Expert answer:eco homework

Expert answer:List five lessons or takeaways that you have learned in this course this week that youconsider to be important. Briefly explain each of them. The takeaways you choose can be big or small. What matters is that these were new pieces of knowledge to you.Choose one of the five takeaways and explain briefly how it would solve or help you solve a problem or exploit an opportunity that you have encountered already in your past experience or that you know you will encounter when you go back to your company/or country/ or find a job after graduation.This must be a typed document, double spaced and 12-point font.please use college student vocabulary please
ch_13_national_accounts.pptx

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Chapter 13 National Accounts
Assessing the Economy’s Performance
• National Income Accounting measures
economy’s overall performance
• Bureau of Economic Analysis (of the Dept. of
Commerce) compiles National Income and
Product Accounts
– Assess health of economy
– Track long run course
– Formulate policy
LO1
Gross Domestic Product
• GDP is the TOTAL MARKET
VALUE of the FINAL goods
and services PRODUCED
within a nation, in a given
PERIOD of TIME.
LO1
Gross Domestic Product
• Measure of aggregate output
• Monetary measure
• Avoid multiple counting
– Market value final goods
– Ignore intermediate goods
– Count value added (value of output – value
of inputs)
LO1
Gross Domestic Product
(1)
Stage of Production
(2)
Sales Value
Of Materials
Or Product
$
0
Firm A, sheep ranch
120
Firm B, wool producer
180
Firm C, coat manufacturer
220
Firm D, clothing manufacturer
270
Firm E, retail clothier
350
Total Sales Value
Value Added (total income)
LO1
(3)
Value
Added
]——–$120 (= $120 – $ 0)
]——– 60 (= 180 – 120)
]——– 40 (= 220 – 180)
]——– 50 (= 270- 220)
]——– 80 (= 350 – 270)
$1140
$350
Gross Domestic Product
• Exclude financial transactions
• Public transfer payments
• Private transfer payments
• Stock market transactions
• Exclude second hand sales
• Sell used car to a friend
LO1
Two Approaches to GDP
• Income approach
– Count income derived from production
– Wages, rental income, interest income,
profit
• Expenditure approach
– Count sum of money spent buying the final
goods
– Who buys the goods?
LO1
Two Approaches to GDP
Expenditures or Output
Approach
Income or
Allocations Approach
Consumption by
Households
Wages
Investment by
Businesses
Rents
+
+
Government
Purchases
+
LO1
Expenditures
By Foreigners
G
=D=
P
+
+
+
+
Interest
Profits
Statistical
Adjustments
Expenditures Approach
• Personal consumption expenditures (C)
– Durable goods
– Nondurable goods
– Consumer expenditures for services
– Domestic plus foreign goods produced
LO2
Expenditures Approach
• Gross private domestic investment (Ig)
– Machinery, equipment, and tools
– All construction
– Positive and negative changes in inventories
• Creation of new capital assets
• Noninvestment transactions excluded
LO2
Expenditures Approach
=
Gross Investment
Depreciation
Net Investment
Gross
Investment
Net
Investment
Depreciation
Stock
Stock of
Capital
January 1
LO2
Consumption,
government
expenditures,
and net exports
of
Capital
Year’s GDP
December 31
Expenditures Approach
• Government purchases (G)
– Expenditures for goods and services
– Expenditures for publicly owned capital
– Excludes transfer payments
• Net exports (Xn)
– Add exported goods
– Subtract imported goods
– Xn= exports (X) – imports (M)
• GDP = C + Ig + G + Xn
LO2
Accounting Statement for
the U.S. Economy, 2012 (in Billions)
LO2
Comparative GDP
LO2
The Income Approach
•
•
•
•
•
Compensation of employees
Rents
Interest
Proprietor’s income
Corporate profits
– Corporate income taxes
– Dividends
– Undistributed corporate profits
• Taxes on production and imports
LO3
The Income Approach
• From national income to GDP
– Subtract net foreign factor income
– Statistical discrepancy
– Consumption of fixed capital
• Other national accounts
– Net domestic product (NDP)
– National income (NI)
– Personal income (PI)
– Disposable income (DI)
LO3
U.S. Income Relationships 2012
LO4
Nominal GDP vs. Real GDP
• GDP is a dollar measure of production
• Using dollar values creates problems
• Nominal GDP
– Based on prices that prevailed when output
was produced
• Real GDP
– Reflect changes in the price level
– Use base year price
LO5
GDP Price Index
• Use price index to determine real GDP
Price
Index
In Given
Year
Real
GDP
LO5
=
=
Price of Market Basket
In Specific Year
Price of Same Basket
In Base Year
x 100
Nominal GDP
Price Index (in hundredths)
GDP Price Index
• Calculating Real GDP (Base Year = Year 1)
LO5
Year
(1)
Units of
Output
(2)
Price of
Pizza
Per Unit
(3)
Price Index
(Year 1 = 100)
(4)
Unadjusted,
or Nominal,
GDP
(1) X (2)
1
5
$10
100
$ 50
$50
2
7
20
200
140
70
3
8
25
250
200
80
4
10
30
—
—
—
5
11
28
—
—
—
(5)
Adjusted,
or
Real, GDP
Shortcomings of GDP
•
•
•
•
•
•
•
LO6
Nonmarket activities
Leisure
Improved product quality
The underground economy
GDP and the environment
Composition and distribution of the output
Noneconomic sources of well-being
Underground Economy
LO6
…
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