gs_-25_--_Balance_of_Payments_Accounts

# gs_-25_--_Balance_of_Payments_Accounts - ANNOUNCEMENTS...

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1 ANNOUNCEMENTS (#1): ± Test will be held at from 7:30 am to 9:00 am. ± SCHEDULE OF EXAMS: o TEST #1 – and TEST #2 -- DONE! o TEST #3 – March 10, 2010 (Wednesday) -- tentative o FINAL EXAM – To be announced – [FINAL EXAM WEEK] March 26, 2010 Econ. 11 -- Lecture #25 2 LECTURE #25: BALANCE OF PAYMENTS ± INCOME ACCOUNTS COMPARING COUNTRIES (Continue…) ± BALANCE OF PAYMENTS March 26, 2010 Econ. 11 -- Lecture #25 3 FACTS ABOUT PHILIPPINE INCOME ACCOUNTS ± Income accounts are measured in current prices and then in 1985 constant prices (unless changed by gov’t statisticians). ± To compare output across the years, use real output in 1985 values. ± The “implicit” price deflator can be calculated from year to year.

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2 Comparing GDP & income measures in a given country over time ± GDP accounts are measured in “current prices” – sometimes known as nominal prices ± To compare over time, the measurements should be in “real” or “constant” prices ± Real prices are measured based on a particular level of prices of a specific year –the base for comparison March 26, 2010 Econ. 11 -- Lecture #25 5 Example (GDP in billion pesos) ± Year ’03 ’04 ’05 ± GDP, current prices 100 120 140 ± Price increase per year 10% 10% ± Price index in % (’03=100) 100 110 121 ± Price index in pure number 1.0 1.1 1.21 ± GDP, constant prices 100 109.1 127.3 ± How did we get GDP in constant prices (real GDP)? 6 GDP in current prices GDP in constant prices= Price index deflator GDP in current prices '04 = Price index deflator '04 120 = 1.1 =109.1 Using the GDP of the previous year as base, it is possible to get GDP in real prices by using the price increase of the year. Note : Price indexes are always expressed in hundredths or percentage. In calculations above, always use the original index numbers (= price index/100=110/100=1.1). That is, divide price index by 100 first. 109.1
3 March 26, 2010 Econ. 11 -- Lecture #25 7 Example ± Year ’03 ’04 ’05 ± GDP, current prices 100 120 140 ± Price increase per year 10% 10% ± Price index (’03=100) 100 110 121 ± Price index in number 1.0 1.1 1.21 ± GDP, constant prices 100 109.1 127.3 Number that we calculated. 109.1 GDP in current prices GDP in constant prices= . Price deflator In general, the formula for calculating real GDP is given by the following formula. Note: THE PRICE DEFLATOR IS OFTEN A PRICE INDEX. March 26, 2010 Econ. 11 -- Lecture #25 9 , Price deflator= . GDP in constant prices Therefore The price deflator gives a measure of price changes in the economy based on the GDP output accounts.

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4 OUTPUT ACCOUNTS ACROSS COUNTRIES ± Countries differ in size of population; large countries have large GDPs. ± Currencies are different – US dollar, UK pound, euro (European countries), yen (Japan), HK dollar, Taiwan dollar, pesetas (Spain), pesos, rubles (Russia), rupees (India), Yuan (China), ringgit (Malaysia), rupiah (Indonesia), dinar (Saudi Arabia).
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## This note was uploaded on 04/18/2010 for the course SE 67256 taught by Professor Dr.gerardosicat during the Spring '10 term at University of the Philippines Diliman.

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gs_-25_--_Balance_of_Payments_Accounts - ANNOUNCEMENTS...

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