1. Introduction to Agricultural and Natural Resources
Overview of Macroeconomics
FREC 150
Dr. Steven E. Hastings

2. Overview of Macroeconomics
Major Topics
Definition
Circular Flow of Income (Again)
Macroeconomic Indicators
National Income Accounts
Summary: Where are We Going?
Macroeconomics
Stock Market
Food and Fiber System

3. Overview of Macroeconomics
Macroeconomics focuses on the “Circular Flow of Income, Resources and Products” as a whole, not individual entities (firms, consumers, etc.)
Macroeconomics focuses on broad aggregates such as GDP, unemployment and inflation. Penson et al. 2009
“Macroeconomists study aggregated indicators such as GDP, unemployment rates, and price indices to understand how the whole economy functions.”

4. Macroeconomics: How do we measure, analyze and influence this?
Figure Penson

5. Macroeconomic Indicators
Many, many macroeconomic indicators (measures) exist – 1,000’s!
Socioeconomic Indicators:
Population (
Income (

6. Economic Indicators: - Consumer Price Index unemployment rates
interest rates
stock prices
WSJ, Market Data Center
- Consumer Price Index

7. Consumer Confidence
CCI, Wikipedia

9. National Income and Product Accounts
A national accounting system (much like a business would use) started in the 1930’s (post-Depression) to measure and monitor the value of economic activity in the U. S. economy.
Viewed the economy much like a business.
Focused on income, expenditures and products produced.
Continually modified and improved.

10. National Income Acounts
Most important measure -
Gross Domestic Product (GDP) – a single dollar value of the total of all goods and services produced in the United States whether by domestic or foreign resources.
A measure of growth in the economy and a basis for other measures.

11. Page 226

12. Ways to measure GDP
There are 2 ways to measure GDP – provides a system of “check and balances”
Expenditure Method – looks at product markets - the sum of all sales of goods and services in the economy.
GDP = Consumption + Investment + Gov’t Expenditures + (Exports – Imports)
Very famous equation!

13. Page 226
We can measure macro economic activity in either resource markets or product markets. Result is the same…

14. United States’ GDP

16. Figure 12–4
Page 229
As a point of reference, real GDP fell by 8.5%, 6.5% and 12.9% annually over the 1930–1932 period.

17. Both way produce the same number!
Income Method – looks at resource markets - the sum of all expenditures on resources in the economy.
GDP = Employee compensation + Corporate profits + Proprietor's Income + Rental income + Net Interest
Both way produce the same number!

18. Page 226
National income = GDP

19. Nominal vs. Real GDP
National Accounts are measures in dollars, but the dollar “value” (the things that can be purchased with a dollar) changes – called, inflation or deflation.
Thus, “nominal values” must be adjusted (usually, deflated) to determine “constant” or “real” values.
“Constant” is outdated; government now used “Chained”
Concept is the same, adjust for inflation; methodology is different.
Bottom line, it is important to distinguish between real and nominal values when making comparisons over time.

20. Examples of Inflation
<< 2004

21. UD Tuition and Fees – Fall 2011
Source: UD Brochure , 2011
2015 – 2016: $25,000 and $44,000!!!!

22. UD Tuition and Fees – Fall 1968
Source: UD Undergraduate Catalog,
Keep in mind that the Minimum Wage was $1.15!

23. How much is U.S. GDP? Other Countries?
Web Sites from the Reading List
Macroeconomic Analysis
Overview of the U. S. Economy: Perspective from the BEA Accounts
ERS/USDA International Macroeconomic Data Set
List of Countries by GDP (nominal)

24. Related Measures in the National Income Accounts
Basis for a series of related measures:
Gross National Product
Net National Product and Net National Income
Personal Income and Disposable Personal Income
See the U.S. Statistical Abstract

25. Table 12–2 GDP: What's In and What's Not

26. Issues with GDP Problems - depend on the purpose: GDP includes:
pollution control – pollute a river, clean it up and increase GDP!
clean up from natural disaster -
war expenditures – go to war and increase GDP!

27. Issues with GDP GDP excludes:
leisure activities – a nice walk or bike ride!
volunteerism
income distribution considerations
private transactions (bartering)
Gross Domestic Product (GDP) as a Measure of Welfare/Growth/Development

28. Summary
Macroeconomic is concerned with the performance of our overall economy.
Our economy is measured and monitored via a series of socioeconomic and economic indicators.
Where are we going?
Macro> Stock Market> Food and Fiber System