Transcript Measuring Economic Activity Gross domestic product (GDP).

Measuring Economic Activity
Gross domestic product (GDP).
The market value of goods and services produced by labor and
property in the United States, regardless of nationality; GDP
replaced gross national product (GNP) as the primary measure of
U.S. production in 1991.
2004
I
Line
1
2
Gross domestic product
Personal consumption expenditures
2004
II
2004
III
2004
IV
2005
I
11,472.6
11,657.5
11,814.9
11,994.8
12,191.7
8,060.2
8,153.8
8,282.5
8,423.3
8,542.8
976.3
975.5
1,007.0
1,017.0
1,023.6
3
Durable goods
4
Nondurable goods
2,316.6
2,354.6
2,387.2
2,449.7
2,490.0
5
Services
4,767.3
4,823.8
4,888.2
4,956.6
5,029.2
1,819.7
1,920.7
1,947.0
2,021.9
2,084.6
1,783.5
1,861.7
1,915.4
1,975.3
2,015.2
1,158.8
1,198.5
1,238.5
1,286.3
1,305.9
6
7
Gross private domestic investment
Fixed investment
8
Nonresidential
9
Structures
266.0
275.5
281.2
290.0
294.9
10
Equipment and software
892.8
923.1
957.3
996.3
1,011.0
624.6
663.2
677.0
688.9
709.3
36.2
59.0
31.6
46.7
69.4
-546.8
-591.3
-611.8
-674.8
-693.6
1,134.3
1,167.6
1,189.5
1,210.4
1,244.5
11
12
13
14
Residential
Change in private inventories
Net exports of goods and services
Exports
15
Goods
790.3
812.2
833.4
845.5
872.5
16
Services
344.1
355.4
356.1
365.0
372.0
17
Imports
1,681.2
1,758.9
1,801.2
1,885.2
1,938.1
18
Goods
1,399.2
1,470.1
1,506.9
1,587.2
1,632.9
19
Services
282.0
288.8
294.4
298.1
305.2
2,139.5
2,174.3
2,197.2
2,224.5
2,257.9
793.3
804.4
817.4
824.6
842.0
20
21
Government consumption expenditures
and gross investment
Federal
22
National defense
534.1
541.2
557.0
559.4
571.1
23
Nondefense
259.1
263.2
260.4
265.2
270.9
24
State and local
1,346.3
1,369.9
1,379.8
1,399.9
1,415.9
National income
• A broader national level economic measure than is personal
income. National income includes payments to individuals
(income from wages and salaries, and other income), plus
payments to government (taxes), plus retained income from the
corporate sector (depreciation, undistributed profits), less
adjustments (subsidies, government and consumer interest, and
statistical discrepancy).
L
i
n
e
2004
I
2004
II
2004
III
2004
IV
2005
I
11,472.6
11,657.5
11,814.9
11,994.8
12,191.7
1
Gross domestic product
2
Plus: Income receipts from the rest of
the world
373.8
388.0
406.8
454.7
457.7
3
Less: Income payments to the rest of
the world
300.3
351.9
368.6
426.7
424.4
4
Equals: Gross national product
11,546.1
11,693.6
11,853.0
12,022.8
12,225.0
5
Less: Consumption of fixed capital
1,355.0
1,375.2
1,497.9
1,401.2
1,408.1
1,132.4
1,148.1
1,266.8
1,165.7
1,167.9
936.4
948.8
1,021.8
962.3
963.6
1,319.8
1,327.7
1,378.0
1,381.4
1,158.6
383.4
378.9
356.2
419.1
195.0
196.0
199.4
245.1
203.5
204.3
222.6
227.0
231.1
235.5
240.2
187.2
190.8
194.0
197.4
201.0
35.4
36.2
37.1
38.1
39.2
6
7
Private
Domestic business
8
Capital consumption
allowances
9
Less: Capital
consumption adjustment
1
0
1
1
Households and
institutions
Government
1
2
General government
1
3
Government enterprises
1
4
Equals: Net national product
10,191.1
10,318.4
10,355.1
10,621.6
10,816.9
1
5
Less: Statistical discrepancy
63.0
56.4
60.4
-52.1
-70.1
1
6
Equals: National income
10,128.1
10,262.0
10,294.7
10,673.7
10,887.0
Personal income
Measures national level income to persons and nonprofit
corporations. Personal income includes payments to
individuals (income from wages and salaries, and other
income), plus transfer payments from government, less
employee social insurance contributions
Equals: National income
10,1
28.1
10,2
62.0
10,2
94.7
10,6
73.7
10,887.0
Less: Corporate profits with inventory
valuation and capital consumption
adjustments
1,16
5.6
1,17
3.9
1,11
8.0
1,26
8.8
1,326.3
Taxes on production and
imports less subsidies 1
782.
