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
Measuring National Output and National Income Chapter 18 ch18 1 Gross Domestic Product • Gross domestic product (GDP) is the total market value of all final goods and services produced within a given period by factors of production located within a country. ch18 2 National Income and Product Accounts • National income and product accounts are data collected and published by the government describing the various components of national income and output in the economy. • The U.S. Department of Commerce is responsible for producing and maintaining the “National Income and Product Accounts” that keep track of GDP. ch18 3 Final Goods and Services • The term final goods and services in GDP refers to goods and services produced for final use. • Intermediate goods are goods produced by one firm for use in further processing by another firm. ch18 4 Value Added • Value added is the difference between the value of goods as they leave a stage of production and the cost of the goods as they entered that stage. – In calculating GDP, we can either sum up the value added at each stage of production, or we can take the value of final sales. ch18 5 Value Added Value Added in the Production of a Gallon of Gasoline (Hypothetical Numbers) STAGE OF PRODUCTION VALUE OF SALES VALUE ADDED $ .50 $ .50 (2) Refining .65 .15 (3) Shipping .80 .15 (4) Retail sale 1.0 0 .20 (1) Oil drilling Total value added $ 1.0 0 ch18 6 Exclusions of Used Goods and Paper Transactions • GDP ignores all transactions in which money or goods change hands but in which no new goods and services are produced. ch18 7 Exclusion of Output Produced Abroad by Domestically Owned Factors of Production • GDP is the value of output produced by factors of production located within a country. Output produced by a country’s citizens, regardless of where the output is produced, is measured by gross national product (GNP). ch18 8 Calculating GDP GDP can be computed in two ways: • The expenditure approach: A method of computing GDP that measures the total amount spent on all final goods during a given period. • The income approach: A method of computing GDP that measures the income—wages, rents, interest, and profits—received by all factors of production in producing final goods. ch18 9 The Expenditure Approach Expenditure categories: • Personal consumption expenditures (C)— household spending on consumer goods. • Gross private domestic investment (I)— spending by firms and households on new capital: plant, equipment, inventory, and new residential structures. ch18 10 The Expenditure Approach Expenditure categories: • Government consumption and gross investment (G) • Net exports (EX – IM)—net spending by the rest of the world, or exports (EX) minus imports (IM) ch18 11 The Expenditure Approach • The expenditure approach calculates GDP by adding together the four components of spending. In equation form: GDP C I G ( EX IM ) ch18 12 Components of GDP, 1999: The Expenditure Approach Components of GDP, 2002: The Expenditure Approach Personal consumption expenditures (C) Durable goods BILLIONS OF DOLLARS 7303.7 PERCENTAGE OF GDP 69.9 871.9 8.3 Nondurable goods 2115.0 20.2 Services 4316.8 41.3 Gross private domestic investment (l) Nonresidential Residential Change in business inventories Government consumption and gross investment (G) Federal State and local Net exports (EX – IM) 1543.2 14.8 1117.4 10.7 471.9 4.5 3.9 0 1972.9 18.9 693.7 6.6 1279.2 12.2 423.6 4.1 Exports (EX) 1014.9 9.8 Imports (IM) 1438.5 13.8 Total gross domestic product (GDP) Note: Numbers may not add exactly because of rounding. ch18 Source: U.S. Department of Commerce, Bureau of Economic Analysis. 10446.2 100.0 13 Personal Consumption Expenditures • Personal consumption expenditures (C) are expenditures by consumers on the following: – Durable goods: Goods that last a relatively long time, such as cars and appliances. – Nondurable goods: Goods that are used up fairly quickly, such as food and clothing. – Services: Things that do not involve the production of physical things, such as legal services, medical services, and education. ch18 14 Gross Private Domestic Investment • Investment refers to the purchase of new capital. • Total investment by the private sector is called gross private domestic investment. It includes the purchase of new housing, plants, equipment, and inventory by the private sector. ch18 15 Gross Private Domestic Investment • Nonresidential investment includes expenditures by firms for machines, tools, plants, and so on. • Residential investment includes expenditures by households