Title: Measuring Economic Activity Gross domestic product (GDP).
1Measuring Economic Activity Gross domestic
product (GDP).
- The market value of goods and services produced
by labor and property in the United States,
regardless of nationality GDP replaced gross
national product (GNP) as the primary measure of
U.S. production in 1991.
2Line     2004   I    2004   II    2004   II    2004   III    2004   IV    2005   I
1       Gross domestic product 11,472.6 11,657.5 11,814.9 11,814.9 11,994.8 12,191.7
2 Personal consumption expenditures 8,060.2 8,153.8 8,282.5 8,282.5 8,423.3 8,542.8
3    Durable goods 976.3 975.5 1,007.0 1,007.0 1,017.0 1,023.6
4    Nondurable goods 2,316.6 2,354.6 2,387.2 2,387.2 2,449.7 2,490.0
5 Â Â Â Services 4,767.3 4,823.8 4,888.2 4,888.2 4,956.6 5,029.2
6 Gross private domestic investment 1,819.7 1,920.7 1,947.0 1,947.0 2,021.9 2,084.6
7    Fixed investment 1,783.5 1,861.7 1,915.4 1,915.4 1,975.3 2,015.2
8 Â Â Â Â Â Â Nonresidential 1,158.8 1,198.5 1,238.5 1,238.5 1,286.3 1,305.9
9 Â Â Â Â Â Â Â Â Â Structures 266.0 275.5 281.2 281.2 290.0 294.9
10          Equipment and software 892.8 923.1 957.3 957.3 996.3 1,011.0
11 Â Â Â Â Â Â Residential 624.6 663.2 677.0 677.0 688.9 709.3
12    Change in private inventories 36.2 59.0 31.6 31.6 46.7 69.4
13 Net exports of goods and services -546.8 -591.3 -611.8 -611.8 -674.8 -693.6
14 Â Â Â Exports 1,134.3 1,167.6 1,189.5 1,189.5 1,210.4 1,244.5
15 Â Â Â Â Â Â Goods 790.3 812.2 833.4 833.4 845.5 872.5
16 Â Â Â Â Â Â Services 344.1 355.4 356.1 356.1 365.0 372.0
17 Â Â Â Imports 1,681.2 1,758.9 1,801.2 1,801.2 1,885.2 1,938.1
18 Â Â Â Â Â Â Goods 1,399.2 1,470.1 1,506.9 1,506.9 1,587.2 1,632.9
19 Â Â Â Â Â Â Services 282.0 288.8 294.4 294.4 298.1 305.2
20 Government consumption expenditures    and gross investment 2,139.5 2,174.3 2,197.2 2,197.2 2,224.5 2,257.9
21 Â Â Â Federal 793.3 804.4 817.4 817.4 824.6 842.0
22       National defense 534.1 541.2 557.0 557.0 559.4 571.1
23 Â Â Â Â Â Â Nondefense 259.1 263.2 260.4 260.4 265.2 270.9
24    State and local 1,346.3 1,369.9 1,379.8 1,379.8 1,399.9 1,415.9
3National income
- A broader national level economic measure than is
personal income. National income includes
payments to individuals (income from wages and
salaries, and other income), plus payments to
government (taxes), plus retained income from the
corporate sector (depreciation, undistributed
profits), less adjustments (subsidies, government
and consumer interest, and statistical
discrepancy).
4Line     2004   I    2004   II    2004   III    2004   IV    2005   I
1 Gross domestic product 11,472.6 11,657.5 11,814.9 11,994.8 12,191.7
2 Plus Income receipts from the rest of    the world 373.8 388.0 406.8 454.7 457.7
3 Less Income payments to the rest of    the world 300.3 351.9 368.6 426.7 424.4
4 Equals Gross national product 11,546.1 11,693.6 11,853.0 12,022.8 12,225.0
5 Less Consumption of fixed capital 1,355.0 1,375.2 1,497.9 1,401.2 1,408.1
6 Â Â Â Â Â Â Â Â Â Â Â Â Private 1,132.4 1,148.1 1,266.8 1,165.7 1,167.9
7                Domestic business 936.4 948.8 1,021.8 962.3 963.6
8                   Capital consumption                      allowances 1,319.8 1,327.7 1,378.0 1,381.4 1,158.6
9                   Less Capital                      consumption adjustment 383.4 378.9 356.2 419.1 195.0
10                Households and                   institutions 196.0 199.4 245.1 203.5 204.3
11 Â Â Â Â Â Â Â Â Â Â Â Â Government 222.6 227.0 231.1 235.5 240.2
12                General government 187.2 190.8 194.0 197.4 201.0
13                Government enterprises 35.4 36.2 37.1 38.1 39.2
14 Equals Net national product 10,191.1 10,318.4 10,355.1 10,621.6 10,816.9
15 Less Statistical discrepancy 63.0 56.4 60.4 -52.1 -70.1
16 Equals National income 10,128.1 10,262.0 10,294.7 10,673.7 10,887.0
5Personal income
- Measures national level income to persons and
nonprofit corporations. Personal income includes
payments to individuals (income from wages and
salaries, and other income), plus transfer
payments from government, less employee social
insurance contributions
6Equals National income 10,128.1 10,262.0 10,294.7 10,673.7 10,887.0
Less Corporate profits with inventory    valuation and capital consumption    adjustments 1,165.6 1,173.9 1,118.0 1,268.8 1,326.3
         Taxes on production and             imports less subsidies 1 782.9 796.3 803.5 819.9 830.0
