Notes for class.tmp - Econ 716 Macroeconomics for Finance...

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Econ 716 Macroeconomics for Finance Lecture Notes Professor Man-lui Lau
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ECON 716 Macroeconomics for Finance Prof. Man-lui Lau 2 I. Introduction to Macroeconomics Definition : GNP (Gross National Product) of a country is the total market value of all the final goods and services produced by the resources owned by its citizen in one year. Definition : GDP (Gross Domestic Product) of a country is the total market value of all the final goods and services produced within its national boundary in one year. Definition : Per capita GNP GNP/Population and Per capita GDP GDP/Population. Example : apples $100 oranges $200 total GDP: $300 Example : apples $100 flour $80 apple juice $200 [need $40 of apples as inputs] apple pie $300 [need $30 of apples and $60 of flour as inputs] final goods: apples: $30 $100 $40 $30 flour: $20 $80 $60 apple juice: $200 apple pie: $300 total GDP: $550 Note : Although most goods and services are valued at their market prices when computing GDP, some are not sold in the market place (example: housing services and government services) and therefore do not have market prices. We use an estimate of their value, an imputed value, to be included in GDP. Remark : GNP (or GDP) the sum of the value added in every industry [value added output value input value] Example : apples $100 flour $80 apple juice $200 [need $40 of apples as inputs] apple pie $300 [need $30 of apples and $60 of flour as inputs] value added: apples: $100 flour: $80 apple juice $160 $200 $40 apple pie $210 $300 $30 $60 total GDP: $550
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ECON 716 Macroeconomics for Finance Prof. Man-lui Lau 3 Remark : GNP (or GDP) : Net Exports Y C I G EX IM C I G NX NX where C : consumption expenditure, I : investment expenditure, G : government expenditure, X : export, and M : import. Note : C includes non-durable goods, durable goods and services I includes business fixed investment, resident fixed investment, and inventory investment G does not include transfer payment Remark : GNP (or GDP) wage rent profit Y Definition : Nominal GDP 1 1 2 2 1 ... n current current current current current current current current i i n n i P Q P Q P Q P Q Definition : Real GDP 2000 2000 2000 2000 1 1 2 2 1 ... n current current current current i i n n i P Q P Q P Q P Q [using 2000 as the base year] Definition : GDP (implicit price) Deflator Nominal GDP Real GDP Nominal GDP Real GDP GDP Deflator Gross national Product Depreciation Net National Product Indirect Tax National Income Corporate Profit Tax Payments, Undistributed Profits Contribution to Social Security + Transfer Payments to Persons + Personal Interest Income Personal Income Personal Taxes Personal Disposable Income Personal Consumption Expenditure Interest Paid to Business Personal Transfer Payments to Foreigners (net) Personal Savings Expenditure approach Factor income approach
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ECON 716 Macroeconomics for Finance Prof. Man-lui Lau 4 Definition : Consumer Price Index (CPI) 2000 2000 1 1 2000 2000 2000 2000 1 1 +...+ +...+ current current n n n n P Q P Q P Q P Q
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