8

THE DATA OF MACROECONOMICS

Chapter 23:

Measuring

a Nation’s Income

Measuring a Nation’s Income

• Microeconomics– Microeconomics is the study of how

individual households and firms make decisions and how they interact with one another in markets.

• Macroeconomics– Macroeconomics is the study of the economy

as a whole.– Its goal is to explain the economic changes

that affect many households, firms, and markets at once.

Measuring a Nation’s Income

• Macroeconomics answers questions like the following:– Why is average income high in some countries

and low in others? – Why do prices rise rapidly in some time

periods while they are more stable in others? – Why do production and employment expand in

some years and contract in others?

The Birth of Macroeconomics• The 1930s marked the first stirrings 波动 of the science

of macroeconomics, founded by John Maynard Keynes as he tried to understand the economic mechanism that produced the Great Depression. After World War , Ⅱreflecting both the increasing influence of Keynesian views and the fear of another depression, the U.S. Congress formally proclaimed federal responsibility for macroeconomic performance. It enacted the landmark划时代的 Employment Act of 1946. (Samuelson, Economics, 17th edition,

p414.)

• For the first time, Congress affirmed the government’s role in promoting output growth, fostering employment, and maintaining price stability.

• Since the 1946 employment Act, the nation’s priorities among these three goals have shifted, but in the U.S. as in all market economies, these goals still frame the central macroeconomic questions:

1. Why do output and employment sometimes fall, and how can unemployment be reduced? All market economies show patterns of expansion and contraction known as business cycle. The last major business-cycle downturn in the U.S. came in 1990-1991,when production of goods and services fell and millions of people lost their jobs. For much of the postwar period, one key goal of macroeconomic policy has been to use monetary and fiscal policy to reduce the severity of business-cycle downturns and unemployment.

Macroeconomics examines the sources of persistent unemployment. Having considered the possible diagnoses, macroeconomics also suggests possible remedies, such as increasing aggregate demand or reforming labor market institutions. The lives and fortunes of millions of people depend upon whether macroeconomists can find the right answers to these questions.

2. What are the sources of price inflation, and how can it be kept under control? A market economy uses prices as a yardstick to measure economic values and conduct business. During period of rapidly rising prices, called price inflation, the price yardstick loses its value. people become confused, make mistake, and spend much of their time worrying about inflation eating away at their incomes. Rapid price changes lead to economic inefficiency.

Macroeconomic policy has increasingly emphasized price stability as a key goal. In the U.S. the overall rate of inflation has fallen from more than 10% per year in the late 1970s to around 3% per year in the 1990s.

Some countries today have not succeeded in containing inflation, however. Formerly socialist countries like Russia and many Latin American and developing countries experienced inflation rates of 50,100,or 1000 percent per year in the 1980s and early 1990s.

Why was the U.S. able to keep the inflationary tiger in the cage, while Russia failed? Macroeconomics can suggest the proper role of monetary and fiscal policies, of exchange-rate system, and of an independent central bank in containing inflation.

3. How can a nation increase its rate of economic growth?Above all, macroeconomics is concerned with economic growth, which refers to the growth in the productive potential of an economy.

An economy’s productive potential is the central factor in determining the growth in it real wages and living standards. After World war 2, rapid economic growth in Asian countries such as Japan, South Korea, and Taiwan produced dramatic gains in living standards. A few countries, have suffered declining per capita output and living standards over the last two decades.

• Among the key factor in rapid economic growth are the predominance of free markets, high rate of saving and investment, an outwardly oriented trade policy, and an honest government with strong property rights.

23.1 THE ECONOMY’S INCOME

AND EXPENDITURE

23.1 THE ECONOMY’S INCOME AND EXPENDITURE

• When judging whether the economy is doing well or poorly, it is natural to look at the total income that everyone in the economy is earning.

23.1 THE ECONOMY’S INCOME AND EXPENDITURE

• For an economy as a whole, income must equal expenditure because:

– Every transaction has a buyer and a seller.

– Every dollar of spending by some buyer is a dollar of income for some seller.

23.2 THE MEASUREMENT OF GROSS DOMESTIC PRODUCT

• Gross domestic product (GDP) is a measure of the income and expenditures of an economy.

