Macro

Lecture 5
September 11, 2014
GDP Measuring Output and Income Part II

Alternative Measures Real World Approximations

Reading: RJB for lecture 6 (see website)
Read chapters thoroughly and take notes

Quarterly estimates annualized by a multiple of 4

S.A.A.R: Seasonally adjusted annualized rate
Weighted five year average per month (for ex: Christmas in
December)
Europe does not annualize growth rates
From GNP NNP
GNP minus depreciation = NNP
NNP = Y (theory)
Alternative Aggregate Measures
GDP includes inventory changes
Economists like to know how much was sold
Final Sales = GDP minus inventory investment
o Inventory investment:
What happens, however, if a surge in spending is on imports?
o Final sales to domestic purchasers = GDP minus
(Inventories and net exports)
A Big tax cut = stronger consumer spending
A sharp rise for interest rates = stronger dollar
Strong spending and strong dollar = surging imports
What investment does NOT include
Financial investments
Purchases or sales of existing or used houses
Outlays outweigh revenue because they are all just transfers of money
not expenditures by the government on final goods and purchases
Globalization allows us the enfranchise Asia