Introduction to Introduction to macroeconomics and national macroeconomics and national

income accountingincome accounting

22

JOIN KHALID AZIZJOIN KHALID AZIZ

ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, B.COM.B.COM.FINANCIAL ACCOUNTING OF ICMAP STAGE FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4 ICAP MODULE B, B.COM, BBA, MBA & 1,3,4 ICAP MODULE B, B.COM, BBA, MBA & PIPFA.PIPFA.COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP MODULE D, BBA, MBA & PIPFA.MODULE D, BBA, MBA & PIPFA.

CONTACT:CONTACT:0322-33857520322-33857520312-23028700312-2302870R-1173,ALNOOR SOCIETY, BLOCK R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA, KARACHI, PAKISTAN.19,F.B.AREA, KARACHI, PAKISTAN.

33

JOIN KHALID AZIZJOIN KHALID AZIZ

Crash Classes of ICMAPCrash Classes of ICMAP

Stage 1. Fundamentals of Financial Stage 1. Fundamentals of Financial AccountingAccounting

Stage 2. Cost AccountingStage 2. Cost Accounting

In Just 20 Classes.In Just 20 Classes.

44

Macroeconomics is ...Macroeconomics is ...

the study of the economy as a wholethe study of the economy as a whole

it deals with broad aggregatesit deals with broad aggregates

but uses the same style of thinking about but uses the same style of thinking about economic issues as in microeconomics.economic issues as in microeconomics.

55

Some key issues in macroeconomicsSome key issues in macroeconomics

InflationInflation

– the rate of change of the general price levelthe rate of change of the general price level

UnemploymentUnemployment

– a measure of the number of people looking for work, a measure of the number of people looking for work,

but who are without jobsbut who are without jobs

OutputOutput

– real gross national product (GNP) measures total real gross national product (GNP) measures total

income of an economyincome of an economy

it is closely related to the economy's total outputit is closely related to the economy's total output

66

More key issues in macroeconomicsMore key issues in macroeconomics

Economic growthEconomic growth– increases in real GNP, an indication of the increases in real GNP, an indication of the

expansion of the economy’s total outputexpansion of the economy’s total output

Macroeconomic policyMacroeconomic policy– a variety of policy measures used by the a variety of policy measures used by the

government to affect the overall performance government to affect the overall performance of the economyof the economy

77

Inflation in the UK, 1950-99Inflation in the UK, 1950-99

0

5

10

15

20

25

30

% p

.a.

Source: Economic Trends Annual Supplement, Labour Market Trends

88

Inflation in selected European countriesInflation in selected European countries

0 1 2 3 4 5

% change 1998 compared with 1997

Greece

Portugal

Italy

Spain

UK

Finland

EU

Belgium

France

Germany

99

Inflation in UK, USA and GermanyInflation in UK, USA and Germany

0

2

4

6

8

10

12

14

16

% p

.a.

1960-73 1973-81 1981-90 1990-98

UK USA Germany

1010

Unemployment in the UK, 1950-99Unemployment in the UK, 1950-99

0

2

4

6

8

10

12

14

% p

.a.

Source: Economic Trends Annual Supplement, Labour Market Trends

1111

UnemploymentUnemploymentin selected European countriesin selected European countries

0 5 10 15 20

% unemployment (ILO measure) 1998

Greece

Portugal

Italy

Spain

UK

Finland

EU

Belgium

France

Germany

1212

UnemploymentUnemploymentin UK, USA and Germanyin UK, USA and Germany

0

2

4

6

8

10

% p

.a.

1960-73 1973-81 1981-90 1990-98

UK USA Germany

1313

Economic growthEconomic growthin UK, USA and Germanyin UK, USA and Germany

0

1

2

3

4

5

% p

.a.

1960-73 1973-81 1981-90 1990-98

UK USA Germany

1414

The circular flow of income, The circular flow of income, expenditure and outputexpenditure and output

Y

Households Firms

C + I

I

CS

1515

Government in the circular flowGovernment in the circular flow

Y

C + I + G

I

CS

Households FirmsGovernment

C + I + G - Te

Te

G

B - Td

Y + B - Td

1616

Adding the foreign sectorAdding the foreign sector

To incorporate the foreign sector into the To incorporate the foreign sector into the circular flowcircular flow

we must recognize that residents of a we must recognize that residents of a country will buy imports from abroadcountry will buy imports from abroad

and that domestic firms will sell (export) and that domestic firms will sell (export) goods and services abroad.goods and services abroad.

1717

GDP and GNPGDP and GNP

Gross domestic product (GDP)Gross domestic product (GDP)– measures the output produced by factors of measures the output produced by factors of

production located in the domestic economyproduction located in the domestic economy

Gross national product (GNP)Gross national product (GNP)– measures the total income earned by measures the total income earned by

domestic citizensdomestic citizens

GNP = GDP + net income from abroadGNP = GDP + net income from abroad

1818

Three measures of national outputThree measures of national output

ExpenditureExpenditure– the sum of expenditures in the economythe sum of expenditures in the economy– Y = C + I + G + X - ZY = C + I + G + X - Z

IncomeIncome– the sum of incomes paid for factor servicesthe sum of incomes paid for factor services– wages, profits, etc.wages, profits, etc.

OutputOutput– the sum of output (value added) produced in the sum of output (value added) produced in

the economythe economy

1919

National income accounting: a summaryNational income accounting: a summary

GNP(andGNI)

atmarketprices

GDPat

marketprices

NYA

C

X - Z

I

NYA

G

NNPat basicprices

Deprec'n

Nationalincome

Indirect taxes

Wagesand

salaries

Self-employment

Profits,rents

2020

What GNP does and does not measureWhat GNP does and does not measure

Some care is needed:Some care is needed:– to distinguish between to distinguish between realreal and and nominalnominal

measurementsmeasurements– to take account of population changesto take account of population changes– to remember that GNP is not a to remember that GNP is not a

comprehensive measure of everything that comprehensive measure of everything that contributes to economic welfarecontributes to economic welfare

2121

JOIN KHALID AZIZJOIN KHALID AZIZ

ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, B.COM.B.COM.FINANCIAL ACCOUNTING OF ICMAP STAGE FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4 ICAP MODULE B, B.COM, BBA, MBA & 1,3,4 ICAP MODULE B, B.COM, BBA, MBA & PIPFA.PIPFA.COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP MODULE D, BBA, MBA & PIPFA.MODULE D, BBA, MBA & PIPFA.

CONTACT:CONTACT:0322-33857520322-33857520312-23028700312-2302870R-1173,ALNOOR SOCIETY, BLOCK R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA, KARACHI, PAKISTAN.19,F.B.AREA, KARACHI, PAKISTAN.