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

23.2 THE MEASUREMENT OF GROSS DOMESTIC PRODUCT

• The equality of income and expenditure can be illustrated with the circular-flow diagram.

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

Figure 1 The Circular-Flow Diagram

Spending

Goods andservicesbought

Revenue

Goodsand servicessold

Labor, land,and capital

Income

= Flow of inputs and outputs

= Flow of dollars

Factors ofproduction

Wages, rent,and profit

FIRMS•Produce and sellgoods and services

•Hire and use factorsof production

•Buy and consumegoods and services

•Own and sell factorsof production

HOUSEHOLDS

•Households sell•Firms buy

MARKETSFOR

FACTORS OF PRODUCTION

•Firms sell•Households buy

MARKETSFOR

GOODS AND SERVICES

Copyright © 2004 South-Western

23.2 THE MEASUREMENT OF GROSS DOMESTIC PRODUCT

1) “GDP is the Market Value . . .”– Output is valued at market prices.

• GDP adds together many different kinds of products into a single measure of the value of economic activity. To do this, it uses market prices. Because market prices measure the amount people are willing to pay for different goods, they reflect the value of those goods. If the price of an apple is twice the price of an orange, then an apple contributes twice as much to GDP as do an orange.

23.2 THE MEASUREMENT OF GROSS DOMESTIC PRODUCT

2) “. . . Of All Final . . .”• It records only the value of final goods, not

intermediate goods (the value is counted only once).• When International Paper makes paper, which

Hallmark uses to make a greeting card, the paper is called an intermediate good, and the card is called a final good. GDP includes only the value of final goods. The reason is that the value of intermediate goods is already included in the prices of the final goods. Adding the market value of the paper to the market value of the card would be double counting. That is, it would (incorrectly) count the paper twice.

23.2 THE MEASUREMENT OF GROSS DOMESTIC PRODUCT

3) “. . . Goods and Services . . .”

– It includes both tangible goods (food, clothing, cars) and intangible services (haircuts, housecleaning, doctor visits).

23.2 THE MEASUREMENT OF GROSS DOMESTIC PRODUCT

4) “. . . Produced . . .”

– It includes goods and services currently produced,

– It does not include transactions involving goods produced in the past.

5) “ . . . Within a Country . . .”

– It measures the value of production within the geographic confines of a country.

23.2 THE MEASUREMENT OF GROSS DOMESTIC PRODUCT

6) “. . . In a Given Period of Time.”

– It measures the value of production that takes place within a specific interval of time, usually a year or a quarter (three months).

23.3 THE COMPONENTS OF GDP

• GDP includes all items produced in the economy and sold legally in markets.

• What Is Not Counted in GDP?

– GDP excludes most items that are produced and consumed at home and that never enter the marketplace.

– It excludes items produced and sold illicitly, such as illegal drugs.

23.3 THE COMPONENTS OF GDP

• GDP (Y) is the sum of the following:

– Consumption (C)

– Investment (I)

– Government Purchases (G)

– Net Exports (NX)

Y = C + I + G + NX

23.3 THE COMPONENTS OF GDP• 23.3.1 Consumption (C):

– The spending by households on goods (durable goods, such as automobiles and appliances,and nondurable goods, such as food and clothing.) and services (such intangible items as haircuts and medical care. Household spending on education is also include in consumption of services), with the exception of purchases of new housing.

• 23.3.2 Investment (I):– The spending on capital equipment, inventories,

and structures. – Investment in structures includes expenditure on

new housing.

23.3 THE COMPONENTS OF GDP

• 23.3.3 Government Purchases (G):– Include the spending on goods and services by

local, state, and federal governments.– It includes the salaries of government workers

and spending on public works.– Does not include transfer payments because

they are not made in exchange for currently produced goods or services. (Mankiw, Principles of Economics, third edition,ch23 Measuring a nation’s income, p506.)

23.3 THE COMPONENTS OF GDP• 23.3.4 Net Exports (NX):

– Exports minus imports.• When a domestic household, firm, or government

buys a goods or service from abroad, the purchase reduces net exports----but because it also raises consumption, investment, or government purchases, it does not affect GDP.

