lecture 2 the data of macroeconomics, macroeconomic accounts 1 1.measuring the value of economic...

Lecture 2The Data of Macroeconomics,Macroeconomic Accounts

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1. Measuring the Value of Economic Activity: GDP

2. Measuring the Cost of Living: The CPI

3. Measuring Joblessness: The Unemployment rate

Lecture 2 The Data of MacroeconomicsMacroeconomic Accounts

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Why GDP is important?

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Lecture 2 The Data of MacroeconomicsMacroeconomic Accounts

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Lecture 2 The Data of MacroeconomicsMacroeconomic Accounts

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Lecture 2 The Data of MacroeconomicsMacroeconomic Accounts

Flow variables: GDP, income, expenditure, # of people losing their jobs, budget deficit

Stock: variables: wealth, # of unemployed people, government debt, international reserves

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Lecture 2 The Data of MacroeconomicsMacroeconomic Accounts

Rules for Computing GDP

• The treatment of inventories

• Adding different types of goods

• Used goods

• Intermediate goods and value added

• Imputation

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Lecture 2 The Data of MacroeconomicsMacroeconomic Accounts

Real and nominal GDP

The GDP deflator

Chain-weighted measures of real GDP

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Euro area: annual rates of growth

Nominal GDP Real GDP GDP deflator

1997 2.2 2.6 -0.41998 3.9 2.9 1.01999 4.6 3.1 1.52000 5.2 4.0 1.32001 4.3 2.0 2.42002 3.5 0.9 2.62003 2.9 0.8 2.12004 4.0 2.1 1.92005 3.4 1.5 1.92006 4.6 2.8 1.8

Lecture 2 The Data of MacroeconomicsMacroeconomic Accounts

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Lecture 2 The Data of MacroeconomicsMacroeconomic Accounts

The Components of Expenditure

Y = C + I + G + NX

• Output i.e. GDP (Y)

• Consumption (C)

• Investment (I)

• Government purchases (G)

• Net exports (NX)

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Lecture 2 The Data of MacroeconomicsMacroeconomic Accounts

Components of GDP(1999-2006, % of GDP)

Consumption (C) Investment (I) Government

purchases (G)

Australia 58.3 25.2 18.1Germany 58.9 18.6 19.0France 56.3 19.8 23.4UK 64.7 17.7 20.5

Italy 59.2 20.7 19.5Japan 57.0 24.0 17.6Canada 56.0 20.6 19.2Switzerland 60.3 22.0 11.5

USA 69.7 19.5 15.4Euro Area 57.1 20.9 20.3

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Lecture 2 The Data of MacroeconomicsMacroeconomic Accounts

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Lecture 2 The Data of MacroeconomicsMacroeconomic Accounts

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Personal disposable

income

Personal incomeNational

income

NDPGDP

C

Indirect taxes

Depreciation

I

G

X-Z

GDP and Its Components

Lecture 2 The Data of MacroeconomicsMacroeconomic Accounts

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Other Measures of Income

Gross National Product

Net National Product

National Income

Personal Income

Disposable Personal Income

Lecture 2 The Data of MacroeconomicsMacroeconomic Accounts

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Lecture 2 The Data of MacroeconomicsMacroeconomic Accounts

Inflation

The Consumer Price Index

The GDP Deflator

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Lecture 2 The Data of MacroeconomicsMacroeconomic Accounts

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Lecture 2 The Data of MacroeconomicsMacroeconomic Accounts

The Unemployment Rate

• Employed

• Unemployed

• Labor Force

• Unemployment Rate

• Labor Force Participation Rate

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Lecture 2 The Data of MacroeconomicsMacroeconomic Accounts

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Lecture 2 The Data of MacroeconomicsMacroeconomic Accounts

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Lecture 2 The Data of MacroeconomicsMacroeconomic Accounts

From Economic Statistics to Economic Models