Lec2 - Finance 101 Monetary Economics& the Global...

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Unformatted text preview: Finance 101: Monetary Economics & the Global Economy Lecture 2 NIPA accounts & economic indicators Prof. Hnatkovska Fall 2011 2 Outline • National income accounting – What is GDP? – What are the characteristics of its components? – Why do we care about GDP? How to measure standards of living? • Savings and wealth • Real GDP, price indices and inflation • Nominal and Real Interest Rates. The Yield Curve • How is Unemployment measured? Why do we care about Unemployment? • Key economic indicators FNCE 101 - Hnatkovska - Lecture 2 Office hours • Professor – Thursdays: 5pm – 6:30pm – By appointment (email: [email protected]) – Office: SH/DH 2311 • TAs – Stan Rabinovich: [email protected] : Wed 1:30-3:00PM – Christina Zhang: [email protected] : Mon 11:00-12:30 – Oren Isacoff : [email protected] : Tue 4:30-6:00PM – Kuang Li: [email protected]: Tue 12:00-1:30PM – Zhao Yang: [email protected]: Fri 10:00-11:30AM – Office: TA cubicles in finance department FNCE 101 - Hnatkovska - Lecture 2 3 4 Readings • ABC, chapter 2 • ABC, chapter 8.1-8.3 • ABC, chapter 3.5 4 FNCE 101 - Hnatkovska - Lecture 2 Practice questions • ABC chapter 2 – Review questions 2, 3, 4, 5, 9, 10 – Numerical questions (pretty much all of them are great for practice) – Analytical questions 2, 3 How to measure GDP FNCE 101 - Hnatkovska - Lecture 2 6 • Income Approach : Value of all final goods and services generates income to someone in the production process – Add income received by all producers of output (wages for workers, profits for firm owners) • Expenditure Approach : final goods and services being produced are bought by somebody – Add the amounts spent by the ultimate consumers of output • Product Approach : value of all final goods and services should equal sum of value added at each stage of production – Add the market value of all good and services produced MINUS the market value of all intermediate inputs used in the production. • All are equivalent: Fundamental identity of National Accounting Example: Let's do some adding up Amount Income Expenditure Product workers owners Apple Farm Inc Sales/Turnover sales to public 500 + + sales to Apple Juice Inc 1500 + Operating Expenses wages paid 1000 + 1000 + Apple Juice Inc Sales/Turnover sales to public 3000 + + Operating Expenses wages paid 800 + cost of apples bought 1500-- 700 + 1800 1700 Total 3500 3500 3500 Profits=Sales-Oper Exp Profits=Sales-Oper Exp FNCE 101 - Hnatkovska - Lecture 2 Equivalence of the 3 approaches • Fundamental identity of national income accounting – Total production = total income = total expenditure • Any output produced ( product approach) is purchased by someone ( expenditure approach) and results in income to someone ( income approach) FNCE 101 - Hnatkovska - Lecture 2 8 In com e ( $ ) La bo r G o o ds ( b rea d ) E xp en ditu re ( $ ) H o u seh o ld s F irm s GDP: Expenditure approach • Production = Expenditures = Y = GDP...
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This note was uploaded on 10/26/2011 for the course ASDF 2342 taught by Professor 2adga during the Spring '11 term at Mansfield University of Pennsylvania.

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Lec2 - Finance 101 Monetary Economics& the Global...

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