1. NATIONAL ACCOUNT SYSTEM (NAS)
Measures the economic activity of the Nation with a double-entry accounting (debit and credit) :
Production account (GDP)
Income account (wages...)
Expenditure account (consumption, savings)
Inflation, unemployment.

2. GDP : a child of the Great Depression
Hoover and Roosevelt had
incomplete datas to make
a decision.
Simon Kuznets ( ) was asked to help the U.S. Department of Commerce to standardize the measurement of GNP

3. GROSS DOMESTIC PRODUCT (GDP)
The total market value of all final goods and services produced within a given period by factors of production located within a country.
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.

4. THE AGENT
In economics, an agent is an actor, a decision maker in a model.
Individuals, households, firms, government, countries...

5. Circular flow : input = output

6. But this distinction is not as clear as that :
Goods and services
In economics outputs are divided in tangible goods and intangibles services.
But this distinction is not as clear as that :
Many things are mixed.

7. Transfer payments (=redistribution of income)
EXCEPTIONS
Important exception : Government productions are not sold on the market. GDP uses their cost.
Intermediate goods
Transfer payments (=redistribution of income)
Used goods

8. Consumer goods or intermediate goods
Consumer goods are produced for the mass market (≠Final goods which include for instance antics or investment assets)
Intermediate goods (or producer goods) are used to produce another good. They are not counted in GDP. Half of them are services.

9. Intermediate goods
Sugar is NOT counted if bought by your favourite pastry shop.
However if you cook a pie and buy sugar, it is counted as final good.

10. GDP ranking (nominal)2011 list by the IMF
Country
GDP (millions of USD)
World
European Union 1
USA 2
China 3
Japan 4
Germany 5
France 6
United Kingdom

11. GDP vs GNP (Gross National Product)
GNP : The total market value of all final goods or services produced within a given period by factors of production owned by a contry's citizens, regardless of where the output is produced.

12. Determining GDP : expenditure or income approach
Expenditure approach : measures the total amount spent on all final goods and services
GDP = private consumption + gross investment + government spending + (exports − imports)
Income approach : measures the income, wages, rents, interest and profits received by all factors of production in producing final goods and services

13. The value added approach
PARTICIPANTS
COST OF MATERIALS
VALUE OF SALES
VALUE ADDED
FARMER
100
CAKE FACTORY
250
150
MIDDLEPERSON
400
VENDOR
500
TOTAL
750
1250

14. Intermediate goods – Final goods
This distinction is important to avoid double counting
GDP sums up the value added at each stage of production

15. Capital goods = final goods
Capital good = means of production
Inventory change : depreciation must be counted in GDP

16. Y = C + I + G + (X - Imp.)

17. NET NATIONAL INCOME
NNI = C + I + G + (NX) + net foreign factor income - indirect taxes - depreciation
Where:
C = Consumption
I = Investments
G = Government spending
NX = net exports (exports minus imports)

18. Composition of GDP

19. Composition of GDP
gdp/

20. Composition of GDP by sectors
France : : agriculture: 1.7%
industry: 18.8%
services: 79.4%
China : agriculture: 10.3%
industry: 46.3%
services: 43.4%
(2009 est. CIA world factbook)

21. Factors shares in french corporate sector
Source : Piketty (2001) : Income Inequality in France

22. Who makes the 451 parts of an iPod ?
The researchers estimated that $163 of the iPod's $299 retail value in the United States was captured by American companies and workers, breaking it down to $75 for distribution and retail costs, $80 to Apple, and $8 to various domestic component makers. Japan contributed about $26 to the value added (mostly via the Toshiba disk drive), while Korea contributed less than $1.

23. A (short) quizz
Where does eBay (or an antique shop) get counted in the GDP ?
And the Stock Exchange ?
What about business inventories changes ?

24. Nominal GDP / Real GDP
Nominal GDP is the Gross Domestic Product measured in current dollars (the current price that we pay for goods and services)
Real GDP is measured with an adjustment to prices changes (inflation, déflation), using constant prices.

25. NOMINAL GDP vs REAL GDPGDP DEFLATOR
Because prices and exchange rates change, the same output can give very different nominal GDP.
GDP deflator : nominal GDP / real GDP X 100

26. 2006
2007
qty
price
Cars 10
2000 12
3000
Computers 4
1000 6
500
Oranges 1
Use the prices for 2006 as the set of common prices and tell the real GDP for 2006 and 2007.
2006 real (2006) GDP: $25, real (2006) GDP: 12($2,000)+6($1,000)+1000($1)=$31,000 Real (2006) GDP has increased by 24%.

27. 2006
2007
qty
price
Cars 10
2000 12
3000
Computers 4
1000 6
500
Oranges 1
Use the prices for 2007 as the set of common prices and tell the real GDP for 2006 and 2007.
2006 real (2007) GDP: 10($3,000)+4($500)+1,000($1)=$33, real (2007) GDP: $40, Real (2007) GDP has increased by 21.2%.

28. 2009 : STIGLITZ-SEN-FITOUSSI COMMISION
Limitation of the GDP concept : GDP does not measure well-being or social welfare.
2009 : STIGLITZ-SEN-FITOUSSI COMMISION

29. OTHER THINGS TO KNOW ABOUT GDP Purchasing Power Parity (PPP) Underground economy (in USA it is estimated to be 13%) Tax heaven Per capita GDP

30. FDI in India by country of origin1991 - 2007
Source : Reserve Bank of India In China more than 50 % of FDI comes from HK and British Virgin Island

31. Distinctions must be kept in mind between quantity and quality of growth, between costs and returns, and between the short and long run. Goals for more growth should specify more growth of what and for what.
Kuznets (1962)