(Mankiw, Principles of Economics, third edion, p506.)

Table 1 GDP and Its Components

Copyright©2004 South-Western

1 trillion= 1000 billion1 billion= 1000 million

GDP and Its Components (2001)

Consumption 69%

Government Purchases

18% Net Exports -3 %

Investment16%

图1. 中国国内生产总值及增长率

109655 120333135823

159878209407

183868

10.710.410.1109.18.3

0

50000

100000

150000

200000

250000

2001 2002 2003 2004 2005 2006

GD

P(

亿元

)

0

2

4

6

8

10

12

GD

P年

增长

率(%

)

GDP growth- rate %

23.4 REAL GDP VERSUS NOMINAL GDP

• Nominal GDP values the production of goods and services at current prices.

• Real GDP values the production of goods and services at constant prices.

23.4 REAL VERSUS NOMINAL GDP

• An accurate view of the economy requires adjusting nominal to real GDP by using the GDP deflator.

23.4.1 Table 2 Real and Nominal GDP

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23.4.1 Table 2 Real and Nominal GDP

Copyright©2004 South-Western

23.4.1 Table 2 Real and Nominal GDP

Copyright©2004 South-Western

23.4.2 The GDP Deflator

• The GDP deflator is a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100.

• It tells us the rise in nominal GDP that is attributable to a rise in prices rather than a rise in the quantities produced.

23.4.2 The GDP Deflator

• The GDP deflator is calculated as follows:

G D P d efla to r =N o m in a l G D P

R eal G D P 1 0 0

23.4.2 The GDP Deflator

• Converting Nominal GDP to Real GDP

– Nominal GDP is converted to real GDP as follows:

R eal G D PN o m in a l G D P

G D P d efla to r2 0 X X2 0 X X

2 0 X X

1 0 0

Table 2 Real and Nominal GDP

Copyright©2004 South-Western

Year Calculating Nominal GDP2001 ( $1 per hot dog 100 hot dogs) ($2 per hamburger50 hamburgers) = $2002002 ( $2 per hot dog 150 hot dogs) ($3 per hamburger100hamburgers) = $6002003 ( $3 per hot dog 200 hot dogs) ($4 per hamburger150 hamburgers) =$1200

Year Calculating Real GDP(Base year 2001)2001 ( $1 per hot dog 100 hot dogs) ($2 per hamburger50 hamburgers) = $2002002 ( $1 per hot dog 150 hot dogs) ($2 per hamburger100hamburgers) =$3502003 ( $1 per hot dog 200 hot dogs) ($2 per hamburger150 hamburgers) =$500

Year Calculating the GDP Deflator2001 ($200 / $200 )100 = 1002002 ($600 / $350 ) 100 = 1712003 ($1200 /$500 ) 100 = 240

Price and Quantities

Year Price of Hot Dogs

Quantitiesof Hot Dogs

Quantities of Hamburgers

Price of Hamburgers

200120022003

$ 123

100150200

50100150

$ 234

Figure 2 Real GDP in the United States

Billions of1996 Dollars

$10,000

9,000

8,000

7,000

6,000

5,000

4,000

3,0001970 1975 1980 1985 1990 20001995

Copyright © 2004 South-Western

23.5 GDP AND ECONOMIC WELL-BEING

• GDP is the best single measure of the economic well-being of a society.

• GDP per person tells us the income and expenditure of the average person in the economy.

23.5 GDP AND ECONOMIC WELL-BEING

• Higher GDP per person indicates a higher standard of living.

• GDP is not a perfect measure of the happiness or quality of life, however.

23.5 GDP AND ECONOMIC WELL-BEING

• Some things that contribute to well-being are not included in GDP.– The value of leisure.– The value of a clean environment.– The value of almost all activity that takes place

outside of markets, such as the value of the time parents spend with their children and the value of volunteer work.

