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Introduction to Agricultural and Natural Resources

Introduction to Agricultural and Natural Resources. Overview of Macroeconomics FREC 150 Dr. Steven E. Hastings . Overview of Macroeconomics. Major Topics Definition Circular Flow of Income (Again) Macroeconomic Indicators National Income Accounts Summary: Where are We Going?

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Introduction to Agricultural and Natural Resources

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  1. Introduction to Agricultural and Natural Resources Overview of Macroeconomics FREC 150 Dr. Steven E. Hastings

  2. Overview of Macroeconomics • Major Topics • Definition • Circular Flow of Income (Again) • Macroeconomic Indicators • National Income Accounts • Summary: Where are We Going? • Macroeconomics • Stock Market • Food and Fiber System

  3. Overview of Macroeconomics • Macroeconomics focuses on the “Circular Flow of Income, Resources and Products” as a whole, not individual entities (firms, consumers, etc.) • Macroeconomics focuses on broad aggregates such as GDP, unemployment and inflation. Penson et al. 2009 • “Macroeconomists study aggregated indicators such as GDP, unemployment rates, and price indices to understand how the whole economy functions.” http://en.wikipedia.org/wiki/Macroeconomics

  4. Macroeconomics: How do we measure, analyze and influence this?

  5. Macroeconomic Indicators • Many, many macroeconomic indicators (measures) exist – 1,000’s! • Socioeconomic Indicators: • Population ( http://www.census.gov/ • Income (www.census.gov)

  6. Economic Indicators: • unemployment rates http://www.bls.gov/ • interest rates www.bankrate.com • stock prices WSJ, Market Data Center

  7. Consumer Confidence CCI, Wikipedia

  8. National Income and Product Accounts • A national accounting system (much like a business would use) started in the 1930’s (post-Depression) to measure and monitor the value of economic activity in the U. S. economy. • Viewed the economy much like a business. • Focused on income, expenditures and products produced. • Continually modified and improved.

  9. National Income Acounts • Most important measure - • Gross Domestic Product – a single dollar value of the total of all goods and services produced in the United States whether by domestic or foreign resources.

  10. Ways to measure GDP • There are 2 ways to measure GDP – provides a system of “check and balances” • Expenditure Method – looks at product markets - the sum of all sales of goods and services in the economy. • GDP = Consumption + Investment + Gov’t Expenditures + (Exports – Imports) Very famous equation!

  11. United States’ GDP

  12. Income Method – looks at resource markets - the sum of all expenditures on resources in the economy. • GDP = Employee compensation + Corporate profits + Proprietor's Income + Rental income + Net Interest • Both way produce the same number!

  13. Nominal vs. Real GDP • National Accounts are measures in dollars, but the dollar “value” (the things that can be purchased with a dollar) changes – called, inflation or deflation. • Thus, “nominal values” must be adjusted (usually, deflated) to determine “constant” or “real” values. • It is important to distinguish between real and nominal values

  14. Examples of Inflation << 2004

  15. UD Tuition and Fees – Fall 1968 Source: UD Undergraduate Catalog, 1968 - 1970 Keep in mind that the Minimum Wage was $1.15!

  16. How much is U.S. GDP? Other Countries? • Web Sites form the Reading List • Macroeconomic Analysis • Overview of the U. S. Economy: Perspective from the BEA Accounts • ERS/USDA International Macroeconomic Data Set • List of Countries by GDP (nominal)

  17. Related Measures in the National Income Accounts • Basis for a series of related measures: • Gross National Product • Net National Product and Net National Income • Personal Income and Disposable Personal Income

  18. Contents of GDP

  19. Issues with GDP • Problems - depend on the purpose: • GDP includes: • pollution control – pollute a river, clean it up and increase GDP! • clean up from natural disaster - • war expenditures – go to war and increase GDP!

  20. Issues with GDP • GDP excludes: • leisure activities – a nice walk or bike ride! • volunteerism • income distribution considerations • private transactions (bartering) • Read: GDP – The Measure and Mismeasure of the Economy • http://www.cbc.ca/money/story/2008/06/16/f-economy-gdp.html

  21. Summary • Macroeconomic is concerned with the performance of our overall economy. • Our economy is measured and monitored via a series of socioeconomic and economic indicators. • Where are we going? • Macro> Stock Market> Food and Fiber System

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