Post on 23-Jan-2015
description
Measuring GDP
Prof. Jeff Takle(857) 277-9050 | jeff.takle@gmail.com
Compare the U.S. to Others…• Who has the highest GDP?• Who has the highest GDP per capita?• What is misleading about graph on p93?
www.NationMaster.com
How Do You Calculate GDP? (expenditure approach)
• What’s included?▫ Only final goods and services▫ C + I + G + (X – M) = Aggregate expenditure = GDP
Consumption Investment Government expenditure Net exports
• What’s not included?▫ Intermediate goods▫ Supplies or resources currently being used (works in progress)▫ Secondhand goods & services▫ Black market goods & services▫ Do-It-Yourself goods & services
Okay, let’s do it…All data 2009 (in trillions)
USA China
Consumption (C)
9.4 1.1*
Investment (I) 2.3 2.0
Government (G)
2.8 1.4*
Exports (X) 1.0 1.2
Imports (M) 1.5 0.9
Calculate GDP 14.0 4.8Per capita $44,000 (#8) $2,033 (#131)
Plus Black Market 1%? 10%?Plus Do-It-Yourself 1%? 20%?Adjusted per capita $44,800 (#8) $2,720 (#116)
Is this included in a GDP calculation?
Pirated CDs, DVDs
Knock-off sunglasses
Is this included in a GDP calculation?
Is this included in a GDP calculation?
Other Weaknesses of GDP• Depreciation• Environmental costs• Stocks of natural
resources• Income disparity
All data 2009 (in trillions)
USA China
Consumption (C)
9.4 1.1*
Investment (I) 2.3 2.0
Government (G)
2.8 1.4*
Exports (X) 1.0 1.2
Imports (M) 1.5 0.9
Calculate GDP 14.0 4.8Per capita $44,000 (#8) $2,033 (#131)
Plus Black Market 1%? 10%?Plus Do-It-Yourself 1%? 20%?Adjusted per capita $44,800 (#8) $2,720 (#116)
How are the countries doing on these issues?
Consumer Price Index (CPI)• Measure of value for a typical “basket of goods”
▫ 100s of products, adjusted every few years• Using the CPI
▫ Pick a base year. That year’s CPI = 100▫ Real GDP = Nominal GDP / CPI or…▫ CPI = Nominal GDP / Real GDP …
Let’s Review
You Should Be Able to…1. Calculate the nominal GDP from its components (Consumption,
Investment, Government spending, Exports and Imports)2. Calculate the real GDP from a nominal GDP, given a Consumer Price
Index (CPI)3. Calculate the real GDP per capita4. Identify whether an economy appears to be growing or shrinking by
looking at the real GDP per capita5. Identify several areas of the economy not accounted for in GDP6. Given estimates for economic activity in those unaccounted-for areas,
calculate an adjusted real GDP per capita7. Compare the adjusted real GDP’s per capita for several countries8. Evaluate several leading, coincident, and lagging economic indicators
and determine if a country is in / headed for growth or a recession
Charts Just For Fun!