...Macroeconomic Data Gross Domestic Product (GDP) Consumer Price Index (CPI) Unemployment rate Gross Domestic Product: Expenditure and Income Two definitions: Total expenditure in goods and services produced in a country Total income earned by productive factors in a country Expenditure equals income, since each dollar/euro spent by a consumer, is also the income of a producer Circular flow in the Economy Income Labor Households Firms Goods/Services Expenditure Value Added Value added of a firm is - The value of its good/service Minus - The value of the intermediate goods used to produce that good/service Exercise: A farmer grows a bushel of wheat and sells it to a miller for $1.00. The miller turns the wheat into flour and then sells the flour to a baker for $3.00. The baker uses the flour to make bread and sells the bread to an engineer for $6.00. The engineer eats the bread. What is the value added by each person? What is GDP? Solution 1. Farmer’s value added: 1,00 € 2. Miller’s VA: 2,00 € 3. Baker’s VA: 3,00 €. 4. GDP = 1 + 2 + 3 = 6 (sum of incomes) 5. GDP = Price of Bread! Final Goods, Value Added and GDP GDP = the total value of final goods and services produced. GDP = the total value added of all firms in the economy. The value of intermediate goods is already included as part of the market price of the final goods in which they are used. To add the intermediate goods to the final goods would be double counting. The Components of Expenditure Consumption...
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...words. |Term |Definition |Definition Source | |Gross Domestic |Gross Domestic Product |http://www.investopedia.com/terms/g/gdp.asp | |Product (GDP) |(GDP) is a way to measure| | | |how well a nation’s |Goss Domestic Product - GDP | | |economy is doing. This is| | | |the value of money after | | | |the goods and services | | | |are calculated during a | | | |certain time. | | |Real GDP |Real GDP is the whole |http://www.diffen.com/difference/Nominal_GDP_vs_Real_GDP | | |economical way to ...
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...To evaluate the Real Gross Domestic Product we must use the equation Normal Gross Domestic Product equals the quantity of products being sold multiplied by the base year's price, or NGDP=QxP. With this equation we can calculate for the base year first: 10 shirts x $20 would be $200, and 5 hamburgers x $5 would be $25. We would then combine the total price for the year which is $225. To get the real Gross Domestic Product for 2014 we would use the quantities from 2014 with the prices of 2013. This equation would be 15 shirts x $20 is $300, and 10 hamburgers at $5 is $50. The real Gross Domestic Product for 2014 would be $350. (Investopedia, 2015) In order to calculate the growth rate for the Gross Domestic Product we must use the equation: 2014 real Gross Domestic Product minus the 2013 real Gross Domestic Product divided by the 2013 real Gross Domestic Product. This would be $300-$225/$225=0.333. This would mean that the growth rate for the real Gross Domestic Product would be 0.333 percent. (Investopedia, 2015) Full employment does not actually mean every person in the country has a job. Full employment means that every member of the labor force that was actively seeking employment is now employed. This level of employment involves everyone except the chronically unemployed as well as members of the workforce that are now retired. The chronically unemployed include members of the workforce that are capable of working, but are unable to find a job due to not having the skills...
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...Nation’s Income Economics PRINCIPLES OF N. Gregory Mankiw Premium PowerPoint Slides by Ron Cronovich © 2009 South-Western, a part of Cengage Learning, all rights reserved In this chapter, look for the answers to these questions: What is Gross Domestic Product (GDP)? How is GDP related to a nation’s total income and spending? What are the components of GDP? How is GDP corrected for inflation? Does GDP measure society’s well-being? 1 Micro vs. Macro Microeconomics: The study of how individual households and firms make decisions, interact with one another in markets. Macroeconomics: The study of the economy as a whole. We begin our study of macroeconomics with the country’s total income and expenditure. MEASURING A NATION’S INCOME 2 Income and Expenditure Gross Domestic Product (GDP) measures total income of everyone in the economy. GDP also measures total expenditure on the economy’s output of g&s. For the economy as a whole, income equals expenditure because every dollar a buyer spends is a dollar of income for the seller. MEASURING A NATION’S INCOME 3 The Circular-Flow Diagram a simple depiction of the macroeconomy illustrates GDP as spending, revenue, factor payments, and income Preliminaries: Factors of production are inputs like labor, land, capital, and natural resources. Factor payments are payments to the factors of production (e.g., wages, rent). MEASURING...
