Chapter 2 Income. Income vs. Development (Don’t confuse these!) Economic development involves many outcomes: –Income growth (Chs 2 & 6), poverty (3),

Slides:



Advertisements
Similar presentations
Price Indexes.
Advertisements

Measuring National Income Copyright P Oldfield Measuring National Income THE ABSOLUTE BASICS.
Economic Growth (GDP) With Mrs. Eskra. OBJECTIVES: WHAT WILL YOU LEARN? – What GDP is and what it measures. – The two approaches to calculating GDP Income.
Unit 1 – Macroeconomic Measurement and Basics Concepts Chapter 7 – Measuring Domestic Output and National Income.
Lucas (1988) “By the problem of development I mean simply the problem of accounting for the observed pattern, across countries and across time, in levels.
Introduction to Macroeconomics
© 2007 Thomson South-Western. Measuring a Nation’s Income Microeconomics is the study of how individual households and firms make decisions and how they.
MEASURING A NATIONS INCOME.  Microeconomics  Microeconomics is the study of how individual households and firms make decisions and how they interact.
Appendix to Chapter 1 Defining Aggregate Output, Income, the Price Level, and the Inflation Rate.
National Income Accounting
Chapter 2 Income. What Development Projects Focus On Concrete outcomes related to poverty, malnutrition, inequality, and health. Basic physical needs.
National Income Accounting
 Final Test – multiple choice.  „Microeconomics 6e” Prentice Hall Publishing House, June 2004 ISBN:  Czarny B. „Podstawy Ekonomii” 
Chap 10, Mankiw – Measurement of national income
Ch 6: Macroeconomic Measurements, Part II GDP and Real GDP
ECONOMIC AGENTS Households FIRMS Government.
Taking the Nation’s Economic Pulse
Measuring a Nation’s Income
Learning Objectives Know what GDP measures – and what it doesn’t Know the difference between real and nominal GDP Know why aggregate.
The U.S. Economy: A Global View Chapter 2 Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.
Measuring National Income and Output
National Income Analysis. National Income- Meaning It is a sum total of factor incomes accruing to normal residents of a country within an accounting.
NATIONAL INCOME ACCOUNTING
Section 3B- Module 11- Interpreting Real Gross Domestic Product.
Chapter Five: Measuring The Economy's Performance.
Copyright © 2008 Pearson Addison-Wesley. All rights reserved. Chapter 2 Measurement.
Measuring National Output Chapter 5. Economic goals  Economic growth  Full employment  Low inflation  An economy grows because of increases in available.
Macroeconomic Aggregates. The Importance of Economic Data For the practicing economists and those who must make economic decisions, measuring the economy.
Taking the Nation’s Economic Pulse
Prepared by: Jamal Husein C H A P T E R 10 © 2005 Prentice Hall Business PublishingSurvey of Economics, 2/eO’Sullivan & Sheffrin Measuring a Nation’s Production.
1 20 C H A P T E R © 2001 Prentice Hall Business PublishingEconomics: Principles and Tools, 2/eO’Sullivan & Sheffrin Measuring a Nation’s Production and.
GDP Chapter 7. Gross Domestic Product GDP is the total market value of a country’s output. It is the market value of all final goods and services produced.
Measuring a Nation’s Economic Health Gross Domestic Product. Mr. Ognibene Economics.
CHAPTER 24 Tracking the Macroeconomy. 2 The National Accounts  Almost all countries calculate a set of numbers known as the national income and product.
Unit 2-1: Macro Measures 1. Macroeconomics is the study of the large economy as a whole. It is the study of the big picture. Instead of analyzing one.
Measuring National Income Copyright P Oldfield Measuring National Income THE ABSOLUTE BASICS.
Gross Domestic Product & Growth Macroeconomics – Part 1.
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
© The McGraw-Hill Companies, 2008 Chapter 19 Introduction to macroeconomics David Begg, Stanley Fischer and Rudiger Dornbusch, Economics, 9th Edition,
Week 8 – Economics Theory National Income Accounting.
Economics 13-4 Economic Growth pages ECONOMIC GROWTH ESSENTIAL QUESTIONS: What are two measures of economic growth? Why is economic growth important?
Part Six: Public Policy “Justice is itself the great standing policy of civil society; and any eminent departure from it, under any circumstances, lies.
Part Six: Public Policy “Justice is itself the great standing policy of civil society; and any eminent departure from it, under any circumstances, lies.
Gross Domestic Product GDP. I. GDP (or nominal GDP) is the dollar amount of all final goods and services produced within a country’s borders in a year.
Part Six: Public Policy “Justice is itself the great standing policy of civil society; and any eminent departure from it, under any circumstances, lies.
Measuring Economies GNP, GDP And “per capita”. Measuring the Size of the Economy GNP & GDP measure the size of the Economy. GNP or “Gross National Product”
Part Six: Public Policy “Justice is itself the great standing policy of civil society; and any eminent departure from it, under any circumstances, lies.
COST AND REVENUES. COSTS VS REVENUES Cost is the money spent for the inputs used (e.g., labor, raw materials, transportation, energy) in producing a good.
GDP Facts  GDP is called the single best measure of economic well-being.  GDP measures both the economy’s total income and expenditures.  Because most.
Introduction: Thinking Like an Economist 1 CHAPTER 2 Measuring the Aggregate Economy The government is very keen on amazing statistics…They collect them,
Gross Domestic Product & Growth
THE DATA OF MACROECONOMICS
Chapter 2: Comparing levels of development
Measuring National Income
Globalisation…. What is globalisation? Definition of globalisation ‘The ability to produce any goods (or service) anywhere in the world, using raw.
THE DATA OF MACROECONOMICS
4 GDP & National income accounting
ECONOMIC PERFORMANCE.
Economic Indicators And Measurements
NATIONAL ACCOUNT SYSTEM (NAS)
Macroeconomics ECN 3102 CHAPTER 2.
Chapter 17 The American Economy.
GDP Facts GDP is called the single best measure of economic well-being. GDP measures both the economy’s total income and expenditures. Because most people.
The Market Economy Productivity.
GDP Facts GDP is called the single best measure of economic well-being. GDP measures both the economy’s total income and expenditures. Because most people.
Appendix to Chapter 1 Defining Aggregate Output, Income, the Price Level, and the Inflation Rate.
Gross Domestic Product & Growth
Source: books and web materials
GDP Facts GDP is called the single best measure of economic well-being. GDP measures both the economy’s total income and expenditures. Because most people.
Presentation transcript:

