Lecture 2 Measuring Macroeconomic Data

Lecture 2 Measuring Macroeconomic Data - 1 2-1 Measuring...

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Unformatted text preview: 1 2-1 Measuring Macroeconomic Data 2-2 Agenda 1. Measuring Economic Activity 2. Measuring Inflation 3. Measuring Unemployment 4. Measuring Interest Rates 2-3 Measuring Economic Activity The national income and product accounts are an accounting framework used to measure economic activity and its components. 2-4 National Income Accounting Three different approaches: 1. Product approach : the dollar amount of output produced . 2. Expenditure approach : the dollar amount spent by purchasers. 3. Income approach : the dollar incomes earned by production. 2 2-5 National Income Accounting Thus, the fundamental identity of national income accounting is: Total Production Total Expenditure Total Income 2-6 The Product Approach to GDP GDP (G ross D omestic P roduct) is: 1. The current market value of all 2. final goods and services 3. newly produced 4. in the domestic economy during a 5. specified period of time 2-7 The Product Approach to GDP 1. Market value : allows adding together unlike items by valuing them at their market prices. a. Imputed values are used for some nonmarket goods and services. b. Most nonmarket goods and services are not included. c. Some market goods and services are not included. 2-8 The Product Approach to GDP 2. Final goods and services : those goods and services that are NOT completely used up in the production process. Intermediate goods and services are those completely used up in the production of other goods and services in the same period that they themselves were produced. Adding up value added works because it automatically excludes intermediate goods. 3 2-9 The Product Approach to GDP 2. Final goods and services: Two caveats a. Capital goods are used to produce other goods and are treated as final goods because they are not completely used up in the same period that they are produced. b. Inventory investment the amount that inventories of unsold finished goods, goods in process, and raw materials have changed during the periodis also treated as a final good. 2-10 The Product Approach to GDP 3. Newly produced : counts only things produced in the specified period of time. 2-11 The Product Approach to GDP 4. In the domestic economy : counts only goods and services produced within the geographical boundaries of the country. 2-12 The Product Approach to GDP 5. Specified period of time : because GDP is a flow concept, it must be measured during a specified period of time. a. Flows represent an amount per unit of time . b. Stocks represent an amount at a particular point in time . 4 2-13 The Expenditure Approach to GDP GDP (Gross Domestic Product) is also: 1. The total spending on all 2. final goods and services produced 3. within the domestic economy during a 4. specified period of time 2-14 The Expenditure Approach to GDP Four main categories of spending: 1. Consumption1....
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Lecture 2 Measuring Macroeconomic Data - 1 2-1 Measuring...

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