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1、macroeconomics fifth edition CHAPTER TWOThe Data of Macroeconomicsmacro 2002 Worth Publishers, all rights reservedCHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 1Learning objectivesIn this chapter, you will learn about:Gross Domestic Product (GDP)the Consumer Price Ind
2、ex (CPI)the Unemployment RateCHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 2Gross Domestic ProductTwo definitions:1.Total expenditure on domestically-produced final goods and services2.Total income earned by domestically-located factors of production CHAPTER 2CHAPTER
3、2 The Data of Macroeconomics The Data of Macroeconomicsslide 3Why expenditure = incomeIn every transaction, the buyers expenditure becomes the sellers income.Thus, the sum of all expenditure equals the sum of all income.CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 4T
4、he Circular FlowCHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 5Value addeddefinition: A firms value added is the value of its output minus the value of the intermediate goods the firm used to produce that output. CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data
5、of Macroeconomicsslide 6Exercise: ( (Problem 2, p.38Problem 2, p.38) )A farmer grows a bushel of wheat and sells it to a miller for $1.00. The miller turns the wheat into flour and sells it to a baker for $3.00. The baker uses the flour to make a loaf of bread and sells it to an engineer for $6.00.
6、The engineer eats the bread. Computevalue added at each stage of productionGDPCHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 7Final goods, value added, and GDPGDP = value of final goods produced = sum of value added at all stages of productionThe value of the final goo
7、ds already includes the value of the intermediate goods, so including intermediate goods in GDP would be double-counting. CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 8The expenditure components of GDPconsumptioninvestmentgovernment spendingnet exportsCHAPTER 2CHAPTE
8、R 2 The Data of Macroeconomics The Data of Macroeconomicsslide 9Consumption (C)durable goods last a long time ex: cars, home appliancesnon-durable goodslast a short time ex: food, clothingserviceswork done for consumers ex: dry cleaning, air travel.def: the value of all goods and services bought by
9、households. Includes:CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 10U.S. Consumption, 2001CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 11Investment (I)def1: spending on the factor of production capital.def2: spending on goods bought f
10、or future use.Includes:business fixed investmentspending on plant and equipment that firms will use to produce other goods & servicesresidential fixed investmentspending on housing units by consumers and landlordsinventory investmentthe change in the value of all firms inventoriesCHAPTER 2CHAPTER 2
11、The Data of Macroeconomics The Data of Macroeconomicsslide 12U.S. Investment, 2001CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 13Investment vs. CapitalCapital is one of the factors of production. At any given moment, the economy has a certain overall stock of capital
12、. Investment is spending on new capital. CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 14Investment vs. CapitalExample (assumes no depreciation): 1/1/2002: economy has $500b worth of capitalduring 2002:investment = $37b1/1/2003: economy will have $537b worth of capita
13、lCHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 15Stocks vs. Flowsstockflowa persons wealtha persons saving# of people with# of new collegecollege degreesgraduatesthe govt. debtthe govt. budget deficitFlowStockMore examples:CHAPTER 2CHAPTER 2 The Data of Macroeconomics
14、 The Data of Macroeconomicsslide 16Government spending (G)G includes all government spending on goods and services.G excludes transfer payments (e.g. unemployment insurance payments), because they do not represent spending on goods and services. CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data
15、 of Macroeconomicsslide 17Government spending, 2001CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 18Net exports (NX = EX - IM)def: the value of total exports (EX) minus the value of total imports (IM)CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconom
16、icsslide 19An important identityY = C + I + G + NXwhere Y = GDP = the value of total output C + I + G + NX = aggregate expenditureCHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 20A question for you:Suppose a firm produces $10 million worth of final goodsbut only sells
17、$9 million worth.Does this violate the expenditure = output identity?CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 21Why output = expenditureUnsold output goes into inventory, and is counted as “inventory investment”whether the inventory buildup was intentional or not
