Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
1-2 The United States Figure 1-3 The United States 1-3 The Euro Area Figure 1-5 The Euro area 1-4 China Figure 1-6 China 2-1 Aggregate Output Figure 2-1 Nominal and real U.S. GDP, 1960–2010 2-1 Aggregate Output Figure 2-2 Growth rate of U.S. GDP, 1960–2010 What is GDP? • Gross Domestic Product (Duh) • Output of final goods and service • Income from the sale of final goods and services Y= C+G+I+(EX-IM) • • • • • Y = Output (GDP) C = Consumption G= Government Spending I = Investment Spending EX-IM = Exports-Imports – Net Exports (NX) As of 2014Q3 • • • • • Y= 17.60 Trillion C= 12.00 Trillion G=3.20 Trillion I= 2.90 Trillion NX = -.52 Trillion – EX =2.37 Trillion – IM =2.88 Trillion Consumption • C = 68% of GDP • Goods (4.01 Trillion) – Durable Goods – Nondurable Goods • Services (7.99 Trillion) • As you can see about 45% of our economy is services I=Investment Spending • 16.4% of GDP • Investment spending is not the same as “making an investment” • I is spending on final goods and services by firms and confusingly: households: – Fixed Investment • Nonresidential ($2.24 tril) – Structures – Software and Equipment • Residential ($0.57 tril) Buying a house means buying the services of the house into the future (i.e. an investment) – Inventories Produced but not sold. Future Sales = Investment G =Government • As of 2011Q4 G=18% of GDP – With Transfers G= 31% of GDP • We get lazy and thing of G =Federal Gov. – However G = State, Local and Federal Government – State and Local Spending = 11% of GDP • T = Taxes • TR = (Net)Transfers (Transfer SpendingTransfer Taxes) – Social Security, Medicare/Medicaid Insurance, Foods Stamps, Foreign Aid etc. Government Budgets • G+TR>T 0> T-(G+TR) – Government Deficit • • • • • G+TR<(T) 0< T-(G+TR) Government Surplus Government Saving (ignoring TR): T-G=Sg Sg = Government Savings – Sg < 0 (Deficit) or Sg > 0 (Surplus) EX and IM • NX = -2.9% of GDP • Total EX + IM = 32% of GDP • EX = Goods produced (income earned) but sold to foreigners. It is output above what is consumed (C+G+I) in the US • IM = Goods consumed (C+G+I) in the US but produced (income earned) by foreigners. • EX-IM = Trade Balance • EX >IM (EX-IM >0) Trade Surplus • EX <IM (EX-IM <0) Trade Deficit UNEMPLOYMENT Unemployment –L=N+U • L=Labor Force • N=employment • U=unemployment • Unemployment Rate= 𝑈 𝑈 = 𝑁+𝑈 𝐿 • Unemployed has a specific definition: – Looked for work within the last month. 2-2 The Unemployment Rate Figure 2-3 U.S. unemployment rate, 1960–2010 Other kinds of not unemployed but without a job: • Marginally attached Workers – Has looked for a job in the last year – Wants to work, can’t find a job • Discouraged workers • Given up looking for work because they feel there are no job opportunities • Involuntary Part Time Workers – Working part time for “economic reasons” Other Ways of Thinking about Unemployment • Employment/Population Ratio. • U3 = Standard Definition of Unemployment • U6 Includes Marginally Attached and Part Time Workers. • Current Employment Survey • Duration of Unemployment. 2-3 The Inflation Rate Figure 2-4 Inflation rate, using the CPI and the GDP deflator, 1960–2010 1-1 The Crisis Figure 1-2 Unemployment rates in the United States and the Euro area, 2000–2012 Inflation Inflation • Inflation= Growth in the price level • Two ways of measuring the price level – Consumer Price Index (CPI) – GDP Deflator • PCE Deflator GDP Deflator • 𝐺𝐷𝑃 𝐷𝑒𝑓𝑙𝑎𝑡𝑜𝑟 = 𝑃 = 𝑁𝑜𝑚𝑖𝑛𝑎𝑙 𝐺𝐷𝑃 𝑅𝑒𝑎𝑙 𝐺𝐷𝑃 = $𝑌 𝑌 – Real GDP: Constant Dollar GDP • Needs a base year. Holding prices constant factors out the “noise” of price changes. • GDP is a measure of OUTPUT (STUFF) • Rearrange: – $Y=PY – Nominal GDP can be “decomposed” into prices and quantities. – Nominal GDP growth can be decomposed too • More later on this CPI • CPI Is calculated using two components. – 1. The Average Urban Consumer (AUC); 87% of US consumers • The BLS measures the AUC “consumption basket” • 7,000 Quarterly Surveys – 2. Measured Monthly Prices. • 80,000 Prices of goods an service. • These two elements get complied into the Consumer Price Index. • The AUC’s basket determines the weight of goods in 200 categories CPI • • • • • • • • 1-32 Food and Beverages: 14.79% Housing: 41.46% Apparel: 3.6% Transportation: 17.31% Medical Care: 6.63% Recreation: 6.29% Education and Com: 6.42% Other G&S: 3.5% © 2013 Pearson Education, Inc. All rights reserved. Core vs Headline CPI • Headline contains all items in the AUC’s basket. • Core CPI factors out highly volatile Food and Energy Indexes. 1-33 © 2013 Pearson Education, Inc. All rights reserved. Some Math Stuff 1-35 © 2013 Pearson Education, Inc. All rights reserved. Growth Rates • We will use growth rates quite a bit in this class – GDP growth – Inflation (growth rate of the price level) Copyright © Pearson 2013Education, Pearson 1-36 © 2013 Inc. All rights reserved. 36 Growth Rates • Growth Rates: 𝑋𝑡+1 −𝑋𝑡 (x100)= 𝑋𝑡 %ΔX t is the time period you are interested in. Almost always in economics we are talking about annual growth. 1-37 © 2013 Pearson Education, Inc. All rights reserved. Properties of Growth rates • The Growth of Z=XY is easy to get • It is approximately (if the “g”s are small): 𝑔𝑧 = 𝑔𝑥 +𝑔𝑦 • Similarly Z=X/Y 𝑔𝑧 = 𝑔𝑥 −𝑔𝑦 • Blanchard walks you through why in the appendix. If you REAAAALLLY want me to go through it I will. 1-38 © 2013 Pearson Education, Inc. All rights reserved. Growth Exercise • Jan 1, 2013 – Nominal GDP 16502.4 – Real GDP 15538.4 • Jan 1, 2014 – Nominal GDP 17044.0 – Real GDP15831.7 • Find nominal and real GDP growth for 2013. Also find the inflation rate (according to the GDP Deflator) 1-39 © 2013 Pearson Education, Inc. All rights reserved. Figure A2-2 (a) U.S. GDP since 1890 (using a linear scale) (b) U.S. GDP since 1890 (using a logarithmic scale) 1-40 © 2013 Pearson Education, Inc. All rights reserved. To get this result: (1 + 𝑥 … 𝑛 (1−𝑥) 𝑥 ) (1−𝑥) 1. Multiply the geometric series by the numerator 2. Simplify 3. Divide by the denominator If x < 1 then 𝑥 𝑛+1 → 0 1-41 © 2013 Pearson Education, Inc. All rights reserved.