Macroeconomics
Chapter 2:
Macroeconomic Data and Variables
Gross Domestic Product (GDP)
Defintion,GDP is the total market value of all final goods and services produced by a country.
Final versus Intermediate,By "final",we mean the goods and service that are purchased for final use by purchaser and not for resale or further processing,The meaning intermediate is opposite to final,
Value Added,GDP not only reflects the market value of final goods and service,but also reflect the income generated from producing these final goods and service,This income feature of GDP can be revealed by the process of value added
Expenditure Approach to Calculate GDP
One way to calculate the GDP is to look at how the final goods and services are used,This approach is called expenditure approach,The following is the composition of GDP in terms of the expenditure (or demand)
Private Consumption
Gross Private Investment
Net investment = Gross Investment - Depreciation
Government Expenditure
Net Export (Export - Import)
Change in Inventories
Remark,The consumption,investment and government expenditure defined above includes the purchases on the imported goods,This is the reason why import must be deducted from the export.
Income Approach to Calculate GDP
Another way is to look at the composition of value added (or income),The following is the composition of GDP in terms of income
Wage
Rents
Interest Rate
Proprietor's income
Corporate Profit
tax
dividends
retained profit
Some Statistic Adjustment
Indirect Tax (Sales tax)
Depreciation
Net foreign factor income earned in U,S,
Remark,Similarly,the wage,profit,etc,include the income of domestic people or company earned in other country,This is the reason why we use net foreign income,
Other Related Variables in National Income Account
Net Domestic Product
Net Domestic Product = GDP – Depreciation
National Income
National Income = Net Domestic Product -
Net Foreign Factor Income - Indirect Tax
Personal Income
Personal Income = National Income -
Social Security Contribution -
Corporate Income Tax -
Retained Profit - Transfer Payment
Disposable Income
Disposable Income = Personal Income - Personal Tax
Nominal GDP,Real GDP and Inflation Index
Nominal GDP is the value of final goods and services calculated at current market price,
The real GDP is the value of final goods and services calculated at fixed price,
GDP deflator (GDP price index),an index that reflects the general price level,The relationship among real and nominal GDP and GDP deflator can be expressed as
Real GDP = (Nominal GDP/GDP deflator) ( 100
Consumer Price Index,another index that reflects the general price level,Its calculation is based on selected consumer goods.
Employment and Unemployment Rate
Employment rate and unemployment rate are the indices that measure joplessness of an economy,In particular,
The Natural Rate of Unemployment is the unemployment rate at equilibrium or at the steady state,
A Simple Model of Natural Rate of Unemployment (presented in class):
Chapter 2:
Macroeconomic Data and Variables
Gross Domestic Product (GDP)
Defintion,GDP is the total market value of all final goods and services produced by a country.
Final versus Intermediate,By "final",we mean the goods and service that are purchased for final use by purchaser and not for resale or further processing,The meaning intermediate is opposite to final,
Value Added,GDP not only reflects the market value of final goods and service,but also reflect the income generated from producing these final goods and service,This income feature of GDP can be revealed by the process of value added
Expenditure Approach to Calculate GDP
One way to calculate the GDP is to look at how the final goods and services are used,This approach is called expenditure approach,The following is the composition of GDP in terms of the expenditure (or demand)
Private Consumption
Gross Private Investment
Net investment = Gross Investment - Depreciation
Government Expenditure
Net Export (Export - Import)
Change in Inventories
Remark,The consumption,investment and government expenditure defined above includes the purchases on the imported goods,This is the reason why import must be deducted from the export.
Income Approach to Calculate GDP
Another way is to look at the composition of value added (or income),The following is the composition of GDP in terms of income
Wage
Rents
Interest Rate
Proprietor's income
Corporate Profit
tax
dividends
retained profit
Some Statistic Adjustment
Indirect Tax (Sales tax)
Depreciation
Net foreign factor income earned in U,S,
Remark,Similarly,the wage,profit,etc,include the income of domestic people or company earned in other country,This is the reason why we use net foreign income,
Other Related Variables in National Income Account
Net Domestic Product
Net Domestic Product = GDP – Depreciation
National Income
National Income = Net Domestic Product -
Net Foreign Factor Income - Indirect Tax
Personal Income
Personal Income = National Income -
Social Security Contribution -
Corporate Income Tax -
Retained Profit - Transfer Payment
Disposable Income
Disposable Income = Personal Income - Personal Tax
Nominal GDP,Real GDP and Inflation Index
Nominal GDP is the value of final goods and services calculated at current market price,
The real GDP is the value of final goods and services calculated at fixed price,
GDP deflator (GDP price index),an index that reflects the general price level,The relationship among real and nominal GDP and GDP deflator can be expressed as
Real GDP = (Nominal GDP/GDP deflator) ( 100
Consumer Price Index,another index that reflects the general price level,Its calculation is based on selected consumer goods.
Employment and Unemployment Rate
Employment rate and unemployment rate are the indices that measure joplessness of an economy,In particular,
The Natural Rate of Unemployment is the unemployment rate at equilibrium or at the steady state,
A Simple Model of Natural Rate of Unemployment (presented in class):