         Contributions for government             social insurance 803.9 814.0 826.9 845.4 868.0
         Net interest and             miscellaneous payments on assets 554.5 548.5 546.7 548.2 557.4
         Business current transfer             payments (net) 82.7 83.5 76.0 86.3 87.2
         Current surplus of government             enterprises 1 8.1 7.4 6.5 5.7 3.4
         Wage accruals less             disbursements 1.5 -1.5 0.0 0.0 0.0
Plus Personal income receipts on assets 1,337.1 1,352.3 1,367.8 1,491.9 1,416.3
         Personal current transfer             receipts 1,379.0 1,400.4 1,415.4 1,428.9 1,469.0
Equals Personal income 9,445.0 9,592.7 9,700.4 10,020.1 10,100.2
7Disposable personal income
- Measures the after-tax income of persons and
nonprofit corporations. It is calculated by
subtracting personal tax and nontax payments from
personal income.
8Issues
- GDP excludes non-market economic activity.
(Washing your car vs going to the car wash.) - GDP excludes illegal activity
- GDP doesnt count externalities
9Measuring Unemployment
- People with jobs are employed.
- People who are jobless, looking for jobs, and
available for work are unemployed. - People who are neither employed nor unemployed
are not in the labor force.
10Issues
- Who is counted as employed
- All persons who did any work for pay or profit
during the survey reference week. - All persons who did at least 15 hours of unpaid
work in a family-operated enterprise. - All persons who were temporarily absent from
their regular jobs because of illness, vacation,
bad weather, industrial dispute, or various
personal reasons. What about the underemployed?
11Who Is Unemployed?
- All persons who were not classified as employed
during the survey reference week, made specific
active efforts to find a job during the prior 4
weeks, and were available for work. - All persons who were not working and were waiting
to be called back to a job from which they had
been temporarily laid off - What about discouraged workers?
12Is Unemployment Bad?
- Almost everyone is unemployed at some point. It
takes time to match workers and employers.
Frictional unemployment is a term used to
describe those who are seeking work but who
havent yet found the right match. - Structural unemployment describes those who are
unlikely to find work because of some flaw in the
economy. - These are not precise terms and it can be hard to
distinguish
13Price Indices
- A price index such as the consumer price index
(cpi) compares the price of bundle of goods today
with the price of the same bundle in a base year.
As a matter of convention, the base year price
is always expressed as 100. - The inflation rate is the percentage change in
the index.
14Year Jan
1996 154.4
1997 159.1
1998 161.6
1999 164.3
2000 168.8
2001 175.1
2002 177.1
2003 181.7
2004 185.2
2005 190.7
2006 198.3
15Real v Nominal
- The Nominal value of some variable is simply the
actual dollar amount (e.g., GDP was about 12.5
trillion.) - The Real value of a variable is the nominal value
adjusted for inflation. That is - Real nominal/price index
16Issues
- How do you compare a standard bundle of goods
from one time with another? (e.g., computers
today and computers in 1980). - How do you deal with long lived assets (houses
are a huge problem). - How do you deal with the fact that people change
their consumption in response to changes in
prices?
17Cool Web Site
- http//data.bls.gov/cgi-bin/cpicalc.pl
18Is Inflation Bad?
- Does it matter if a clock is 10 minutes fast or
slow? - Inflation can do two bad things
- Reduce the value of monetary assets. (But this
can accomodated by various kinds of indexing) - Distort the information contained in prices
- This all means that we should distinguish
anticpated and unanticipated inflation.
19The Simplest (and maybe most misleading) Macro
Model
20Definitions
- Y total gross domestic product
- C Consumption
- G Government Expenditures
- T Tax
- I Investment Expenditure
21Assumptions
- C a b(Y-T) (b is the marginal propensity to
consume) - Y CIG (no international tradewell fix that
latter).
22Conclusion and Implications
- Y aIG-bT/(1-b)
- Multipliers (change in Y per unit change in G, I,
or T) - Investment and G 1/(1-b)
- Tax -b/(1-b)
23Complication
- I is almost certainly determined by a number of
factors, including the level of interest rates. - Thus, we need to think about how the actions of
the central bank influence the level of interest
(and also prices).