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Understanding National Income Accounting in Macroeconomics

Learn about GDP measurement, saving, wealth, real GDP, price indexes, inflation, interest rates, and national income accounting in macroeconomics. Explore the product and expenditure approaches to measuring GDP, differences between GNP and GDP, and the income approach to measuring GDP.

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Understanding National Income Accounting in Macroeconomics

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  1. Macroeconomics ECN 3102 CHAPTER 2

  2. Chapter Outline National Income Accounting: The Measurement of Production, Income, and Expenditure Gross Domestic Product Saving and Wealth Real GDP, Price Indexes, and Inflation Interest Rates

  3. National Income Accounting • Measuring current economic activity

  4. Measurements

  5. Gross Domestic Product • The product approach to measuring GDP • GDP (gross domestic product) is the market value of final goods and services newly produced within a nation during a fixed period of time

  6. Problem -GDP • misses nonmarket items such as homemaking, the value of environmental quality, and natural resource depletion • There is some adjustment to reflect the underground economy • Government services (that aren’t sold in markets) are valued at their cost of production • Newly produced: counts only things produced in the given period; excludes things produced earlier

  7. GDP • Final goods and services • Don’t count intermediate goods and services (those used up in the production of other goods and services in the same period that they themselves were produced) • Final goods & services are those that are not intermediate • Capital goods (goods used to produce other goods) are final goods since they aren’t used up in the same period that they are produced

  8. Gross Domestic Product • GNP vs. GDP • The expenditure approach to measuring GDP • Consumption • Investment • Government purchases of goods and services • Net exports: exports minus imports • The income approach to measuring GDP

  9. Saving and Wealth • Wealth • Measures of aggregate saving

  10. Real GDP, Price Indexes, and Inflation • Real GDP • Price Indexes • Real vs. nominal interest rates

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