludetheequivalenthousingservicesthathomeownersenjoy.Itisthusnecessarytoimputeavalueofhousingservices,whichissimplylikesupposingthathomeownerspayrenttothemselves.Imputedvaluesarealsocalculatedfortheservicesofpublicservants;theyaresimplyvaluedbythewagesthattheyarepaid.

RealGDPVersusNominalGDP

Supplement2-2NominalandRealGDPsince1929

Valuinggoodsattheirmarketpriceallowsustoadddifferentgoodsintoacompositemeasurebutalsomeanswemightbemisledintothinkingweareproducingmoreifpricesarerising.Thus,itisimportanttocorrectforchangesinprices.Todothis,economistsvaluegoodsatthepricesatwhichtheysoldinsomegivenyear.Forexample,wemightmeasureGDPat1998prices(oftenreferredtoasmeasuringGDPin1998dollars).ThisisthenknownasrealGDP.GDPmeasuredatcurrentprices(incurrentdollars)isknownasnominalGDP.Thedistinctionbetweenrealandnominalvariablesarisestimeandagaininmacroeconomics.

TheGDPDeflator

TheGDPdeflatoristheratioofnominalGDPtorealGDP:

.

TheGDPdeflatormeasuresthepriceofoutputrelativetopricesinthebaseyear,whichwedenotebyP.Hence,nominalGDPequalsPY.

Chain-WeightedMeasuresofRealGDP

Supplement2-3Chain-WeightedRealGDP

In1996,theBureauofEconomicAnalysischangeditsapproachtoindexingGDP.Insteadofusingafixedbaseyearforprices,theBureaubeganusingamovingbaseyear.Previously,theBureauhadusedpricesinagivenyear—say,1990—tomeasurethevalueofgoodsproducedinallyears.Now,tomeasurethechangeinrealGDPfrom,say,2014to2015,theBureauusesanaverageofthepricesinboth2014and2015.Similarly,tomeasurethechangeinrealGDPfrom2015to2016,theBureauusesanaverageofthepricesin2015and2016.

FYI:TwoHelpfulHintsforWorkingwithPercentageChanges

Supplement8-5GrowthRates,LogarithmsandElasticities

Thepercentagechangeofaproductintwovariablesequals(approximately)thesumofthepercentagechangesintheindividualvariables.Thepercentagechangeoftheratiooftwovariablesequals(approximately)thedifferencebetweenthepercentagechangeinthenumeratorandthepercentagechangeinthedenominator.

TheComponentsofExpenditure

AlthoughGDPisthemostgeneralmeasureofoutput,wealsocareaboutwhatthisoutputisusedfor.Nationalincomeaccountsthusdividetotalexpenditureintofourcategories,correspondingapproximatelytowhodoesthespending,inanequationknownasthenationalincomeidentity,

Y=C+I+G+NX,

whereCisconsumption,Iisinvestment,Gisgovernmentpurchases,andNXisnetexports,orexportsminusimports.Consumptionisexpenditureongoodsandservicesbyhouseholds;itisthusthespendingthatindividualscarryouteverydayonfood,clothes,movies,TVs,automobiles,andthelike.Food,clothing,andothergoodsthatlastforshortperiodsoftimeareclassifiedasnondurablegoods,whereasautomobiles,TVs,andsimilargoodsareclassifiedasdurablegoods.(Thedistinctionissomewhatarbitrary:Agoodpairofhikingbootsmightlastformanyyears,whilethelatestlaptopcomputermightbeoutofdateinamatterofmonths!)Thethirdcategoryofconsumption,knownasservices,includesthepurchaseofintangibleitems,suchasdoctorvisits,legaladvice,andhaircuts.

Investmentisforthemostpartexpenditurebyfirmsonfactories,machinery,andintellectualpropertyproducts;thisisknownasbusinessfixedinvestment.Wenotedearlierthatgoodsputintoinventorybyfirmsarecountedaspartofexpenditure;theyareclassifiedasinventoryinvestment.Thiscanbenegativeiffirmsarerunningdowntheirstocksofinventoryratherthanincreasingthem.Athirdcomponentofinvestmentspendingisactuallycarriedoutbyhouseholdsandlandlords—residentialfixedinvestment.Thisisthepurchaseofnewhousing.

Thethirdcategoryofexpenditurecorrespondstopurchasesbygovernment(atalllevels—federal,state,andlocal).Itincludes,mostnotably,defenseexpenditures,aswellasspendingonhighways,bridges,andsoforth.ItisimportanttorealizethatitincludesonlyspendingongoodsandservicesthatmakeupGDP.Thismeansthatitexcludesunemploymentinsurancepayments,SocialSecuritypayments,andothertransferpayments.Whenthegovernmentpaystransferstoindividuals,thereisanindirecteffectonGDPonly,totheextentthatindividualstakethosetransferpaymentsandusethemforconsumption.