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...Exercise 1 Chapter 7 GDP: Measuring Total Production and Income 7.1 Gross Domestic Product Measures Total Production 1) In May 2009, Ford Motor Company's sales were down 20 percent from a year earlier. These events were caused by A) an economic recession. B) an economic expansion. C) a reduction in advertising. D) declining quality of service. Answer: A Diff: 2 Page Ref: 613/209 Topic: The Business Cycle Objective: LO1: Explain how total production is measured. Special Feature: Chapter Opener: Ford Motor Company Feels the Effects of the Recession 2) During a business cycle expansion, total production ________ and total employment ________. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases Answer: A Comment: Recurring Diff: 1 Page Ref: 617/213 Topic: The Business Cycle Objective: LO1: Explain how total production is measured. AACSB: Reflective Thinking Special Feature: None 3) Macroeconomics, as opposed to microeconomics, includes the study of what determines the A) average price levels of goods and services in the economy. B) price charged for laptop computers by Dell. C) wages paid to employees by Dell. D) quantity of Dell employees. Answer: A Comment: Recurring Diff: 1 Page Ref: 614/210 Topic: Macroeconomics vs. Microeconomics Objective: LO1: Explain how total production is measured. AACSB: Reflective...
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...Exercise 1 Chapter 7 GDP: Measuring Total Production and Income 7.1 Gross Domestic Product Measures Total Production 1) In May 2009, Ford Motor Company's sales were down 20 percent from a year earlier. These events were caused by A) an economic recession. B) an economic expansion. C) a reduction in advertising. D) declining quality of service. Answer: A Diff: 2 Page Ref: 613/209 Topic: The Business Cycle Objective: LO1: Explain how total production is measured. Special Feature: Chapter Opener: Ford Motor Company Feels the Effects of the Recession 2) During a business cycle expansion, total production ________ and total employment ________. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases Answer: A Comment: Recurring Diff: 1 Page Ref: 617/213 Topic: The Business Cycle Objective: LO1: Explain how total production is measured. AACSB: Reflective Thinking Special Feature: None 3) Macroeconomics, as opposed to microeconomics, includes the study of what determines the A) average price levels of goods and services in the economy. B) price charged for laptop computers by Dell. C) wages paid to employees by Dell. D) quantity of Dell employees. Answer: A Comment: Recurring Diff: 1 Page Ref: 614/210 Topic: Macroeconomics vs. Microeconomics Objective: LO1: Explain how total production is measured. AACSB: Reflective...
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...between GDP & HDI Submitted ToCourse Instructor Of B-University of DhakaDepartment of Banking | Submitted ByMd. Yasir ArafatId No. 62B.B.A 13th BatchDepartment of BankingUniversity of Dhaka | Date of Submission08.o7.09 | Introduction to GDP A region's gross domestic product, or GDP, is one of the ways of measuring the size of its economy. The GDP of a country is defined as the total market value of all final goods and services produced within a country in a given period of time (usually a calendar year). It is also considered the sum of value added at every stage of production (the intermediate stages) of all final goods and services produced within a country in a given period of time. Components of GDP Each of the variables C (Consumption), I (Investment), G (Government spending) and X − M (Net Exports) (where GDP = C + I + G + (X − M) as above) C (Consumption) is private consumption in the economy. This includes most personal expenditures of households such as food, rent, medical expenses and so on but does not include new housing. I (Investment) is defined as investments by business or households in capital. Examples of investment by a business include construction of a new mine, purchase of software, or purchase of machinery and equipment for a factory. Spending by households (not government) on new houses is also included in Investment. In contrast to its colloquial meaning, 'Investment' in GDP does not mean purchases of financial products. Buying...
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...expenditure types represent the market value of goods and services. The expenditure approach to calculating gross domestic product for the nation, or GDP, uses these four expenditure categories as a measure of economic growth and activity. As these four expenditures go up, the economy expands and businesses of all sizes do better; as they go down, the economy contracts and businesses do worse (Amadeo, 2015). The total payment made by households on consumption goods and services is called consumption expenditures (C). Firms, however, do not sell all of their output to households. Some of what they produce is purchased by other firms. The purchase of new plants, equipment, buildings, new homes, and additions to inventories is called investment expenditures (I). In the national income accounts, buying a stock, or an antique car, or precious gems, or a piece of art is not investment. Government purchases of finished products of businesses and all direct purchases of resources are called government expenditures (G). The expenditure by the rest of the world on goods and services produced by domestic firms (exports) minus the US expenditures on goods and services produced by the rest of the world (imports) is called net exports (NX). Keywords: consumption, government, expenditures The Expenditure Approach The expenditure approach is to add up the market value of all domestic expenditures made on final goods and services in a single year. Final goods and services are goods...