18、. In effect, we are assuming that firms purchase their unsold output. CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 22GDP: An important and versatile conceptWe have now seen that GDP measurestotal incometotal outputtotal expenditurethe sum of value-added at all stages
19、 in the production of final goodsCHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 23GNP vs. GDPGross National Product (GNP): total income earned by the nations factors of production, regardless of where locatedGross Domestic Product (GDP):total income earned by domestica
20、lly-located factors of production, regardless of nationality.(GNP GDP) = (factor payments from abroad) (factor payments to abroad)CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 24Discussion Question:In your country, which would you want to be bigger, GDP or GNP? Why?CH
21、APTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 25(GNP GDP) as a percentage of GDP for selected countries, 1997.for selected countries, 1997.CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 27Real vs. Nominal GDPGDP is the value of all final g
22、oods and services produced. Nominal GDP measures these values using current prices. Real GDP measure these values using the prices of a base year. CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 28Real GDP controls for inflationChanges in nominal GDP can be due to:chang
23、es in prices changes in quantities of output producedChanges in real GDP can only be due to changes in quantities,because real GDP is constructed using constant base-year prices. CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 29Practice problem, part 1Compute nominal G
24、DP in each yearCompute real GDP in each year using 2001 as the base year.200120022003PQPQPQgood A$30900$311,000$361,050good B$100192$102200$100205CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 30Answers to practice problem, part 1Nominal GDP multiply Ps & Qs from same
25、year2001: $46,200 = $30 900 + $100 192 2002: $51,400 2003: $58,300Real GDP multiply each years Qs by 2001 Ps2001: $46,3002002: $50,000 2003: $52,000 = $30 1050 + $100 205CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 31U.S. Real & Nominal GDP, 1967-20011967-2001CHAPTER
26、 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 32GDP DeflatorThe inflation rate is the percentage increase in the overall level of prices.One measure of the price level is the GDP Deflator, defined asCHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslid
27、e 33Practice problem, part 2Use your previous answers to compute the GDP deflator in each year. Use GDP deflator to compute the inflation rate from 2001 to 2002, and from 2002 to 2003. Nom. GDPReal GDPGDP deflatorinflationrate2001$46,200$46,200n.a.200251,40050,000200358,30052,000CHAPTER 2CHAPTER 2 T
28、he Data of Macroeconomics The Data of Macroeconomicsslide 34Answers to practice problem, part 2Nom. GDPReal GDPGDP deflatorinflationrate2001$46,200$46,200100.0n.a.200251,40050,000102.82.8%200358,30052,000112.19.1%CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 37Working
29、 with percentage changesEX:If your hourly wage rises 5% and you work 7% more hours, then your wage income rises approximately 12%.USEFUL TRICK #1 USEFUL TRICK #1 For any variables For any variables X X and and Y Y, , the percentage change in (the percentage change in (X X Y Y ) ) the percentage chan
30、ge in the percentage change in X X + + the percentage change in the percentage change in Y YCHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 38Working with percentage changesEX: GDP deflator = 100 NGDP/RGDP.If NGDP rises 9% and RGDP rises 4%, then the inflation rate is a
31、pproximately 5%.USEFUL TRICK #2USEFUL TRICK #2the percentage change in (the percentage change in (X X/ /Y Y ) ) the percentage change in the percentage change in X X the percentage change in the percentage change in Y YCHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 39C
32、hain-weighted Real GDPOver time, relative prices change, so the base year should be updated periodically.In essence, “chain-weighted Real GDP” updates the base year every year. This makes chain-weighted GDP more accurate than constant-price GDP.But the two measures are highly correlated, and constan
33、t-price real GDP is easier to computeso well usually use constant-price real GDP. CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 40Consumer Price Index (CPI)A measure of the overall level of prices Published by the Bureau of Labor Statistics (BLS) Used to track changes
34、 in the typical households cost of livingadjust many contracts for inflation (i.e. “COLAs”)allow comparisons of dollar figures from different yearsCHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 41How the BLS constructs the CPI1.Survey consumers to determine composition
35、 of the typical consumers “basket” of goods.2.Every month, collect data on prices of all items in the basket; compute cost of basket3.CPI in any month equalsCHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 42Exercise: Compute the CPIThe basket contains 20 pizzas and 10 c