Finally,someofthegoodsthatweproducearepurchasedbyforeigners.Thesepurchasesrepresentanothercomponentofspending—exports—thatmustbeaddedin.But,conversely,expendituresongoodsproducedinothercountriesdonotrepresentpurchasesofgoodsthatweproduce.SincetheideaofGDPistomeasuretotalproductioninourcountry,importsmustbesubtracted.Netexportssimplyequalexportsminusimports.

FYI:WhatIsInvestment?

Supplement3-4EconomistsTerminology

Economistsusetheterminvestmentinaveryprecisesense.Toaneconomist,investmentmeansthepurchaseofnewlycreatedgoodsandservicestoaddtothecapitalstock.Itdoesnotapplytothepurchaseofalreadyexistingassets,sincethissimplychangestheownershipofthecapitalstock.

CaseStudy:GDPandItsComponents

Supplement2-5,DefiningNationalIncome

Table2-1

Fortheyear2016,U.S.GDPequaledabout$18.6trillion,ornearly$58,000perperson.Approximatelytwo-thirdsofGDPwasspentonconsumption(about$12.8trillion).Privateinvestmentwasabout16percentofGDP(about$3.1trillion),whilegovernmentpurchaseswerenearly18percentofGDP(about$3.3trillion).Importsexceededexportsbyabout$520billion.

OtherMeasuresofIncome

Supplement2-6SeasonalAdjustmentandtheSeasonalCycle

ThereareothermeasuresofincomeapartfromGDP.Themostimportantareasfollows:grossnationalproduct(GNP)equalsGDPminusincomeearneddomesticallybyforeignnationalsplusincomeearnedbyU.S.nationalsinothercountries;netnationalproduct(NNP)equalsGNPminusacorrectionforthedepreciation,orwearandtear,ofthecapitalstock(consumptionoffixedcapital).Depreciationequaledabout16percentofGNPin2017Netnationalproductisapproximatelyequaltonationalincome.Thetwomeasuresdifferbyasmallamountknownasthestatisticaldiscrepancy,whichreflectsdifferencesindatasourcesthatarenotcompletelyconsistent.Byaddingdividends,transferpayments,andpersonalinterestincomeandsubtractingindirectbusinesstaxes,corporateprofits,socialinsurancecontributions,andnetinterest,wemovefromnationalincometopersonalincome.Finally,ifwesubtractincometaxesandnontaxpayments,weobtaindisposablepersonalincome.Thisisameasureoftheafter-taxincomeofconsumers.Mostofthedifferencesamongthesemeasuresofincomearenotimportantforourtheoreticalmodels,butwedomakeuseofthedistinctionbetweenGDPanddisposableincome.

SeasonalAdjustment

Manyeconomicvariablesexhibitaseasonalpattern—forexample,GDPislowestinthefirstquarteroftheyearandhighestinthelastquarter.Suchfluctuationsarenotsurprisingsincesomesectorsoftheeconomy,suchasconstruction,agriculture,andtourism,areinfluencedbytheweatherandtheseasons.Forthisreason,economistsoftencorrectforsuchseasonalvariationandlookatdatathatareseasonallyadjusted.

2-2 MeasuringtheCostofLiving:TheConsumerPriceIndex

WenotedearlierthedifferencebetweenrealandnominalGDP:realGDPtakesGDPmeasuredindollars—nominalGDP—andadjustsforinflation.Therearetwobasicmeasuresoftheinflationrate:thepercentagechangeintheGDPdeflatorandthepercentagechangeintheconsumerpriceindex(CPI).

ThePriceofaBasketofGoods

Thepercentagechangeintheconsumerpriceindexisagoodmeasureofinflationasitaffectsthetypicalhousehold.TheCPIiscalculatedonthebasisofatypical“basketofgoods,”basedonasurveyofconsumers’purchases.Thepointofhavingabasketofgoodsisthatpricechangesareweightedaccordingtohowimportantthegoodisforatypicalconsumer.Ifthepriceofbreaddoubles,thatwillhaveabiggereffectonconsumersthanifthepriceofmatchesdoublesbecauseconsumersspendmoreoftheirincomeonbreadthantheydoonmatches.TheCPIisdefinedas

Supplement2-4,“TheComponentsofGDP”

LiketheGDPdeflator,theCPIisameasureofthepricelevelP.