Chapter 2 Income

Income vs. Development (Don’t confuse these!) Economic development involves many outcomes: –Income growth (Chs 2 & 6), poverty (3), inequality (4), human welfare (5) One theme of this class: –Income growth and development are different things –…but it’s hard to have development without growth

Tools of the Trade:

What is Growth? Income? Growth: Rise in national or per-capita income and production (Ch. 6) Gross National Product (GNP; same as Gross National Income) –Add up value of all final goods and services produced in a country then sold Value at market prices –Alternatively, add up the cost of all factor inputs (Capital, Labor, Land), called Value Added. GDP at factor cost

What’s NOT in GDP? GDP Excludes intermediate inputs (no double counting) Includes goods & services produced by citizens abroad (Mexican migrant remittances add ~$25 billion/year to Mexico’s GNP!) Excludes goods & services not sold Get divorced, hire a cook or nanny, and GNP goes up! Same if subsistence farm sells instead of eating its rice Me and Home Depot = no contractor and lower GNP What about obesity? The environment?

Per-capita Income Take the GNP Divide by the population What everyone would have if income were perfectly equally distributed One measure of welfare (and development)

Input-Output Accounting

Green Accounting = 1,215

GNP vs. GDP Gross Domestic Product: Like GNP but only counts income earned within a country’s borders –Philippines: GDP is ~6% lower than GNP, because it doesn’t count income of Philippin migrants working abroad –If Philippine person works in Malaysia, the value of output she produces counts in the Philippines’ GNP but not its GDP. It counts in Malaysia’s GDP but not GNP We often use GDP; it usually doesn’t matter much

Real vs. Nominal GDP Real means “adjusted for inflation” –Very important for comparing a country’s changes in income over time:

Purchasing Power Parity (PPP) Adjusts exchange rates for purchasing power of income in different countries –Critical for comparing incomes across countries Mexico: Exchange Rate on was 12.8 pesos/US$ But you get more for your money in Mexico (~44% more), so the PPP exchange rate is around 8.9 (=12.8/1.44) –In other words,12.8 pesos gives you not $1 but $1.44 (=12.8/8.9) in purchasing power in Mexico if you adjust for PPP!

Making an Income Index Rank index: Income index (see index generator program):

Country Typologies World Bank Standard: –Low Income (<US$765/capita in 2003) –Lower Middle ($765-$3,035) –Upper Middle ($3,035-$9,385) –High (>$9,385) Other terms: –Third World (Pretty much out of use) –Less Developed, Developing (Commonly heard at international forums) –Emerging (Rapidly growing: China, E. European) –Industrialized (What about post-industrial OECD?) –Transitional (E. Europe, Russia, Ukraine: Controlled market -> market oriented economies) –North-South (Imprecise, but still heard sometimes)

Next Three Chapters In 2010, just under 1.3 billion people—22.4% of the world’s population—lived on less than $1.25 a day (PPP adjusted). The low-income countries contained 12.5% of the world’s population but controlled less than 1% of its income, while the high income countries had a little over 16% of its population and 72% of its income. In the poorest 10% of countries, those with GDP per capita less than $1,123, life expectancy averaged 54.4 years (compared to 80 in the richest 10%), and years of schooling averaged 3.2 years (compared to 10.5 years).