Table 3 GDP, Life Expectancy, and Literacy

Copyright©2004 South-Western

Country

Humandevelopment

index (HDI) value(2004)

Life Expectancyat birth(2004)

Adult Literacyrate (% ages 15

and older)(2004)

Combined grossenrolment ratio

for primary,secondary and

tertiary schools(%) (2004)

GDP percapita

(PPP US$)(2004)

United States 0.948 77.5 99% 93 39,676

Japan 0.949 82.2 99% 85 29,251

Germany 0.932 78.9 99 89 28,303

United Kingdom 0.94 78.5 99 93 30,821

France 0.942 79.6 99 93 29,300

Italy 0.94 80.2 98.4 89 28,180

Hong Kong 0.927 81.8 absence 77 30,822

Mexico 0.821 75.3 91 75 9,803

Russia 0.797 65.2 99.4 88 9,902

Brazil 0.792 70.8 88.6 86 8,195

China,81 0.768 71.9 90.9 70 5,896

Indonesia,108 0.711 67.2 90.4 68 3,609

India,126 0.611 63.6 61 62 3,139

Pakistan 0.539 63.4 49.9 38 2,225

Bangladesh 0.53 63.3 absence 57 1,870

Nigeria,159 0.448 43.4 absence 55 1,154

Source: Human development report 2006, table 1,( http://hdr.undp.org/hdr2006/).

Summary

• Because every transaction has a buyer and a seller, the total expenditure in the economy must equal the total income in the economy.

• Gross Domestic Product (GDP) measures an economy’s total expenditure on newly produced goods and services and the total income earned from the production of these goods and services.

Summary

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

• GDP is divided among four components of expenditure: consumption, investment, government purchases, and net exports.

Summary

• Nominal GDP uses current prices to value the economy’s production. Real GDP uses constant base-year prices to value the economy’s production of goods and services.

• The GDP deflator—calculated from the ratio of nominal to real GDP—measures the level of prices in the economy.

Summary

• GDP is a good measure of economic well-being because people prefer higher to lower incomes.

• It is not a perfect measure of well-being because some things, such as leisure time and a clean environment, are not measured by GDP.

Questions for Review

Chapter 23 Measuring a nation’s income

• 名词解释：1 、宏观经济学、微观经济学？2 、国内生产总值的概念及其组成部分？3 、实际 GDP 与名义 GDP 的概念及计算？4 、 GDP 平减指数的概念及计算？• 论述题：1、解释为什么一个经济的收入必定等于其支出？2 、 GDP 是衡量经济中物品与劳务产量的价值，但从衡量经济中产出的实物重量看，今天美国经济的 GDP 只比 50 或 100 年前略重一点。“ GDP 变轻了”说明了什么？

2 、“ U.S. GDP 变轻了”说明了什么？答： 1)An ever-growing proportion of the US.GDP

consists of things that don’t weigh anything at all----lawyers’ services,psychotherapy, e-mail, online information.

2)Only a small fraction of the US. economic growth in the past several decades represents growth in the tonnage of physical materials----oil, coal, ores, wood, raw chemicals. The remainder represents new insights into how to rearrange those physical materials to better serve human needs.

3) The downsizing of output means that products are easier and hence less costly to move, and most especially across national borders.

1、解释为什么一个经济的收入必定等于其支出？2 、生产一辆经济型轿车或生产一辆豪华型轿车，

哪一个对 GDP 的贡献更大？为什么？3 、农民以 2 美元的价格把小麦卖给面包师。面

包师用小麦制成面包，以 3 美元的价格出售。这些交易对 GDP 的贡献是多少呢 ？

4 、许多年以前，佩吉为了收集唱片而花了 500 美元。今天她在旧货销售中把她收集的物品卖了l00 美元。这种销售如何影响现期 GDP ？

5 、列出 GDP 的四个组成部分。各举一个例子。

1、解释为什么一个经济的收入必定等于其支出？答 1 ：因为每一次交易都有一个买方和一个卖方，购买者的 1 元钱支出等于卖者 1 元钱的收入，买卖双方的交易是等价交换，因此交易对买卖双方作出了相同的贡献。由于 GDP 既衡量总收入又衡量总支出，因此无论作为总收入来衡量，还是作为总支出来衡量， GDP 都相等。

2 、生产一辆经济型轿车或生产一辆豪华型轿车，哪一个对 GDP 的贡献更大？为什么？

3 、农民以 2 美元的价格把小麦卖给面包师。面包师用小麦制成面包，以 3美元的价格出售。这些交易对 GDP的贡献是多少呢 ？

4 、许多年以前，佩吉为了收集唱片而花了 500 美元。今天她在旧货销售中把她收集的物品卖了 l00 美元。这种销售如何影响现期 GDP ？（不影响现期 GDP ）

