GDP: Production and Income Data published since 1947

Transcription

1 GDP: Producion and Income Daa published since 1947 GDP is he marke value of all final goods and services produced wihin a counry in a given period of ime. GDP is he sum of value added in he economy during a given period (value of is producion minus he value of inermediae goods i uses in producion) GDP is he sum of incomes in he economy during a given period (wage, dividends, indirec axes) Noes: a) i includes he value of housing services b) i does no include he value of vegeables and fruis produced and consumed a home

2 An economy has 100 workers and here are only wo firms. One firm is producing oys and he oher one is producing plasic (used in oys producion). A worker can produce 10 baches of oys or 4 of plasic. Each worker earns 40,000$ a year in wages. Toys can sell for $ 5,000 each and ones of plasic sell for $12,500. Currenly he economy produces 900 baches of oys per year and all workers are employed. A he end of he year all oys and plasics are sold and all firms profis are disribued as dividends o household. Calculae he GDP of his counry.

3 Soluion: 10 workers produce plasic: 40 plasic. Plasic producion (Firm 1) Revenues from sales: 40*12,500=500,000$ Expenses: 10*40,000=400,000$ Wages: 400,000$ Profi: 100,000$ Toy company (firm 2) Revenues from sales: 900*5,000=4,500,000$ Expenses: 4,100,000$ Wages: 90*40,000$=3,600,000$ Plasic purchases: 500,000$ Profi: $400,000 GDP=value of final oupu=$4,500,000 GDP=sum of value added: $500,000 + (4,500, ,000) =$4,500,000 GDP=sum of incomes: 400,000+3,600,000(wages 90%)+100, ,000(profis)=4,500,000$

4 Nominal and Real GDP Nominal GDP: The sum of he quaniies of final goods produced imes heir curren price Increase due o increase in prices and increase in he quaniy of goods Real GDP: he sum of he quaniies of final goods produced a consan prices

5 Suppose he number and prices of fooballs and baskeballs in 3 successive years are given by: Fooballs Baskeball s Year Price ($) Quaniy P($) Q Nomin al GDP Real GDP 2012 Growh rae GDP deflaor GDP growh: he rae of change of real GDP in year = (Y -Y -1 )/Y -1 Using differen base years we would ge differen growh raes (hisorically changed he base year and re-esimae hisory) Real GDP in chained (2005) dollars Periods of negaive growh for a leas 2 consecuive quarers: recessions Periods of posiive growh: expansions Nominal GDP: dollar GDP pr GDP in curren dollars Real GDP: GDP in erms of goods, in consan $, adjused for inflaion or in 2005 $ Real GDP per capia (raio of GDP o he populaion)

6 The GDP deflaor: a measure of he average price of oupu (an index number): average price of oupu/ final goods produced in he economy P Nomin al Re al GDP GDP $ Y *100 Y Consumer Price Index (CPI): a measure of he average price of consumpion (he cos of living) based on a baske of goods ha he ypical consumer consumes (updaed every 2 years) since 1917 BLS: every monh hey visi sores o find ou prices of abou 80,000 iems Se o 100 in a given year (base is ) 2015: =238 (cos 125% more o buy he same consumpion baske) Differences: Impored goods (oil) Indusrial goods 1974 and lae 79 differences in he inflaion rae (oil crises) Used o deermine inflaion: he rae a which prices increase= P P 1 *100. P 1 CPI and inflaion from 1913 hp://

7 Inflaion: susained rise in he general price level Deflaion Why do we care abou inflaion? - affecs income disribuion (reirees are on fixed income) US Social Securiy benefis are adjused for inflaion - more uncerainy in he marke (fixed prices lag) - disors he relaive prices - disors he axaion US :2015 (0.2%); 2010 (1.6%); 2009 (-0.4%); July 2006: 4.15%, 2005:3.17%, 2003:2.11% Core price consumpion-expendiure index, increased 1.8% percen in July 2015 from a year earlier (excludes prices for food and energy) The Unemploymen rae: Labor force: Unemploymen rae: L = N + U (employed +unemployed) U u L Before 1940: U=people regisered a unemploymen offices

8 Now: surveys of household (Curren Populaion Survey): 60,000 HHS every monh : 9.1% 2015: 5.3% A person who doesn have a job and has been looking for work in he las 4 weeks. Discouraged workers: no in he labor force Employmen siuaion hp:// Why do we care abou unemploymen? - an indicaor if he economy is operaing above or below he normal level of aciviy Okun s law(1960): high oupu growh leads o decrease in unemploymen and vice-versa - imporan social consequences Paricipaion rae: raio of labor force o oal populaion of working age

9 I increases when unemploymen decreases and vice versa.