1. Lesson One Welcome to Economics

2. Teacher ’ s expectation Interaction Attentive Hardworking

3. Students expectation

4. Introduction Email address: duncanfong@i-cable.comduncanfong@i-cable.com Staff room C Icq: 177928499

5. National Economic Objectives Employment National output Price stability

6. National income Stock is a any measurement of time E.g. value of supermarket

7. Flow Any measurement that spreads over a period E.g. monthly earning of supermarket Salary of a teacher

8. Final goods Goods for final use or consumption

9. Intermediate goods As input in producing other goods

10. Coca cola Final goods if consumed by customers Intermediate goods in caf é shop

11. What other examples?

12. Steel, air-conditioner Similar to the concept of consumer goods and capital goods in microeconomics

13. Circular flow of economy National output = total market value of final goods and services E.g. production of teddy bear, mobile phone & trousers by firms

14. National expenditure approach Household ’ s total expenditure in paying for the teddy bear, mobile phone and trousers

15. Factor approach Wages+ interest+ rental income +profit

16. Three approaches (identical results) Output Expenditure Factor (national income)

17. Gross domestic product Production of all resident producing units

18. Other examples Oil tanker company transporting oil from Middle East to USA Management consulting firm provides service in Singapore

19. Items excluded Second hand goods Why not included?

20. Items excluded Second hand goods Domestic services

21. Items excluded Second hand goods Domestic services (not transacted in market) Intermediate goods (to avoid double counting)

22. Items excluded Second hand goods Domestic services Intermediate goods Transaction of shares Transfer payment

23. Items excluded Second hand goods Domestic services Intermediate goods Transaction of shares Transfer payment (transfer of funds only)

24. Question Does the work of housewife include in GDP? Any difference if she works as a domestic helper in other families?

25. Expenditure Approach ( 開支面 ) GDP= C+I+G+ (X-M) C= Private consumption E.g. movie expenditure

26. Investment expenditure ( 投資支出 ) Gross domestic fixed capital formation ( 本地固定資本形成總額 ) e.g. land sites exploring Changes in inventories ( 存貨增減 ) in current year

27. Government expenditure Transfer payment excluded Expenditure on goods and civil servants included

28. Exports minus imports Net re-export is a kind of export Consumption of imported goods should be deducted Does the mainland tourists buy Japanese AV equipment included in HK GDP?

29. Production Approach ( 生產面 ) To use the value added method Value added= value of output minus value of intermediate goods in the course of production

30. Government role in Value added approach Indirect business taxes added (VAT 增值 稅 ) Subsides deducted ( 農產品津貼 )

31. III income approach ( 收入面 ) Compensation of employees ( 僱傭報酬 ) + gross operating surplus ( 公司經營盈餘 ) that is the sum of return on four factors of production Similarly, business tax and subsidies included in government

32. Question 5 and 2.3 on P.23 Why some items excluded?

33. Gross National Product ( 本地 居民生產總值 ) Vs GDP ( 本地生產總值 ), by resident producing units Earned by residents of an economy Examples of differences

34. GNP Factory operating and registering in Mainland China but owned by HK resident Filipino maid HK retired persons earning from abroad

35. GNP GNP = GDP+ Net factor income from abroad ( 外地生產要素所得淨值 ) or net external factor income flow ( 對外要素 收益流動淨值 )

36. net external factor income flow Investment income + labour income Profits, earnings from shares+ interest earned etc

37. Can GDP > GNP? Any examples? Q7 of P.26 (Japanese investor in HK)

38. Other statistics GDP at factor cost (GDP- (Indirect business taxes – subsidies))

39. Per capita ( 人均總值 ) GDP divided by the number of population

40. Price level Current/ money/ nominal price level ( 名義 價格指數 ) Constant/ real price level ( 實質價格指數 ) Current price divided by nominal level is the implicit price deflator ( 內含平減物價指 數 )

41. Exercise on p.30 to 32 Q10 why $900? Q2.5 from a to c Q11 why 12%? Q12 on P.32

42. Use of national income statistics Measurement of living standard Basis of international comparison Formulation government policies Indicators of economic progress

43. Limitations Effects of population size Effects of price change Distribution of income Composition of GNP Domestic services

44. Other limitations Domestic and personnel services Desirable/ undesirable effects of industrialization Black market transactions (corruption, tax evasion, prostitution) Q14 on p.38