HowtheCPIComparestotheGDPandPCEDeflators

Figure2-3

TheGDPdeflatorisameasureofthepriceofallgoodsproducedintheUnitedStatesthatgointoGDP.Inparticular,theGDPdeflatoraccountsforchangesinthepriceofinvestmentgoodsandgoodspurchasedbythegovernment,whicharenotincludedintheCPI.Itis,thus,agoodmeasureofthepriceof“aunitofGDP.”TheCPIisapoorermeasureofthepriceofGDP,butitprovidesabettermeasureofthepricelevelasitaffectstheaverageconsumer.SincetheCPImeasuresthecostofatypicalsetofconsumerpurchases,itdoesnotincludethepricesof,say,earthmovingequipmentorStealthbombers.Itdoesincludethepricesofimportedgoodsthatconsumerspurchase,suchasJapanesetelevisions.BothofthesefactorsmaketheCPIdifferfromtheGDPdeflator.

Afinaldifferencebetweenthesetwomeasuresofinflationismoresubtle.TheCPIiscalculatedonthebasisofafixedbasketofgoods,whereastheGDPdeflatorisbasedonachangingbasketofgoods.Forexample,whenthepriceofapplesrisesandconsumerspurchasemoreorangesandfewerapples,theCPIdoesnottakeintoaccountthechangeinquantitiespurchasedandcontinuestoweightthepricesofapplesandorangesbythequantitiesthatwerepurchasedduringthebaseyear.TheGDPdeflator,bycontrast,allowsthebasketofgoodstochangeovertimeasthecompositionofGDPchanges.Thus,theCPI“overweights”productswhosepricesarerisingrapidlyand“underweights”productswhosepricesarerisingslowly,therebyoverstatingtherateofinflation.Byupdatingthebasketofgoods,theGDPdeflatorcapturesthetendencyofconsumerstosubstituteawayfrommoreexpensivegoodsandtowardcheapergoods.TheGDPdeflator,however,mayactuallyunderstatetherateofinflationbecausepeoplemaybeworseoffwhentheysubstituteawayfromgoodsthattheyreallyenjoy—someonewholikesapplesmuchbetterthanorangesmaybeunhappyeatingfewerapplesandmoreorangeswhenthepriceofapplesrises.

Anothermeasureofinflationistheimplicitpricedeflatorforpersonalconsumptionexpenditures,orPCEdeflator.Thismeasure,computedastheratioofnominalconsumptionexpenditurestorealconsumptionexpenditures,issimilartotheGDPdeflatorbutincludesonlytheconsumptioncomponentofGDP.LiketheCPI,thePCEdeflatorexcludesgoodspurchasedbygovernmentandbybusinessesandincludesimportedgoods.LiketheGDPdeflator,itallowsthebasketofgoodstochangeovertime.Becauseofthesecharacteristics,theFederalReserveusesthePCEdeflatorasitspreferredmeasureofinflation.

DoestheCPIOverstateInflation?

Supplement2-7,“MeasuringthePriceofLight”

Supplement2-8,“ImprovingtheCPI”

Supplement2-9,“CPIImprovementsandtheDeclineinInflationDuringthe1990s”

ManyeconomistsbelievethatchangesintheCPIareanoverestimateofthetrueinflationrate.WealreadynotedthattheCPIoverstatesinflationbecauseconsumerssubstituteawayfrommoreexpensivegoods.Therearetwootherconsiderations:

NewGoodsWhenproducersintroduceanewgood,consumershavemorechoicesandcanmakebetteruseoftheirdollarstosatisfytheirwants.Eachdollarwill,ineffect,buymoreforanindividual,sotheintroductionofnewgoodsislikeadecreaseinthepricelevel.ThisvalueofgreatervarietyisnotmeasuredbytheCPI.

QualityImprovementsLikewise,animprovementinthequalityofgoodsmeansthateachdollareffectivelybuysmorefortheconsumer.Anincreaseinthepriceofaproductthusmayreflectanimprovementinqualityandnotsimplyariseincostofthe“same”product.TheBureauofLaborStatisticsmakesadjustmentsforqualityinmeasuringpriceincreasesforsomeproducts,includingautos,butmanychangesinqualityarehardtomeasure.Accordingly,ifovertimethequalityofproductsandservicestendstoimproveratherthandeteriorate,thentheCPIprobablyoverstatesinflation.

Supplement2-10“TheBillionPricesProject”

In1995,apanelofeconomistsappointedbytheSenateFinanceCommitteestudiedtheproblemandconcludedtheCPIoverstatesinflationbyabout1.1percentagepointsperyear.TheBLShassincemadefurtherchangesinthewaytheCPIiscalculatedsothatthebiasisnowbelievedtobelessthan1percentagepoint.

