macroeconomic summer learning

injections > leakages

economic growth

leakages > injections

economy declines

national income accounting

measures value of total output

methods to calculate national ouput (in theory the value of each will be equal to one another)

• expenditure approach

• income approach

• ouput approach

expenditure approach

measures spending on final goods and services only

• if other products were used to make the product, only the final product is countd

total spending

consumption - spending by households

investment- spending by firms

government spending - spending/investment by government

net exports - output - input

• collectively create the gross domestic product (GDP)

GDP (gross domestic product)

the market value of all final goods and services produced in a country over a given time

income approach

• measures income from the production of a good and services such as wages, rents, interest, and profits.

• It focuses on the earnings generated by the factors of production used in the economy.

output approach

• measures the value added at each stage of production

  • only accounts for the additional value created after each stage

gross national income (GNI)

GNI = GDP + net income from abroad

net income from abroad = income from abroad - income sent abroad

difference between GDP and GNI

GDP: the total value of all goods and services produced within a country's borders no matter who actually made the product

GNI: only considers money made by the national residents regardless of where the money came from

nominal GDP

the total market value of all final goods and services produced in an economy in a given period, measured at current prices.

real GDP

the value of how much a quantity can buy

• requires a base year to compare

GDP deflator

a measure of the level of prices of all new, domestically produced, final goods and services in an economy without inflation

GDP deflator = nominal GDP/real GDP • 100

GDP per capita

GDP/population

• measures the average economic output per person in a given area.

purchasing power parities (PPP)

a method of measuring the relative value of currencies based on the cost of goods and services in different countries, enabling comparisons of economic productivity and standards of living.