36、ompact discs. prices:pizzaCDs2000$10$152001$11$152002$12$162003$13$15For each year, computethe cost of the basketthe CPI (use 2000 as the base year)the inflation rate from the preceding yearCHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 43cost of inflationbasket CPI ra
37、te2000$350100.0n.a.2001 370105.75.7%2002 400114.38.1%2003 410117.12.5%answers:CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 44The composition of the CPIs “basket”CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 47Reasons why the CPI may ov
38、erstate inflationSubstitution bias: The CPI uses fixed weights, so it cannot reflect consumers ability to substitute toward goods whose relative prices have fallen.Introduction of new goods: The introduction of new goods makes consumers better off and, in effect, increases the real value of the doll
39、ar. But it does not reduce the CPI, because the CPI uses fixed weights.Unmeasured changes in quality: Quality improvements increase the value of the dollar, but are often not fully measured. CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 48The CPIs biasThe Boskin Panel
40、s “best estimate”:The CPI overstates the true increase in the cost of living by 1.1% per year.Result: the BLS has refined the way it calculates the CPI to reduce the bias.It is now believed that the CPIs bias is slightly less than 1% per year. CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data o
41、f Macroeconomicsslide 50CPI vs. GDP deflatorprices of capital goodsincluded in GDP deflator (if produced domestically)excluded from CPIprices of imported consumer goodsincluded in CPIexcluded from GDP deflatorthe basket of goodsCPI: fixedGDP deflator: changes every yearCHAPTER 2CHAPTER 2 The Data of
42、 Macroeconomics The Data of Macroeconomicsslide 51Two measures of inflation16 14 12 10 8 6 4 2 0 -2Percentagechange194819531958196319681973Year19781983198819931998CPIGDP deflatorCHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 52Categories of the populationemployed worki
43、ng at a paid job unemployed not employed but looking for a job labor force the amount of labor available for producing goods and services; all employed plus unemployed persons not in the labor force not employed, not looking for work. CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroec
44、onomicsslide 53Two important labor force conceptsunemployment rate percentage of the labor force that is unemployedlabor force participation rate the fraction of the adult population that participates in the labor forceCHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 54E
45、xercise: Compute labor force statisticsU.S. adult population by group, April 2002Number employed = 134.0 millionNumber unemployed = 8.6 millionAdult population = 213.5 millionUse the above data to calculatethe labor forcethe number of people not in the labor forcethe labor force participation rateth
46、e unemployment rate CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 55Answers:data: E = 134.0, U = 8.6, POP = 213.5labor forceL = E +U = 134.0 + 8.6 = 142.6not in labor forceNILF = POP L = 213.5 142.6 = 70.9unemployment rateU/L = 8.6/142.6 = 0.06 or 6.0%labor force part
47、icipation rateL/POP = 142.6/213.5 = 0.668 or 68.8%CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 57Employed workers help produce GDP, while unemployed workers do not. So one would expect a negative relationship between unemployment and real GDP.This relationship is cle
48、ar in the dataOkuns LawCHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 58Okuns Law1951198419992000199319821975Change in unemployment rate10 -3-2-1012438 6 4 2 0 -2Percentage change in real GDPOkuns Law states that a one-percent decrease in unemployment is associated wit
49、h two percentage points of additional growth in real GDPCHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 59Chapter Summary1.Gross Domestic Product (GDP) measures both total income and total expenditure on the economys output of goods & services.2.Nominal GDP values outpu
50、t at current prices; real GDP values output at constant prices. Changes in output affect both measures, but changes in prices only affect nominal GDP. 3.GDP is the sum of consumption, investment, government purchases, and net exports. CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroec
51、onomicsslide 60Chapter Summary4.The overall level of prices can be measured by eitherthe Consumer Price Index (CPI), the price of a fixed basket of goods purchased by the typical consumerthe GDP deflator, the ratio of nominal to real GDP5.The unemployment rate is the fraction of the labor force that is not employed. When unemployment rises, the growth rate of real GDP falls. CHAPTER 2CHAPTER 2 The Data of Macroeconomics The Data of Macroeconomicsslide 61
