Ch13 National Income Accounting

1、Ch13 National Income Accounting13-2Topics?Economys Income and Expenditure?Gross Domestic ProductCh13 National Income Accounting?Consumer Price Index (CPI) EconomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITYEconomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY13-313-4131.2 GROSS DOM

2、ESTIC PRODUCT13.1 ECONOMYS INCOME AND EXPENDITURE?For an economy as a whole, income must equal expenditurebecause:?Gross domestic product (GDP) is a measure of the income and expenditures of an economy.Every transaction has a buyer and a seller.?It is the total market value of all final goods Every

3、dollar of spending by some buyer is a dollar of and services produced within a country in a income for some seller.given period of time.EconomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITYEconomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY13-513-6THE COMPONENTS OF GDP THE COMPONEN

4、TS OF GDP?What Is Not Counted in GDP?GDP (Y) is the sum of the following:GDP excludes most items that are produced and Consumption (C)consumed at home and that never enter the Investment (I)marketplace.Government Purchases (G)It excludes items produced and sold illicitly, such as Net Exports (NX)ill

5、egal drugs.Y = C + I + G + NXwhere Y= GDP = the value of total outputC+ I+ G+ NX= aggregate expenditureEconomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITYEconomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY113-713-8THE COMPONENTS OF GDP(1)THE COMPONENTS OF GDP(2)?Consumption (C):T

6、he spending by households on goods and services, with the exception of purchases of new housing.?Investment (I):?durable goods The spending on capital equipment, inventories, and structures, last a long time including new housing.ex: cars, home appliancesIncludes:?non-durable goods ?business fixed i

7、nvestmentspending on plant and equipment that firms will use to produce last a short time other goods & servicesex: food, clothing?residential fixed investment?servicesspending on housing units by consumers and landlordswork done for consumers ?inventory investmentex: dry cleaning, the change in

8、 the value of all firmsinventoriesair travel.EconomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITYEconomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY13-913-10Net vs. Gross InvestmentTHE COMPONENTS OF GDP(3)?Net investment is positive when the nation is ?Government Purchases (G):pro

9、ducing more capital goods than are currently The spending on goods and services by local, state, and being used up in the form of depreciation. federal governments.Since depreciation is hard to estimate Does notinclude transfer paymentsbecause they are accurately, statisticians have more confidence

10、not made in exchange for currently produced goods or in their measures of gross investment than in services.those of net investment. ?Net Exports (NX):Exports minus imports.EconomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITYEconomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY13-11

11、13-12Gross Domestic Product Can Be Measured Either as (a) a Flow of Final Products or, Measuring GDPEquivalently, as (b) a Flow of CostsApproaches:Final goods approach(Product Approach): add up the total value of goods and services produced, categorized by ultimate users. (C + I + G + NX)Earnings ap

12、proach:add up incomes received. Value-added approach: calculate the value added at each stage of production.EconomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITYEconomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY213-1313-14GDP, NDP ,NI and DIEarnings approach?GDP from the income si

13、de, include:?NDP = GDP depreciationWages,salaries,interest, rent,and profit?NI=NDP-indirect taxesIndirect business taxesNational income represents the total incomes received by labor, capital, and landDepreciation?DI=NI-direct taxes-net business saving+transfer paymentDisposable income (DI) is what

14、people actually have left -after all tax payments, corporate saving of undistributed profits, and transfer adjustments have been made -to spend on consumption or to save. EconomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITYEconomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY13-1513

15、-16Starting with GDP, We Can Calculate National Income (NI) and Disposable Personal GNP vs. GDPIncome (DI)?Gross NationalProduct(GNP):GNP: The market value of all final goods and services produced by permanent residents of a nation in a given period of time.total income earned by the nations factors

16、 of production, regardless of where located?(GNP GDP) = (factor payments from abroad) (factor payments to abroad)EconomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITYEconomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY13-1713-18REAL VERSUS NOMINAL GDPREAL VERSUS NOMINAL GDP?Nominal

17、GDP values the production of goods and ?An accurate 6view of the economy requires services at current prices.adjusting nominal to real GDP by using the GDP deflator.?Real GDP values the production of goods and services at constant prices.EconomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITYE

18、conomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY313-1913-20The GDP DeflatorGDP AND ECONOMIC WELL-BEINGThe GDP deflator is a measure of the price level calculated ?GDP is the best single measure of the economic as the ratio of nominal GDP to real GDP times 100.well-being of a society. ?GD

19、P per persontells us the income and Nominal GDPexpenditure of the average person in the GDP deflator=100economy.Real GDP?Higher GDP per person indicates a higher niistandard of living.pqtti=1GDP deflator=niipq0ti=1(Paacheprice index)EconomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITYEconom

20、icsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY13-2113-2213.3 Consumer Price Index (CPI)GDP AND ECONOMIC WELL-BEING?A measure of the overall level of prices ?GDP is not a perfect measure of the happiness ?Published by the Bureau of Labor Statistics(BLS) or quality of life, however.?Used to ?

21、Some things that contribute to well-being are track changes in the typical households cost of livingnot included in GDP.adjust many contracts for inflation The value of leisure.(i.e.“COLAs”)allow comparisons of dollar figures from different The value of a clean environment.yearsThe value of almost a

22、ll activity that takes place outside of markets, such as the value of the time parents spend with their children and the value of volunteer work.EconomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITYEconomicsECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY13-2313-24How the BLS constructs

23、the CPIChapter Summary1.Survey consumers to determine composition of the typical 1.Gross Domestic Product (GDP) measures both total consumers “basket”of goods.income and total expenditure on the economys output of goods & services.2.Every month, collect data on prices of all items in the basket; compute cost of basket2.GDP is the market value of all final goods and services produced within a country in a given period 3.CPI in any month equalsof tim