Economic Performance and Challenges Macroeconomics Economic Performance and Challenges
macroeconomics The study of economic behavior and decision-making in a nation’s whole economy
Explain how gross domestic product (GDP) is calculated Objectives Explain how gross domestic product (GDP) is calculated Interpret GDP Data Identify factors that influence GDP Describe other output and income
National Income Accounting Economic Measures National Income Accounting A system used to monitor the U..S. economy
National Income Accounting Economist use this system by collecting and organizing macroeconomic statistics on production, income, investment, and savings. The Department of Commerce then presents these data in the form of National Income Products and Accounts (NIPA). The government uses the NIPA data to determine economic policies
Gross Domestic Product
Gross domestic Product The most important measure of NIPA is GDP, the dollar value of all goods and services produced in a country’s borders in a given year
The Expenditure Approach Government economist calculate the GDP in two ways. In one method they use the expenditure approach, sometimes called the output expenditure approach. First, economist estimate the annual expenditure, or amounts spent, on four categories of final goods and services: Consumer goods Business goods and services Government goods and services Net exports
Expenditure Approach
Intermediate Goods Products used in the production of final goods
Durable Goods and Nondurable Goods
Income Approach This method calculates GDP by adding up all the incomes in the economy. The rationale for this approach is that when a firm sells a product or service, the selling price minus the dollar value of goods and services purchased from other firms represents income for all firms’s owners and employees.
INcome Approach
GDP Measured in current prices Two measures of gdp Nominal GDP GDP Measured in current prices Real GDP GDP expressed in constant , or unchanging prices
Nominal vs real gdp
What the gdp doesn’t measure Nonmarket Activities The Undergrown Economy Negative Externalities Quality of Life
Other Economic Measures
Factors that affect the gdp Aggregate Supply Aggregate Demand Aggregate Equilibrium
Aggregate supply The total amount of goods and services in the economy available at all price levels
Aggregate demand The amount of goods and services that will be purchased at all possibles price levels
Gross national product
Gross national product The annual income earned by a nation’s companies and people
depreciation The loss of the value of capital equipment that results from normal wer and tear
The End