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...and currency controls/transactions (US current policy is free/no control) * China restricts amount citizens can invest in foreign investments 12. Trade (protect home market or open export markets) 1/18/13 FX rate change depends on the strength of the currency Dealing with Euro and European debt crisis Diversification of portfolio Some of portfolio in Euro denominated bond. 1/23/13 * Decline of the dollar * Devaluation -> inflation * Expectations of devaluation * Purchasing Power Parity-Long Run * Increase imports price (demand inelastic-not sensitive to price) * Domestic producers increase prices * CPI * Interest rates – short run predictor * Real interest rates * Nominal interest rates with the rate of inflation * Negative real interest rate- * Macro policies 1. FX system 2. No controls 3. Trade 4....
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...GDP, Unemployment and Inflation (Chap 23, 24, and 28) 1. GDP measures two things at once: the total income of everyone in the economy and the total expenditure on the economy’s output of goods and services. 2. For the economy as a whole, Income=Expenditure (Every transaction has two parties: Buyer and Seller) 3. Definition of GDP (Gross Domestic Product): GDP is the market value of all final goods and services produced within a country in a given period of time. 4. Components of GDP (Y) : Consumption (C), Investment (I), Government purchases (G), Net exports (NX) Y = C + I + G + NX 5. Consumption refers to spending by households on goods and services. E.g. of goods are cars and appliances, E.g. of services are haircuts, medical care and education. [Some argue that education is under investment.] 6. Investment refers to the purchase of goods that will be used in the future to produce more goods and services. Sum purchase of capital equipment, inventories and structures. E.g. New housing. 7. Government purchase refers to spending on goods and services by the governments, e.g. salaries of government workers and spending on public works. 8. Net exports refer to purchases of domestically produced goods by the foreigners (Exports X) minus domestic purchase of foreign goods (Imports M). NX = X - M 9. Real GDP vs Nominal GDP a. Real GDP: Production of goods and services at constant prices i. Not affected by changes in prices [Changes...
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...Lecture 2: Basic Definitions • • • • GDP Inflation Rate Unemployment Rate Trade and Budget Deficits Gross Domestic Product • First thing we look at (its rate of growth) • Aggregate output: Not easy! – Sum of apples and oranges – Double-counting • Example A Simple Economy • Steel Company – Revenue from sales – Expenses (wages) – Profit $100 80 20 $210 $70 100 • Car Company – Revenue from sales – Expenses • Wages • Steel purchases – Profit 40 • What is this economy’s GDP? Calculating GDP • Method 1: GDP is the value of the final goods and services produced by the economy during a given period • Method 2: GDP is the sum of valued added produced…. • Method 3: GDP is the sum of incomes in the economy... Nominal vs Real GDP • Nominal GDP: sum of final goods produced times their current price – Growth due to quantity (production) – Growth due to prices • Real GDP: … times their base year price • Example (next trp.) • GDP Growth: (Y(t)-Y(t-1))/Y(t-1) Nominal vs Real GDP Year 0 Q Potatoes 100,000 Cars 10 Nominal GDP P $1 $10,000 Value 100,000 100,000 200,000 Year 1 Q Potatoes 100,000 Cars 11 Nominal GDP P $1.2 $10,000 Value 120,000 110,000 230,000 The Inflation Rate • More than one…. (P(t)-P(t-1))/P(t-1) • GDP deflator and CPI • GDP deflator = Nominal GDP / GDP – P0 = 1 – P1 = 230,000/210,000 = 1.1 (approx.) • NGDP growth = GDPg + Inflation (defl) • 15 5 10 • Why do we care? ...
