Download GDP

Measuring Economic Performance
GDP
x
 The market value of the
final goods and services
produced by workers
and other resources
located within the
border of a nation over
period of one year
GNP
 the market value of final
output produced
annually by all labour
and property supplied
by a nation’s
households, no matter
where those resources
are employed
Nominal GDP x Real GDP
 the market value of
nation’s final output
based on current prices
for the goods and
services produced during
the year
 an estimate of the value
of a nation’s final
products based on
prices of certain base
year
YP

GDPdeflator 
Y P
1 1
1
0
Intermediate Products and Value Added
 Intermediate products – products produced by business firms for
resale by other firms or for use as materials or services that will
be included in the value of resold good
 VALUE ADDED = the extra worth that a business firm adds to
intermediate products, it is measured by the difference between
the market value of a firm’s sales, and the market value of the
intermediate products that the firm purchases
 Total value added = market value of -
in a nation (GDP)
all products
market value of
intermediate products
Computing Value Added - example
Sales transactions
Intermediate purchases
Value added (Sales receipts
– Intermediate purchases)
1. EUR 1 mil. sale of cotton
by farmers to weavers
None
EUR 1 mil.
2. EUR 2 mil. Sale of cloth
by weavers to manufacturer
of blue jeans
EUR 1 mil. of cotton
EUR 1 mil.
3. EUR 4 mil. Sale of blue
jeans by blue jean
manufacturer to consumers
EUR 2 mil. of cloth
EUR 2 mil.
Market value of all products
- Market value of
intermediate products
= Total value added
EUR 7 mil.
- EUR 3 mil.
= EUR 4 mil.
METHODS OF MEASURING GDP
1) Flow-of-Product Approach (The
EXPANDITURE COMPONENTS OF GDP)
2) Earnings or cost approach (The INCOME
SIDE OF GDP)
From NNP to Disposable Income
 Net National Product
- Indirect business taxes and other adjustments
 National Income
- corporate profits
- net interest paid
- social security (payroll) taxes
+ government transfer payments
+ personal interest, dividends and other transfers
• Personal Income - Personal taxes = Disposable income
NET ECONOMIC WELFARE
 GDP
 Nonmarket production
 The value of leisure time
 The underground economy
 Cost of enviromental damage
Potential output
Production-possibility frontier
Y
unattainable
waste
X
Tasks:
1. Based on following dates calculate: GDP, NDP, NI, NX, DI
Item
Mld. EUR
Consumption expenditure
600
Personal taxes
400
Transfer payments
250
Export
240
Import
220
Government expanditure
200
Gross Investment
150
Capital consumption allowance
60
2. Calculate nominal GDP, net investment and real GDP, assuming GDP
deflator 116, C = 740, a = 21, G = 305, X = 194, M = 178, indirect
taxes = 289, profits = 357, wages = 481, rents = 9, net interests = 18.
3. Calculate real and nominal GDP using following dates:
Output
2000
Output
2006
Price 2000
Price 2006
Chicken
100
150
2
4
Apples
100
140
4
6
Total