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Macroeconomics 3.1
It is the study of the general price level of the economy, the total
demand for goods and services, the total output produced in the
economy, total employment, total investment, total exports and
imports, which in economics is called aggregates.
GDP
http://www.youtube.com/watch?v=yUiU_xRPwMc&lis
t=PLF2A3693D8481F442&index=19&feature=plpp_vid
eo
Of all
Includes all items produced in the economy & sold legally
Final
Value of intermediate goods is already included in the
prices of the final goods
Problem of double counting
Produced
G & S currently produced
Does not include transactions involving items produced in
the past value of a used car sold on the market not included
in GDP
Within a country
GDP measures the value of production within
geographical confines, regardless of the nationality of
the producer
Firms
Households
Firms
Same As
Households
Firms
Same As
Households
Value of what is
spent
Expenditures by Consumers, Investors, Government, and Net Exports
Firms
Expenditures
Approach
Value of what is
produced
Same As
Households
Value of what is
spent
Value of what is
produced
Same As
Firms
Expenditures
Approach
Households
Value of what is
spent
(GDP = C + I + G + Xn )
Methods of
Measurement
Factor Income
Adding up total payments for use of
factors of production
Interest imputed (estimated)
When the public sector utilises
wholly owned buildings, it is freely
using capital which would have
been paid for in the private sector
Amount (millions of
)
47,090
10,903
Rental Income
Interest (imputed consumption of
non-trading capital)
6181
26,290
218
statistical discrepancy
569
102,869
Amount (millions of
)
Household consumption ( C )
55,202
27,461
Government Expenditure
15,413
Exports ( X )
imports ( - M )
112,938
95,702
-14,572
2,697
-569
102,869
(millions CAD$)
Consumer expenditure on
goods & services
Business investment
1,527,258
Government expenditure
333,942
Exports
438,553
Imports
464,722
269,394
Expenditure Method
Investment : circulating capital
(unsold stocks), work in progress
Output method
Value added approach
All output generates rewards to
factor inputs
Generated
Added
$100
$100
Farmer
harvest wheat
Miller
200
100
Baker
300
100
$600
$300
Amount (millions of
)
4,003
1,329
Construction
8,085
Manufacturing
32,715
Transport, communication
6,014
8,728
8,478
Other services
22,789
4,032
9,991
Total
less adjustment for
financal services
statistical discrepancy
-3,863
569
Billion MNL
11.3
Investment spending
3.2
Government spending
3.5
2.5
2.1
(UK )
Property income from abroad
55,526
(-) 49907
5,916
394,787
(+) 5,916
400,703
Calculate
Mountainlands GNP
Components
Consumer
spending
Billion MNL
11.3
Investment
spending
3.2
Government
spending
3.5
Exports of
goods &
services
2.5
Imports of
goods &
services
2.1
GDP deflator
GDP Deflator
National Income
Accounting
Money value of aggregate output
= GDP
Adjust for use of foreign factors of
production = GNP
Subtract depreciation of capital =
NNP
(to show net addition to GNP)
Depreciation
Year
Event in firm
gross investment
machine # 1
machine # 2
= 100,000
= 200,000
100,000
200,000
25,000
25,000
depreciation # 2 (1/4 of
100,000 per year
50,000
depreciation # 3 - 5 (1/4 of
100,000 per year
25,000
75,000
2 mn
2.5
400,000
300,000
2.4 mn
2.8 mn
-25,000
-75,000
2.375 mn
2.725 mn
depreciation # 1(1/4 of
100,000 per year
total depreciation
total output (GDP)
net property income
GNP
less depreciation
NNP
Resoures
Mankiw G. ; Principles of
Economics; 3rd edition Pg 499
518
http://www.cr1.dircon.co.uk/TB/3/c
flow.htm