2-3 MeasuringJoblessness:TheUnemploymentRate

Finally,weconsiderthemeasurementofunemployment.Employmentandunemploymentstatisticsareamongthemostwatchedofalleconomicdata,foracoupleofreasons.First,awell-functioningeconomywilluseallitsresources.Unemploymentmaysignalwastedresourcesand,hence,problemsinthefunctioningoftheeconomy.Second,unemploymentisoftenfelttobeofconcernsinceitscostsareveryunevenlydistributedacrossthepopulation.

TheHouseholdSurvey

TheU.S.BureauofLaborStatisticscalculatestheunemploymentrateandotherstatisticsthateconomistsandpolicymakersusetogaugethestateofthelabormarket.ThesestatisticsarebasedonresultsfromtheCurrentPopulationSurveyofabout60,000householdsthattheBureauperformseachmonth.Thesurveyprovidesestimatesofthenumberofpeopleintheadultpopulation(16yearsandolder)whoareclassifiedaseitheremployed,unemployed,ornotinthelaborforce:

Figure2-4

POP=E+U+NL,

wherePOPisthepopulation,Eistheemployed,Uistheunemployed,andNListhosenotinthelaborforce.Thus,wehave

L=E+U,

whereListhelaborforce.Thelabor-forceparticipationrateisthefractionofthepopulationinthelaborforce:

Labor-ForceParticipationRate=L/POP.

Supplement2-11,“AlternativeMeasuresofUnemployment”

Theemploymentrate(e)andunemploymentrate(u)aregivenby

e=E/L

u=U/L=1–e.

CaseStudy:Men,Women,andLabor-ForceParticipation

Supplement8-6,“Labor-ForceParticipation”

Overtheperiod1950to2016,labor-forceparticipationamongwomenrosesharply,from34percentto56percent,whileamongmenitdeclinedfrom86percentto69percent.Manyfactorshavecontributedtotheincreaseinwomen’sparticipation,includingnewtechnologiessuchasclothes-washingmachines,dishwashers,refrigerators,etc.,whichreducedthetimeneededforhouseholdchores;fewerchildrenperfamily;andchangingsocialandpoliticalattitudestowardwomenintheworkforce.Formen,thedeclinehasbeenduetoearlierandlongerperiodsofretirement,moretimespentinschool(andoutofthelaborforce)foryoungermen,andgreaterprevalenceofstay-at-homefathers.

Figure2-5

Forthemostrecentdecade,thelabor-forceparticipationratehasdeclinedforbothmenandwomen.Partofthisisduetothebeginningofretirementforthebaby-boomgenerationandpartisduetothesloweconomicrecoveryfollowingthefinancialcrisisof2008to2009.Someeconomistspredictthatthelabor-forceparticipationratewilldeclinefurtherovercomingdecadesastheelderlyshareofthepopulationcontinuestorise.

TheEstablishmentSurvey

Inadditiontoaskinghouseholdsabouttheiremploymentstatus,theBureauofLaborStatisticsalsoseparatelyasksbusinessestablishmentsaboutthenumberofworkersontheirpayrolleachmonth.Thisestablishmentsurveycovers160,000businessesthatemploymorethan40millionworkers.Thesurveycollectsdataonemployment,hoursworked,andwages,anditprovidesbreakdownsbyindustryandjobcategories.Employmentasmeasuredbytheestablishmentsurveydiffersfromemploymentasmeasuredbythehouseholdsurveyforseveralreasons.First,aself-employedpersonisreportedasworkinginthehouseholdsurveybutdoesnotshowuponthepayrollofabusinessestablishmentandsoisnotcountedintheestablishmentsurvey.Second,thehouseholdsurveydoesnotcountseparatejobsbutonlyreportsifapersonisworking,whereastheestablishmentsurveycountseveryjob.Third,bothsurveysusestatisticalmethodstoextrapolatefromthesampletothepopulation.Fortheestablishmentsurvey,estimatesaboutthenumberofworkersatnewstart-upfirmsthatarenotyetinthesamplemaybeimperfect.Forthehouseholdsurvey,incorrectestimatesabouttheoverallsizeofthepopulation—due,forexample,todifficultymeasuringchangesinimmigration—mayleadtoincorrectestimatesofoverallemployment.Anespeciallylargedivergencebetweenthetwosurveysoccurredintheearly2000s,whentheeconomywasrecoveringfromtherecessionof2001.OvertheperiodNovember2001toAugust2003,thehouseholdsurveyshowedanincreaseinemploymentof1.4million,whiletheestablishmentsurveyshowedadeclineof1.0million.

