How to get a final mark

1. How to get a finalmark • Final Test – multiplechoice

2. Bibliography • „Microeconomics 6e” Prentice Hall Publishing House, June2004 ISBN: 0-13-191207-0 • Czarny B. „Podstawy Ekonomii” • Begg D., „Economics” • http://www.ioz.pwr.wroc.pl/Pracownicy/Chodak/ • http://windward.hawaii.edu/facstaff/briggs-p/Macroeconomics/macrolectures.htm • www.wikipedia.org

3. Measuring a Nation’s Income

4. 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. To have this number make sense, it is also best to look at income per person.

5. The Economy’s Income and Expenditure • For an economy as a whole, income must equal expenditurebecause: • Every transaction has a buyer and a seller. • Every dollar of spending by some buyer is a dollar of income for some seller. • Say’s Law-Supply creates it’s own demand • This process can be seen using a Circular Flow Diagram.

6. Revenue Spending Goods & Services sold Goods & Services bought Inputs for production Labor, land, and capital Wages, rent, and profit Income The Circular-Flow Diagram Market for Goods and Services Firms Households Market for Factors of Production

7. 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. • How much is the current GDP per capita?

8. Importantindicators • GDP (current U$) • GDP per capita (current U$) • GDP per capita (PPP-purchasing power parity) • GNI per capita (current U$) • GNI per capita (PPP) • GDP annual growth • Fertility rate • Life expectancy • Literacy rate

10. The Measurement of GDP GDP is:GDP can be defined in three ways, all of which are conceptually identical. • First, it is equal to the total expenditures for all final goods and services produced within the country in a stipulated period of time (usually a 365-day year). • Second, it is equal to the sum of the value added at every stage of production (the intermediate stages) by all the industries within a country, plus taxes less subsidies on products, in the period. • Third, it is equal to the sum of the income generated by production in the country in the period—that is, compensation of employees, taxes on production and imports less subsidies, and gross operating surplus (or profits).

11. Finalgoods • In economics final goods are goods that are ultimately consumed rather than used in the production of another good. • For example, a car sold to a consumer is a final good; • The components such as tires sold to the car manufacturer are not; they are intermediate goods used to make the final good.

12. Valueadded • Value added refers to the additional value of a commodity over the cost of commodities used to produce it from the previous stage of production. • It refers to the contribution of the factors of production, i.e., land, labour, and capital goods, to raising the value of a product and corresponds to the incomes received by the owners of these factors. • In national accounts such as the United Nations System of National Accounts (UNSNA), gross value added is obtained by deducting intermediate consumption from gross output. Thus gross value added is equal to net output.

14. What Is Counted and Not Counted inGDP? GDP includes all items produced in the economy and sold legally in markets. GDP excludes services that are produced and consumed at home and that never enter the marketplace. Caring labour, the work that is normally produced by women. Because GDP does not count it, it diminishes its importance. GDP also excludes black market items, such as illegal drugs.

15. Other Measures of Income • Gross National Product (GNP) • Net National Product (NNP) • National Income • Personal Income • Disposable Personal Income

16. 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

17. GDP and Its Components (1998, USA)

18. GDP and Its Components (1998) Government Purchases 18% Investment 16% Net Exports -2 % Consumption 68 %

19. Measuring Economic Growth • We use real GDP to calculate the economic growth rate. • The economic growth rate is the percentage change in the quantity of goods and services produced from one year to the next. • We measure economic growth so we can make: • Economic welfare comparisons • International welfare comparisons • Business cycle forecasts

20. Measuring Economic Growth • Business Cycle Forecasts • Real GDP is used to measure business cycle fluctuations.

21. Real 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.

22. Real GDP and the Price Level • Deflating the GDP Balloon • Nominal GDP increases because production—real GDP– increases.

23. Real GDP and the Price Level • Nominal GDP also increases because prices rise. • Deflating the GDP Balloon

24. Real GDP and the Price Level • We use the GDP Deflator to take the air out of Nominal GDP.

25. (Periods of falling real GDP) Real GDP in the United States Billions of 1992 Dollars 8,000 7,000 6,000 5,000 4,000 3,000 1970 1975 1980 1985 1990 1995 2000

26. Bibliography:http://windward.hawaii.edu/facstaff/briggs-p/Macroeconomics/macrolectures.htmCzarny Bogusław, Podstawy Ekonomii, PWE 2002