5 、列出 GDP 的四个组成部分。各举一个例子。

6、为什么经济学家在判断经济福利时用实际 GDP，而不用名义 GDP ？

7 、在 2001 年，某个经济生产 100 个面包，每个以 2 美元的价格售出。在 2002 年，这个经济生产 200 个面包，每个以 3 美元的价格售出。计算每年的名义 GDP 、实际 GDP 和 GDP 平减指数。 ( 用 2001 年做基年。 ) 从一年到下一年这三个统计数字的百分比分别提高了多少？

8 、为什么一国有高的 GDP是合意的？举出一个增加了GDP但并不合意的事情的例子。

答 8 ：一个国家拥有较高的 GDP 是过上好生活的必要条件，但高的 GDP 并不是福利的完美衡量指标，因为存在着 5 种有增长而无发展的情况： (1) 无工作的增长。(2) 无声的增长。 (3) 无情的增长。 (4) 无根的增长。 (5)无未来的增长。

Ch.23 Problems and Applications• 1. (Mankiw-Ch23., p516.) What components of GDP(if any )

would each of the following transactions affect? Explain.

• a) A family buys a new refrigerator. • b) Aunt Jane buys a new house.• c) Ford sells a Thunderbird from its inventory.• d) Hubei Province repaves Highway 107. • e)Your parents buy a bottle of French wine.• f) Nokia expands its factory in Tianjin, China.

• 1. (Mankiw-Ch23., p516.)What components of GDP (if any ) would each of the following transactions affect? Explain.

a) A family buys a new refrigerator.(durable goods, C ) b) Aunt Jane buys a new house.(Investment in structure, I )

c) Ford sells a Thunderbird from its inventory. (inventory investment, I ,GDP )

d) Hubei Province repaves Highway 107.(Gov.purchase, G )

e)Your parents buy a bottle of French wine.(NX + C, GDP keeps constant.)

f) Nokia expands its factory in Tianjin, China.(I + NX )

9 、当凯伦为多戈给她修剪草坪而进行支付时，这种交易是 GDP 的一部分。如果凯伦与多戈结婚，对 GDP 会产生什么影响， GDP 发生变化了吗？

• 答 9 ：当凯伦为多戈给她修剪草坪而进行支付时，这种交易是 GDP 的一部分。如果凯伦与多戈结婚，情况就变了。尽管多戈仍然会为凯伦修剪草坪，但修剪草坪的价值现在就不属于GDP 了，因为多戈的劳务不再在市场上出售。因此，当凯伦和多戈结婚时， GDP 减少了。

10 、某彩电公司将 2006 年的存货彩电成功地在 2007 年销售一空，存货的变动对 GDP 会产生什么影响， GDP 发生变化了吗？

答 10 ：当生产出来的一种中间物品没有被使用，而是增加了企业以后使用或出售的存货时，这个原则就出现了一个重要的例外。在这种情况下，中间物品被暂时作为“最终”物品，其价值作为存货投资而加到 GDP 中。当以后使用或销售中间物品存货时，企业的存货投资是负的，因此后一个时期的 GDP 就减少了。

11 、假设一个中国家庭向瑞典汽车制造商沃尔沃公司购买了一辆 30 万元人民币的汽车。这种交易对 GDP 会产生什么影响， GDP 会发生变化吗？

答 11 ：一个中国家庭向瑞典汽车制造商沃尔沃公司购买了一辆 30 万元人民币的汽车。这个交易增加了 30 万元人民币的消费，因为购买汽车是消费支出的一部分。它还减少了净出口 30 万元人民币，因为汽车是进口的。换句话说，净出口包括国外生产的物品与劳务 ( 符号为负 ) 是因为这些物品与劳务包括在消费、投资和政府购买中（符号为正）。因此，当国内的家庭、企业或政府购买了国外物品与劳务时，这种购买减少了净出口；但由于它还增加了消费、投资或政府购买，所以并不影响 GDP 。