2-4 Conclusion:FromEconomicStatisticstoEconomicModels

Supplement2-12,“ImprovingtheNationalAccounts”

ThischapterhasexplainedhowwemeasurerealGDP,prices,andunemployment.Theseareimportanteconomicstatistics,sincetheyprovideanindicationoftheoverallhealthoftheeconomy.Thetaskofmacroeconomics,however,isnotjusttodescribethedataandmeasureeconomicperformancebutalsotoexplainthebehavioroftheeconomy.Thisisthesubjecttowhichweturninsubsequentchapters.

LECTURESUPPLEMENT

2-1 MeasuringOutput

Asdiscussedinthetext,wecanmeasurethevalueofnationaloutputeitherbyaddingupallofthespendingontheeconomy’soutputofgoodsandservicesorbyaddingupalloftheincomesgeneratedinproducingoutput.Thisbasicequivalencebetweenoutputandincomeallowsustodevelopthenationalincomeaccountingidentitiesrelatingsaving,investment,andnetexportsthatarepresentedinChapters3and6.

Althoughthetextusesthetermgrossdomesticproduct(GDP)torefertoboththespendingmeasureandtheincomemeasureoftotaloutput,thenationalincomeaccountsinfactprovidetwoseparatemeasuresoftotaloutput.Inthenationalincomeaccounts,GDPismeasuredbyaddingupspendingondomesticallyproducedgoodsandservices.Aseparatequantity,knownasgrossdomesticincome(GDI),ismeasuredbyaddingupincomegeneratedinproducingdomesticoutput.Intheory,thesemeasuresshouldbethesame.Inpractice,however,ameasurementerror—knownasthestatisticaldiscrepancy—meansthatGDPandGDIusuallydifferbyasmallamount.Typically,thediscrepancyaveragesclosetozerooverlongerperiodsoftimeandtendstobecomesmallerasthedataarerevised.

Duringthemid-tolate1990s,however,thestatisticaldiscrepancybecameunusuallypersistent,evenafterrevisionstohistoricaldata.Overtheperiod1993–1998,theeconomygrew4.5percentperyearwhenmeasuredusingrealGDIcomparedwith3.9percentperyearwhenmeasuredusingrealGDP.Figure1showsannualaveragegrowthratesoversuccessivefive-yearperiodssince1960.Asthefigureillustrates,thedifferenceingrowthratesfromthetwomeasureshastypicallyaveragedclosetozero.

WhichMeasureIsMoreAccuratefortheMid-toLate1990s?

Boththespendingandincomesidesofthenationalaccountsaremeasuredwitherrorbecausesignificantportionsofthedataareestimatesbasedonextrapolationsfromotherindicatorsandtrends.Foradditionaldiscussion,seeTheEconomicReportofthePresident,1997,U.S.GovernmentPrintingOffice,Washington,pp.72–74.TheReportarguesthatfromitsvantagepointbackin1997,Okun’slawseemedtofitbetterusingGDIgrowthratherthanGDPgrowth.Subsequentrevisionsandmoredataseemtohavereversedthisfinding,asdocumentedbelow.

Asmorecompletedatabecomeavailable,theBureauofEconomicAnalysisrevisesitsestimatesofGDPandGDI.Generally,theseannualandmultiyearrevisionsreplacemoreofthespending-sideestimateswithdetailedsourcedatathantheincome-sideestimates,whichoftencontinuetobebasedonincompletedata.Whentaxreturnsandcensusdatabecomeavailable,usuallywithalagofmanyyears,incomeestimateswouldbeexpectedtoimprove.Butbecausethesedataforincomeremainfarfromcomplete,GDPwouldstillbethemoreaccuratemeasure,althoughthediscrepancybetweenthetwoprobablywouldshrink.Thepersistenceofthedifferenceforthelate1990s,despiteseveralmajorrevisions,hascontinuedtobepuzzling.

AnotherwayofgaugingtheaccuracyofGDPcomparedwithGDIistoconsiderwhichmeasurefitsbetterwithwell-knowneconomicrelationshipsthathavetypicallyheldinthepast.OnesuchrelationshipisOkun’slaw,aruleofthumbdiscussedinChapter10thatrelatesthegrowthrateofoutputtothechangeintheunemploymentrate.ArthurM.Okun,“PotentialGNP:ItsMeasurementandSignificance,”inProceedingsoftheBusinessandEconomicsStatisticsSection,AmericanStatisticalAssociation(Washington,DC:AmericanStatisticalAss