and firms on new houses and apartment buildings. • Change in inventories computes the amount by which firms’ inventories change during a given period. Inventories are the goods that firms produce now but intend to sell later. ch18 16 Gross Private Domestic Investment • Remember that GDP is not the market value of total sales during a period—it is the market value of total production. • The relationship between total production and total sales is: GDP = final sales + change in business inventories ch18 17 Gross Investment versus Net Investment • Gross investment is the total value of all newly produced capital goods (plant, equipment, housing, and inventory) produced in a given period. • Depreciation is the amount by which an asset’s value falls in a given period. • Net investment equals gross investment minus depreciation. capitalend of period = capitalbeginning of period + net investment ch18 18 Government Consumption and Gross Investment • Government consumption and gross investment (G) counts expenditures by federal, state, and local governments for final goods and services. ch18 19 Net Exports • Net exports (EX – IM) is the difference between exports and imports. The figure can be positive or negative. – Exports (EX) are sales to foreigners of U.S.produced goods and services. – Imports (IM) are U.S. purchases of goods and services from abroad). ch18 20 The Income Approach • National income is the total income earned by the factors of production owned by a country’s citizens. • The income approach to GDP breaks down GDP into four components: GDP = national income + depreciation + (indirect taxes – subsidies) + net factor payments to the rest of the world + other ch18 21 The Income Approach Components of GDP, 2002: The Income Approach BILLIONS OF DOLLARS National income Compensation of employees Proprietors’ income Corporate profits Net interest Rental income Depreciation Indirect taxes minus subsidies Net factor payments to the rest of the world Other Gross domestic product PERCENTAGE OF GDP 8,199.9 80.3 6,010.0 943.5 748.9 554.8 142.7 58.9 7.3 7.3 5.4 1.4 1,351.3 739.4 11.1 96.1 10,205.6 13.2 7.2 0.1 0.9 100.0 Source: See Table 18.2. ch18 22 From GDP to Disposable Personal Income GDP, GNP, NNP, National Income, Personal Income, and Disposable Personal Income, 2002 GDP Plus: receipts of factor income from the rest of the world Less: payments of factor income to the rest of the world Equals: GNP Less: depreciation Equals: net national product (NNP) Less: indirect taxes minus subsidies plus other Equals: national income Less: corporate profits minus dividends Less: social insurance payments Plus: personal interest income received from the government and consumers Plus: transfer payments to persons Equals: personal income Less: personal taxes Equals: disposable personal income Source: See Table 18.2. ch18 DOLLARS (BILLIONS) 10,205.6 + 342.1 353.2 10,194.5 1,351.3 8,843.2 643.3 8,199.9 332.6 731.2 + 439.1 +1,148.7 8,723.9 1,306.2 7,417.7 23 From GDP to Disposable Personal Income • Net national product equals gross national product minus depreciation; a nation’s total product minus what is required to maintain the value of its capital stock. • Personal income is the income received by households after paying social insurance taxes but before paying personal income taxes. ch18 24 Disposable Personal Income and Personal Saving Disposable Personal Income and Personal Saving, 2002 DOLLARS (BILLIONS) 7,417.7 Disposable personal income Less: 7063.5 Personal consumption expenditures 204.3 Interest paid by consumers to business Personal transfer payments to foreigners 118.6 Equals: personal savinga Personal savings as a percentage of disposable personal income: Source: See Table 18.2. 31.3 ch18 1.6% 25 Disposable Personal Income and Personal Saving • The personal saving rate is the percentage of disposable personal income that is saved. • If the personal saving rate is low, households are spending a large amount relative to their incomes; if it is high, households are spending cautiously. ch18 26 Nominal Versus Real GDP • Nominal GDP is GDP measured in current dollars, or the current prices we pay for things. Nominal GDP includes all the components of GDP valued at their current prices. • When a variable is measured in current dollars, it is described in nominal terms. ch18 27 Calculating Real GDP • A weight is the importance attached to an item within a group of items. • A base year is the year chosen for the weights in a fixed-weight procedure. • A fixed-weight procedure uses weights from a given base year. ch18 28 Calculating Real GDP A Three-Good Economya (1) (2) PRODUCTION YEAR YEAR 2 1 Q1 Q2 (3) (4) PRICE PER UNIT YEAR 1 YEAR 2 (5) (6) (7) (8) GDP IN YEAR 1 IN YEAR 1 PRICES GDP IN YEAR 2 IN YEAR 1 PRICES GDP IN YEAR 1 IN YEAR 2 PRICES GDP IN YEAR 2 IN YEAR 2 PRICES P1 P2 P1 x Q1 P1 x Q2 P2 x Q1 P2 X Q2 Good A 6 11 $.50 $ .40 $3.00 $5.50 $2.40 $4.40 Good B 7 4 .30 1.00 2.10 1.20 7.00 4.00 Good C 10 12 .70 .90 7.00 8.40 9.00 10.80 $12.10 $15.10 $18.40 $19.20 Total Nominal GDP in year 1 ch18 Nominal GDP in year 2 29 Calculating the GDP Deflator • The GDP deflator is one measure of the overall price level. The GDP deflator is computed by the Bureau of Economic Analysis (BEA). • Overall price increases can be sensitive to the choice of the base year. For this reason, using fixed-price weights to compute real GDP has some problems. ch18 30 The Problems of Fixed Weights The use of fixed price weights to estimate real GDP leads to problems because it ignores: 1. Structural changes in the economy. 2. Supply shifts, which cause large decreases in price and large increases in quantity supplied. 3. The substitution effect of price increases. ch18 31 GDP and Social Welfare • Society is better off when crime decreases, however, a decrease in crime is not reflected in GDP. • An increase in leisure is an increase in social welfare, but not counted in GDP. • Nonmarket and household activities are not counted in GDP even though they amount to real production. ch18 32 GDP and Social Welfare • GDP accounting rules do not adjust for production that pollutes the environment. • GDP has nothing to say about the distribution of output. Redistributive income policies have no direct impact on GDP. • GDP is neutral to the kinds of goods an economy produces. ch18 33 The Underground Economy • The underground economy is the part of an economy in which transactions take place and in which income is generated that is unreported and therefore not counted in GDP. ch18 34 Gross National Income per Capita • To make comparisons of GNP between countries, currency exchange rates must be taken into account. • Gross National Income (GNI) is a measure used to make international comparisons of output. GNI is GNP converted into dollars using an average of currency exchange rates over several years adjusted for rates of inflation. • GNI divided by population equals gross national income per capita. ch18 35 Gross National Income per Capita Per Capita Gross National Income for Selected Countries, 2002 COUNTRY Switzerland Japan Norway United States Denmark Ireland Sweden United Kingdom Netherlands Austria Finland Germany Belgium France Canada Australia Italy Spain Greece U.S. DOLLARS 36,970 35,990 35,530 34,870 31,090 28,880 25,400 24,230 24,040 23,940 23,840 23,700 23,340 22,640 21,340 18,770 18,470 14,860 11,780 Source: The World Bank Atlas, 2002. ch18 COUNTRY Portugal South Korea Argentina Mexico Czech Republic Brazil South Africa Turkey Colombia Jordan Romania Philippines China Indonesia India Pakistan Nepal Rwanda Ethiopia U.S. DOLLARS 10,670 9,400 6,860 5,540 5,270 3,060 2,900 2,540 1,910 1,750 1,710 1,050 890 680 460 420 250 220 10036 Terms and Concepts: base year: temel yıl change in business inventories: işletme stoklarında değişme compensation of employees: çalışanlara ücret-maaş corporate profits: şirket karları current dollars: cari-bugünkü dolar değeriyle, cari- bugünkü fiyatlarla depreciation: aşınma payı, amortisman disposable personal income, or after-tax income: kullanılabilir kişisel gelir, vergiden sonra kişinin dilediği gibi harcayabileceği gelir durable goods: dayanıklı mallar expenditure approach: harcama yaklaşımı final goods and services: nihai mal ve hizmetler fixed-weight procedure: sabit ağırlık-tartı işlemi-prosedürüyöntemi ch18 37 Terms and Concepts: government consumption and gross investment (G): hükümet-devlet harcamaları ve gayrı safi yatırımı gross domestic product (GDP): brüt- gayri safi yurtiçi hasıla (GSYİH) gross investment: brüt- gayrı safi yatırım gross national income (GNI): brüt- gayri safi milli gelir (GSMG) gross national product (GNP): brüt- gayri safi milli hasıla (GSMH) gross private domestic investment (I): brüt- gayrı safi özel yurtiçi yatırım income approach: gelir yaklaşımı indirect taxes: dolaylı vergiler intermediate goods: ara mallar national income: milli gelir national income and product accounts: milli gelir ve ch18 38 hasılat muhasebesi Terms and Concepts: net exports (EX – IM): net ihracat net factor payments to the rest of the world: net dış alem faktör gelirleri net interest: net faiz net investment: net yatırım net national product (NNP): net milli hasıla nominal GDP: nominal GSYİH nondurable