Lecture 2 GDPandtheMainIndicators oftheNationalAccounts Lecture 2:

Lecture 2 GDPandthe. Main. Indicators ofthe. National. Accounts

Lecture 2: GDPandthe. Main. Indicators ofthe. National. Accounts 1. GDPandthe. Waysof. Its. Measuring. 2. GNPandthe. Other. Indicators. Usedin. National Accounts 3. Nominal&Real. GDP. The. Priceindexes.

Lecture 2: GDPandthe. Main. Indicators ofthe. National. Accounts Depreciation – амортизація Net Indirect Taxes – непрямі податки Social Insurance Premium – внески на соціальне страхування Earned Surplus of Corporations – нерозподілений прибуток корпорацій Income Tax – прибутковий податок Corporate Income Tax – податок на прибуток корпорацій Net Factor Income From Abroad – чистий факторний прибуток з-за кордону

Lecture 2: GDPandthe. Main. Indicators ofthe. National. Accounts The gross domestic product (GDP) or gross domestic income (GDI) isameasureofacountry’s overallofficialeconomicoutput. Itisthemarketvalue ofallfinalgoodsandservicesofficiallymadewithin thebordersofacountryinayear. Itisoftenpositivelycorrelatedwiththe standard of living , thoughitsuseasastand-informeasuringthe standardoflivinghascomeunderincreasing criticismandmanycountriesareactivelyexploring alternativemeasuresto. GDPforthatpurpose.

Lecture 2: GDPandthe. Main. Indicators ofthe. National. Accounts GDPcanbe determined in three ways , allofwhich shouldinprinciplegivethesameresult. Theyarethe industrial (oroutput) approach , the income approach , andthe expenditure approach. 1. Expenditure approach Y = C + I + G + (X − M) GDP (Y) isasumof. Consumption( C ), Investment( I ), Government. Spending( G )and. Net. Exports( X — M ).

Lecture 2: GDPandthe. Main. Indicators ofthe. National. Accounts 2. Income approach GDP = R + I + P + SA + W here R: rents I: interests P: profits SA: statisticaladjustments(corporateincometaxes, dividends, undistributedcorporateprofits, depresiation, indirecttaxes ) W: wages Notethemnemonic, » ripsaw «.

Lecture 2: GDPandthe. Main. Indicators ofthe. National. Accounts 3. Industrial Approach (accordingtovalueadded) GDP = total sum of values added Totalvalueadded=totallevelofoutput-totalvalueof intermediateproducts Note that all three counting methods should in theory give the same final figure. However, inpracticeminordifferencesareobtained fromthethreemethodsforseveralreasons, includingchangesin inventorylevelsanderrorsinthestatistics. Oneproblemforinstanceis thatgoodsininventoryhavebeenproduced(thereforeincludedin Product), butnotyetsold(thereforenotyetincludedin. Expenditure).

Lecture 2: GDPandthe. Main. Indicators ofthe. National. Accounts IMF 2008 estimates (internationaldollars) GDP (PPP) Per Capita 50. 000+ 30. 000 10. 000 Gross domestic product per capita is the mean value of the output produced person, which is also the mean income. 1.

Lecture 2: GDPandthe. Main. Indicators ofthe. National. Accounts Gross National Product GDPcanbecontrastedwith gross national product (GNP). GDPis productproducedwithinacountry’sborders; GNPisproductproduced byenterprisesownedbyacountry’scitizens. Grossnationalproduct(GNP)equals. GDPplusincomereceiptsfrom therestoftheworldminusincomepaymentstotherestoftheworld. GDP = GNP + NFIA (net factor income from abroad)

Lecture 2: GDPandthe. Main. Indicators ofthe. National. Accounts The Net Domestic Product «Net» means «Gross» minus theamountthatmustbeusedtooffset depreciation –ie. , wear-and-tearorobsolescenceofthenation’sfixed capitalassets. «Net»givesanindicationofhowmuchproductisactually availableforconsumptionornewinvestment. The NDP isdefinedasthe. GDPlesscapitalconsumption. NDP = GDP – Depreciation National Income National income isaneconomicstermencompassedtheincomeof households, businesses, andthegovernment. National income (NI) = NDP – Net Indirect Taxes

Lecture 2: GDPandthe. Main. Indicators ofthe. National. Accounts Private Income Private income isanytypeofincomereceivedbyaprivateindividual orhousehold, oftenderivedfromoccupationalactivities. PI = NI – Social Insurance Premium – Earned Surplus of Corporations – Corporate Income Tax + Transfer Payments Disposable Income (Personal) Disposable Income – themoneyapersonhasavailableto spendafterpayingtaxes, pensioncontributions, etc. DI = PI – Income Tax

Lecture 2: GDPandthe. Main. Indicators ofthe. National. Accounts Ineconomics, nominalvaluereferstoavalueexpressed inmoneyoftheyear, asopposedtorealvalue, which adjustsfortheeffectofinflationonthenominalvalue. Inmostsystemsofnationalaccountsthe. GDPdeflator measurestheratioof nominal GDP tothe real measure of GDP. Theformulausedtocalculatethedeflatoris: Dividingthenominal. GDPbythe. GDPdeflatorand multiplyingitby 100 wouldthengivethefigureforreal GDP, hencedeflatingthenominal. GDPintoareal measure.

Lecture 2: GDPandthe. Main. Indicators ofthe. National. Accounts A consumer price index (CPI) measureschangesthrough timeinthepricelevelofconsumergoodsandservices purchasedbyhouseholds. The. CPIisdefinedasameasure oftheaveragechangeovertimeinthepricespaidbyurban consumersfor a market basket ofconsumergoodsand services. Itcalculateslikethe Laspeyres (afterthe. German economist. Etienne. Laspeyres) index : where P–isprice Q–isquality 0&t–arethebasicperiodandthecurrentperiodrelatively.

Lecture 2: GDPandthe. Main. Indicators ofthe. National. Accounts Whilethe Paasche (afterthe. Germaneconomist. Hermann Paasche) index iscomputedas: Notethattheonlydifferenceintheformulasisthattheformer usesperiodtquantities, whereasthelatterusesbaseperiod (period 0)quantities. The. Laspeyresindexsystematically overstates inflation , whilethe. Paascheindex understates it, becausetheindices donotaccountforthefactthatconsumerstypicallyreactto pricechangesbychangingthequantitiesthattheybuy. For example, ifpricesgoupforgoodcthen, quantitiesofthat goodshouldgodown.

Lecture 2: GDPandthe. Main. Indicators ofthe. National. Accounts The Fisher index (afterthe. Americaneconomist. Irving. Fisher), is calculatedasthegeometricmeanof. I P and. I L : Fisher’sindexisalsoknownasthe“ideal”priceindex. Unlikepriceindexes, the GDP deflator isnotbasedona fixed basket ofgoodsandservices. Thebasketisallowedtochangewith people’sconsumptionandinvestmentpatterns. Inpractice, thedifferencebetweenthedeflatorandapriceindexlike the. Consumerpriceindex(CPI)isoften relatively small.

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