GDP

1
GDP
2
Economic Performance

• Predict
• Study current and past information
• Macroeconomists study National income and product
  accounts (NIPA)
• Track production, income and consumption
• National income accounting

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Measuring Economic Production

• Total production measure of economys strength
• NIPA most used is GDP
• Total dollar value of all final goods and
  services produced within a country during one year

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Component one Final output

• Avoid counting more than once
• Tree to lumber, lumber to furniture store, turn
  into a table Final good

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Component two Current year

• Used cars and secondhand clothing not counted
• Sales in current year for the first time

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Component three Output within National borders

• Regardless of who produces, only counts within
  the nation
• Does include foreign workers in the U.S.

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Output expenditure model

• Personal consumption, gross investment,
  government purchases and net exports
• CIG(X-M)GDP

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Personal Consumption Expenditures

• Consumer purchases
• Durable goods, nondurable goods and services
• Durable last longer than a year

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Investment

• Real investments
• Capital goods produced
• In nation, within one year
• Changes in dollar value of business inventories
• Fixed investment and inventory investment
• F.I.-buildings machinery
• I.I.-raw materials
• NOT stocks, bonds and land

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Government purchases

• Federal, state and local governments spending
• Highways, education and defense
• Transfer payments not included

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Net Exports

• Exports minus imports

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Adjusting for price increases

• Nominal GDP current GDP, expressed in prices of
  the period being measured
• Real GDP adjusted for price changes
• Price index used
• Base year assigned index number of 100
• Calculate

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Limits

• Accuracy and timeliness of data
• Nonmarket activities
• Underground economy

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Other National Income and Product Accounts

• GNP
• Net National Product
• National Income
• Personal Income
• Disposable personal income