Economics

Viktor Ni, NIS 2013

Unit 12.1A: Money and financial institutions

Macroeconomic indicators

Макроэкономические показатели

Lesson objective

• Show awareness of key macroeconomic indicators: GDP;

• GNP; • NNP; • HDI; • inflation rate; • unemployment rate; and • trade position

Inflation rateGNP (Gross-National Product)

Net national product (NNP) Unemployment rate

Gross domestic product (GDP) Human Development Index (HDI)

Questions

1. What is it?2. Who is it used by?3. Why is it important?4. How do we calculate it?5. What does it mean?

Site:

• Economim.weebly.com

Part 1

GDP

Gross domestic product (GDP)

• the market value of all final goods and services produced within a country in a given period of time

“GDP Is the Market Value . . .”– GDP adds together many different kinds of products

into a single measure of the value of economic activity through market prices.

“. . . of All . . .”– It includes all items produced in the economy and sold

legally in markets. – excludes most items produced and sold illicitly (drags)

“. . . Final . . .”– When International Paper makes paper, which

Hallmark then uses to make a greeting card, the paper is called an intermediate good, and the card is called a final good. Incorrectly to count the paper twice.

Gross domestic product (GDP)

“. . . Goods and Services . . .”– GDP includes both tangible goods (food, clothing, cars) and

intangible services (haircuts, housecleaning, doctor visits)

“. . . Produced . . .”– GDP includes goods and services currently produced. It does

not include transactions involving items produced in the past.

“. . . Within a Country . . .”– GDP measures the value of production within the geographic

confines of a country. When a Canadian citizen works temporarily in the United States, her production is part of U.S. GDP.

– When an American citizen owns a factory in Haiti, the production at his factory is NOT part of U.S. GDP. (It is part of Haiti’s GDP.) Thus, items are included in a nation’s GDP if they are produced domestically, regardless of the nationality of the producer.

“. . . In a Given Period of Time.”- Usually, that interval is a year or a quarter (three months)- The GDP data reported in the news are always seasonally adjusted.

Quick Quiz

• Which contributes more to GDP—the production of a pound of hamburger or the production of a pound of caviar? Why?

http://quizlet.com/coolgirl7496/folders/mankiw

Answer

•A pound of caviar contributes more to GDP because it costs more than a pound of hamburger. The contribution to GDP is measured by market value and the price of a pound of caviar is much higher than the price of a pound of hamburger.

Formula of GDP

• GDP is divided into four components: consumption (C), investment (I), government purchases (G), and net exports (NX):

Y = C + I + G + NX.

Where to include: “Purchases of new housing”?

Y = C + I + G + NX

• consumption (C)• investment (I)• government purchases (G)• net exports (NX) (E-M)

Answer

• Consumption is spending by households on goods and services, with the exception of purchases of new housing.

• Investment - spending on capital equipment, inventories, and structures, including household purchases of new housing

• Government purchases (government consumption expenditure and gross investment) spending on goods and services by local, state, and federal governments

Counted:– The salary of an Army general or a schoolteacher

NOT Counted:– Social Security benefit to a person who is elderly or an

unemployment insurance benefit to a worker who was recently laid off (transfer payments)

• Because GDP is intended to measure income from, and expenditure on, the production of goods and services, transfer payments are not counted as part of government purchases.

• Net exports - spending on domestically produced goods by foreigners (exports) minus spending on foreign goods by domestic residents (imports)

• For example, suppose that a household buys a $30,000 car from Volvo, the Swedish carmaker. That transaction increases consumption by $30,000 because car purchases are part of consumer spending.

• It also reduces net exports by $30,000 because the car is an import.

• In other words, net exports include goods and services produced abroad (with a minus sign) because these goods and services are included in consumption, investment, and government purchases (with a plus sign).

• The Components of U.S. GDPTable 1 shows the composition of U.S. GDP in 2009. In this year, the GDP of the United States was over $14 trillion. Dividing this number by the 2009 U.S. population of 307 million yields GDP per person (sometimes called GDP per capita). In 2009 the income and expenditure of the average American was $46,372.

• Consumption made up 71 percent of GDP, or $32,823 per person. Investment was $5,278 per person. Government purchases were $9,540 per person. Net exports were –$1,269 per person. This number is negative because Americans spent more on foreign goods than foreigners spent on American goods.