9
796.
3
803.
5
819.
9
830.0
Contributions for government
social insurance
803.
9
814.
0
826.
9
845.
4
868.0
Net interest and
miscellaneous payments on assets
554.
5
548.
5
546.
7
548.
2
557.4
Business current transfer
payments (net)
82.7
83.5
76.0
86.3
87.2
Current surplus of government
enterprises 1
8.1
7.4
6.5
5.7
3.4
Wage accruals less
disbursements
1.5
-1.5
0.0
0.0
0.0
1,33
7.1
1,35
2.3
1,36
7.8
1,49
1.9
1,416.3
1,37
9.0
1,40
0.4
1,41
5.4
1,42
8.9
1,469.0
9,44
5.0
9,59
2.7
9,70
0.4
10,0
20.1
10,100.2
Plus: Personal income receipts on assets
Personal current transfer
receipts
Equals: Personal income
Disposable personal income
• Measures the after-tax income of persons and nonprofit
corporations. It is calculated by subtracting personal tax and
nontax payments from personal income.
Issues
• GDP excludes non-market economic activity. (Washing your
car vs going to the car wash.)
• GDP excludes illegal activity
• GDP doesn’t count “externalities”
Measuring Unemployment
• People with jobs are employed.
• People who are jobless, looking for jobs, and available for work are
unemployed.
• People who are neither employed nor unemployed are not in the labor
force.
•
Issues
•
•
Who is counted as employed
All persons who did any work for pay or profit during the survey reference week.
•
All persons who did at least 15 hours of unpaid work in a family-operated
enterprise.
•
All persons who were temporarily absent from their regular jobs because of illness,
vacation, bad weather, industrial dispute, or various personal reasons.
What about the underemployed?
•
Who Is Unemployed?
• All persons who were not classified as employed during the survey
reference week, made specific active efforts to find a job during the prior 4
weeks, and were available for work.
• All persons who were not working and were waiting to be called back to a
job from which they had been temporarily laid off
• What about discouraged workers?
Is Unemployment Bad?
• Almost everyone is unemployed at some point. It takes time to match
workers and employers. Frictional unemployment is a term used to
describe those who are seeking work but who haven’t yet found the right
match.
• Structural unemployment describes those who are unlikely to find work
because of some flaw in the economy.
• These are not precise terms and it can be hard to distinguish
Price Indices
• A price index such as the consumer price index (cpi) compares
the price of bundle of goods today with the price of the same
bundle in a base year. As a matter of convention, the base
year price is always expressed as 100.
• The inflation rate is the percentage change in the index.
Year
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Jan
154.4
159.1
161.6
164.3
168.8
175.1
177.1
181.7
185.2
190.7
198.3
Real v Nominal
• The Nominal value of some variable is simply the actual dollar
amount (e.g., GDP was about $12.5 trillion.)
• The Real value of a variable is the nominal value adjusted for
inflation. That is
• Real = nominal/price index
Issues
• How do you compare a standard bundle of goods from one
time with another? (e.g., computers today and computers in
1980).
• How do you deal with long lived assets (houses are a huge
problem).
• How do you deal with the fact that people change their
consumption in response to changes in prices?
Cool Web Site
• http://data.bls.gov/cgi-bin/cpicalc.pl
Is Inflation Bad?
• Does it matter if a clock is 10 minutes fast or slow?
• Inflation can do two bad things
– Reduce the value of monetary assets. (But this can
accomodated by various kinds of indexing)
– Distort the “information” contained in prices
• This all means that we should distinguish anticpated and
unanticipated inflation.
The Simplest (and maybe most misleading) Macro
Model
Definitions
•
•
•
•
•
Y = total gross domestic product
C = Consumption
G= Government Expenditures
T= Tax
I= Investment Expenditure
Assumptions
• C = a + b(Y-T) (b is the “marginal propensity to consume”)
• Y = C+I+G (no international trade—we’ll fix that latter).
Conclusion and Implications
•
•
•
•
Y = [a+I+G-bT]/(1-b)
Multipliers (change in Y per unit change in G, I, or T)
Investment and G = 1/(1-b)
Tax = -b/(1-b)
Complication
•
I is almost certainly determined by a number of factors,
including the level of interest rates.
• Thus, we need to think about how the actions of the central
bank influence the level of interest (and also prices).