goods: dayanıksız mallar nonresidential investment: yerleşik olmayan yatırım personal consumption expenditures (C): kişisel tüketim harcamaları personal income: kişisel gelir ch18 39 Terms and Concepts: personal saving: kişisel tasarruf personal saving rate: kişisel tasarruf oranı proprietors’ income: mal sahibi kazancı rental income: kira geliri residential investment: konut yatırımları, yerleşik yatırım services: hizmetler subsidies: sübvansiyonlar, yardımlar, devlet yardımları underground economy: kayıt dışı ekonomi value added: katma değer weight: ağırlık, tartı ch18 40 Problems: 1) If net investment is negative, we know that A) net exports are positive. B) net exports are negative. C) GDP is less than GNP. D) GDP is greater than GNP. E) the capital stock has decreased. 2) If depreciation is greater than gross investment, we know that A) the capital stock has decreased. B) the capital stock has increased. C) GDP is less than GNP. D) GDP is greater than GNP. E) None of the above ch18 41 Problems: 3) Inventories are counted as __________ and changes in inventory are counted as __________. A) capital; personal consumption expenditures B) capital; investment C) services; investment D) investment; personal consumption expenditures E) services; personal consumption expenditures 4) If net investment is zero, we know that A) the capital stock has increased. B) GDP is less than GNP. C) the capital stock has decreased. D) GDP is greater than GNP. E) None of the above ch18 42 Problems: 5) Net national product (NNP) is equal to A) GDP minus depreciation. B) GNP plus depreciation. C) GDP plus depreciation. D) GNP minus depreciation. E) GNP minus net investment. 6) In 2000, government consumption and gross investment (G) accounted for approximately what percentage of GDP? A) 38% B) 10% C) 18% D) 28% E) 48% 7) Which of the following is NOT a durable good? A) Automobiles B) Clothing C) Household appliances D) Furniture ch18 E) None of the above 43 Problems: SCENARIO 1: The components of GDP in 1999 in billions of dollars are: 8) Refer to Scenario 1. Personal consumption expenditures in 1999 were A) $3,656. B) $6,255. C) $6,299. D) $5,497. E) $2,599. 9) The National Income and Product Accounts A) are like income and balance sheets in accounting. B) provide profit data on industrial markets. C) describe the financial sector of the economy. D) describe the components of national income in the economy44 ch18 E) are collected and compiled by firms in the private sector. Problems: 10) For countries like the United States, we know that A) the difference between GDP and GNP will be small. B) GNP and GDP will be equal when net exports are zero. C) GDP will always exceed GNP. D) GNP will always exceed GDP. E) GDP will always equal GNP. Refer to Scenario 2 below to answer the questions that follow. SCENARIO 2: The components of personal income in 1999 in billions of dollars are: 11) Refer to Scenario 2. Personal income in 1999 was A) $7,791. B) $6,255. C) $6,865. D) $6,413. E) $6,639. ch18 45 Problems: 12) Which of the following statements is correct? A) Consumption is spending by firms and households on new capital. B) Consumption includes spending on inventory and new residential structures. C) The purchase of a new home is treated as investment. D) Net exports are imports minus exports. E) Investment represents household purchases of assets. 13) Which of the following statements is correct? A) There is only one way to compute GDP. B) Each buyer's payment is different from his/her seller's receipt. C) The expenditure approach to calculating GDP measures the income¹wages, rents, interest, and profits received by all factors of production in producing final goods. D) The expenditure approach to calculating GDP measures the amount spent on all goods during a given period. E) None of the above ch18 46 Problems: 14) Per capita GDP is a country's A) GDP divided by its population. B) GDP divided by its GNP. C) GNP divided by its GDP. D) population multiplied by its GDP. E) population divided by its GDP. 15) The personal saving rate is the percentage of A) GNP that is saved. B) national income that is saved. C) disposable personal income that is saved. D) disposable income that is saved. E) GDP that is saved. ch18 47 Problems: Refer to Table 6.1 below to answer the following questions. Table 6.1 16) Refer to Table 6.1. If we use a fixed-weight procedure and year 1 as the base year, then real GDP in year 2 is A) $6.20. B) $9.70. C) $8.50. D) $7.80. E) None of the above 17) In 2000, services accounted for approximately what percentage of GDP? ch18 A) 40% B) 75% C) 50% D) 83% E) 68% 48