Introduction to Agricultural and Natural Resources

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? Figure 12.3 - Penson

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 - Consumer Price Index http://www.bls.gov/cpi/

7. Consumer Confidence CCI, Wikipedia

9. 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.

10. National Income Acounts • Most important measure - • Gross Domestic Product (GDP) – a single dollar value of the total of all goods and services produced in the United States whether by domestic or foreign resources. • A measure of growth in the economy and a basis for other measures.

12. 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!

13. We can measure macro economic activity in either resource markets or product markets. Result is the same…

14. United States’ GDP

16. Figure 12–4 As a point of reference, real GDP fell by 8.5%, 6.5% and 12.9% annually over the 1930–1932 period.

17. 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!

18. National income = GDP

19. 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. • “Constant” is outdated; government now used “Chained” • Concept is the same, adjust for inflation; methodology is different. • http://en.wikipedia.org/wiki/Chained_dollars • Bottom line, it is important to distinguish between real and nominal values when making comparisons over time.

20. Examples of Inflation << 2004

21. UD Tuition and Fees – Fall 2011 Source: UD Brochure , 2011 2015 – 2016: $25,000 and $44,000!!!!

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

23. How much is U.S. GDP? Other Countries? • Web Sites from 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)

24. 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 • See the U.S. Statistical Abstract

25. Table 12–2 GDP: What's In and What's Not

26. 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!

27. Issues with GDP • GDP excludes: • leisure activities – a nice walk or bike ride! • volunteerism • income distribution considerations • private transactions (bartering) • Gross Domestic Product (GDP) as a Measure of Welfare/Growth/Development

28. 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