GDP
- Gross Domestic Product; the total value of all final goods and services produces within a countries borders within a given year
- Included:
- final goods and services
- income earned
- interest payments on corporate bonds
- current production of final goods/services
- unsold output (business inventories)
- Excluded:
- intermediate goods
- transfer payments (public/private)
- Ex: scholarship, SS
- purchases of stocks and bonds
- used/secondhand sales
- non-market transactions
§ illegal drugs, prostitution
§ baby sitting
§ own housework/repairs
§ growing own products for person consumption
GNP
- Gross National Product; total value of all final goods and services produces by US within a given year
Calculations
- GDP:
- Expenditure: C + Ig + G + Xn
- C- personal consumption
- Ig- Gross private domestic investment
- G- government spending
- Xn- Net Exports
- Income: W + R + I + P + Statistical Adjustments
- F.O.P
- W- wages/salaries/compensation of employees
- R- rent/rental income
- I- interest income
- P- Payments/ Proprietors income/profit
- Budget
- Deficit - Total amount that the govt. borrows within a year (total govt. spending exceed tax and fee revenue)
- transfer payments + govt. purchases of goods/services - Gov. tax and fee collection
- Neg = Surplus Pos = deficit
- Trade
- Exports - imports
- National Income
- Method 1:
- Compensation of employees + proprietors income + interests income + rental income + corporate income
- Method 2:
- GDP - Indirect business taxes - depreciation - net foreign factor
- Disposable Personal Income
- national income - Household taxes + Govt. Transfer Payments
- Net Domestic Product
- GDP - depreciation (consumption of fixed income)
- Net National Product
- GNP – depreciation (consumption of fixed income)
- GNP
- GDP + Net Foreign Factor Payment
- Nominal GDP (Inflation)
- The value of output produces in current prices (can increase year to year if either output or price increase
- P X Q
- · Real GDP (Economic Growth)
o Value of output produced in constant or base year prices
o can only increase if output increases
o Original Price X Q
o adjusted for inflation
- · Deflator- NGDP/RGDP * 100
o Base Yr: Def =100
o After Base Yr: Def>100
o Before Base Yr: Def<100
- · Consumer Price Index
o measures the cost of the market basket of goods of a typical
urban American family
o (Cost of market basket in a given year)/(cost of market
basket in a base year) * 100
- · Inflation - general rise of the price level
- · Deflation - fall of the price level
- · Rate of Inflation
o (CPIx - CPIbase)/CPIbase * 100
- · Types of Inflation
o Cost-push inflation - higher production costs which increase
prices, results in a supply shock
o Demand-pull inflation - too much money chasing too few
goods; shortage driving up prices, overheated economy w/ excessive spending w/
same amount of goods
- Political Panic - depression/ recession
- Inflation Hurts
- lenders- loan money at a fixed rate
- people with a fixed income
- fixed wage
- Inflation Benefits
- debtors
- business where price of the product increases faster than the price of resources
- · Unemployment
o % of people w/o jobs
- · Labor force- employed + unemployed
- · Not in the labor force:
o 16 or younger
o military personnel
o mentally insane
o jail mates
o stay at home mom/dads
o full time students;
retires
o discouraged (16+ years olds who have searched for a job for
2 weeks)
- · Calculate Unemployment Rate
o (# of unemployed)/(total labor force) * 100
- · 4 Types of Unemployment
o Seasonal- lifeguard/ Santa worker, etc.
o Frictional- between jobs, quit before you get the other jobs
o Structural- lack of skill/declining industry
o Cyclical- bad for society and individuals (you have a
recession)
- · Full Employment - occurs when there is no cyclical unemployment present in the economy
- · Okun's Law - for every one % of unemployment above the NRU occurs a 2% decline in real GDP
Your notes are very well organized. The only thing I would say to add is that for trade if the number is positive then it is a surplus and if it is a negative number then it is a deficit.
ReplyDeleteGreat blog, well organized and detailed. I have some trouble understanding which equation to use when calculating GDP though. I know there are two different equations for them, but how do you determine which equation to use sometimes?
ReplyDeleteOverall, your blog was very easy to understand because it is very simple and organized. However, one thing you may want to add would be the definition of the Rule of 70.
ReplyDelete