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...Introduction: An economic indicator is simply any economic statistic, such as the unemployment rate, GDP, or the inflation rate, which indicate how well the economy is doing and how well the economy is going to do in the future. If a set of economic indicators suggest that the economy is going to do better or worse in the future than they had previously expected, they may decide to change their investing strategy. Economic indicators include various indices, earnings reports, and economic summaries. Examples: unemployment rate, quits rate, housing starts, Consumer Price Index (a measure for inflation), Consumer Leverage Ratio, industrial production, bankruptcies, Gross Domestic Product, broadband internet penetration, retail sales, stock market prices, money supply changes. Three Attributes of Economic Indicators 1. Relation to the Business Cycle / Economy Economic Indicators can have one of three different relationships to the economy: 1. Procyclic: A procyclic (or procyclical) economic indicator is one that moves in the same direction as the economy. So if the economy is doing well, this number is usually increasing, whereas if we're in a recession this indicator is decreasing. The Gross Domestic Product (GDP) is an example of a procyclic economic indicator. 2. Countercyclic: A countercyclic (or countercyclical) economic indicator is one that moves in the opposite direction as the economy. The unemployment rate gets larger as the economy gets worse so...
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...Ateneo de Zamboanga University School of Management and Accountancy Accounting Academic Organization Economics Requirement A Research Paper in Econ 112 (A) Prepared by: INTONG, Bryan O. CHIONG, Leo Anthony A. AGIAS, Juville Bryan RAMOS, Marie Christalene A. Submitted to: Henry A. Paňales Moderator April 26, 2014 I. Introduction A. MALAYSIA Malaysia’s economic freedom score is 69.6, making its economy the 37th freest in the 2014 Index. Its score is 3.5 points higher than last year, with impressive improvements in seven of the 10 economic freedoms including financial freedom, investment freedom, labor freedom, and business freedom. Malaysia is ranked 9th out of 42 countries in the Asia–Pacific region, and its overall score is above the world and regional averages. Over the 20-year history of the Index, Malaysia’s economic freedom score has declined by 2.3 points. Declines have been recorded in five of the 10 economic freedoms, including property rights, freedom from corruption, and investment freedom. Most notably, freedom from corruption has declined by over 25 points, undermining the rule of law. Over the past two decades, Malaysia’s economy has mostly been rated “moderately free.” Registering one of the 10 best score improvements in the 2014 Index, Malaysia has charted an upward trajectory of economic freedom for the past five years. It has undertaken wide-ranging reforms to address various structural weaknesses and improve competitiveness. Recent...
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...Definitions: Chapter 3 Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a given period of time. Real GDP is an example of the distinction between real vs. nominal values in economics. Nominal GDP is a gross domestic product (GDP) figure that has not been adjusted for inflation. Unemployment rate is the percentage of the total labor force that is unemployed but actively seeking employment and willing to work. Inflation rate is a measure of inflation or the rate of increase of a price index such as the consumer price index. Interest rate is the amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets. In our economy we have many different things that can affect it and how it is ran, did you know it just doesn’t affect the government, it affects households and businesses all around. Here I will describe to you how purchasing groceries, massive layoff of employees and decrease in taxes can affect all three just as much as the other one. Even though we know how these things can affect one mediate source, it affects all portions of our economy just as much as the other one. Some people may feel that when purchasing groceries, it will only affect the house hold it is going in along with the business that it was purchased from. However that isn’t the case, our government plays a huge part...
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... b. literacy c. average GDP Despite gains it has made on the economic front, the Philippines remained at 114th globally for the 5th straight year in the Human Development Index (HDI) released by the United Nations Development Program (UNDP) on Friday, March 15. The HDI is a key indicator of citizens' state of health, education, and income, among others. In the 2013 Human Development Report titled "The Rise of the South: Human Progress in a Diverse World," the UNDP said the Philippines' HDI score has been improving in the past 30 years. But its score -- 0.654 -- is still slightly below the East Asia and the Pacific regional average of 0.683. (A total of 186 countries were covered by the UNDP study.) Some data on the Philippines from the 2013 HDR include the following: * The life expectancy of Filipinos is 69 years old. * The mean years of schooling in the Philippines is 8.9 years while the expected years of schooling is 11.7 years. * The country's Gross National Income per capita level is $3,752 (computed using 2005 purchasing power parity) * The country ranked 77th overall in the Gender Inequality Index, the third lowest rank in the ASEAN. * Around 18.4% of the population lived below $1.25 in the 2011-2012 period. * Some 9.1% of the population is vulnerable to poverty while 5.7% are living in severe poverty. * Debt servicing was the highest public sector expense and accounts for 6.5% of Gross Domestic Product (GDP) in 2009. * The country's...
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