These data come from the Bureau of Economic Analysis, the part of the U.S. Department of Commerce that produces the national income accounts. You can find more recent data on GDP at its website, http://www.bea.gov.

Part 2

GNP

Gross national product (GNP)• is the total income earned by a nation’s permanent

residents (called nationals).

• It differs from GDP by including income that our citizens earn abroad and excluding income that foreigners earn here.

• For example, when a Canadian citizen works temporarily in the United States, her production is part of U.S. GDP, but it is not part of U.S. GNP. (It is part of Canada’s GNP.)

• For most countries, including the United States, domestic residents are responsible for most domestic production, so GDP and GNP are quite close.

Соотношение ВВП и ВНП:

• Соотношение ВВП и ВНП описывается следующей формулой:

• ВНП = ВВП + Δ,

• где• Δ = (первичные доходы, полученные

резидентами за пределами экономической территории страны) — (первичные доходы, полученные нерезидентами на экономической территории страны); то есть сальдо обмена первичными доходами с остальным миром.

Кто включит в GDP, а кто в GNP?

Кто включит в GDP, а кто в GNP?

∆

Мы зарабатываем по программе “Work and Travel”

Иностранные учителя зарабатывают в НИШ

Интерпретация взаимосвязи ВВП и ВНП

• Если ВНП (ВНД) > ВВП — значит, жители данной страны получают за границей больше, чем иностранцы зарабатывают в данной стране.

• Если ВНП (ВНД) < ВВП — значит, иностранцы зарабатывают в данной стране больше, чем жители данной страны получают за границей.

Net national product (NNP)

• Net national product (NNP) is the total income of a nation’s residents (GNP) minus losses from depreciation.

• Depreciation is the wear and tear on the economy’s stock of equipment and structures, such as trucks rusting and computers becoming obsolete.

• In the national income accounts prepared by the Department of Commerce, depreciation is called the “consumption of fixed capital.”

Part 3

NNP and NDP

• Net national product (NNP) refers to gross national product (GNP), i.e. the total market value of all final goods and services produced by the factors of production of a country or other polity during a given time period, minus depreciation.[1]

• Similarly, net domestic product(NDP) corresponds to gross domestic product (GDP) minus depreciation.[2]

• Depreciation describes the devaluation of fixed capital through wear and tear associated with its use in productive activities.http://

en.wikipedia.org/wiki/Net_national_product

• In national accounting, net national product (NNP) and net domestic product (NDP) are given by the two following formulas:

NNP = GNP - Depreciation

NDP = GDP - Depreciation

Methods of depreciationStraight-line method:

Рассчитайте норму амортизационных отчислений (Residual Value) (линейным способом):Стоимость ноутбука: $1000Срок службы: 5 лет

Амортизация основных фондов

• это сумма амортизационных отчислений на полное восстановление элементов основных производственных фондов. Определяется она исходя из стоимости основных фондов и норм амортизационных отчислений.

Рассчитайте: GDP (ВВП) (по доходам и расходам), NNP (ЧНП)

Показатели Сумма млрд. у.е.Косвенные налоги 45Государственные закупки 60Потребление домохозяйств 361Валовая прибыль корпораций 103Чистые инвестиции 81Трансферты (субвенции) 35Амортизация 100Заработная плата 202Доход от собственности 146Экспорт 42Импорт 48

• СУБВЕНЦИЯ - вид денежного пособия государства местным органам власти.В отличие от дотации СУБВЕНЦИЯ предоставляется на финансирование определенного мероприятия и подлежит возврату в случае нарушения ее целевого использования.

Part 4

HDI

• The Human Development Index (HDI) is a composite statistic of life expectancy, education, and income indices used to rank countries into four tiers of human development.

HDI1. Life Expectancy Index (LEI)

2. Education Index (EI)

• 2.1 Mean Years of Schooling Index (MYSI) [7]

• 2.2 Expected Years of Schooling Index (EYSI) [8]

3. Income Index (II)

• Найдите данные по Казахстану и позицию в рейтинге стран:– GDP– GNP– NNP– HDI– Unemployment

Homework

Answers:

Про Work and Travel: • Америка в GDP • Казахстан в GNP

Иностранные учителя:• Америка в GNP• Казахстан в ВВП

Next lesson

Real versus Nominal GDP