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Measuring Economic Performance

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Presentation on theme: "Measuring Economic Performance"— Presentation transcript:

1 Measuring Economic Performance
Gross Domestic Product

2 Gross Domestic Product
= C + I + G + Nx Consumption Method of calculation

3 Gross Domestic Product
= value of sales – value of inputs from other businesses (intermediate goods) Value-added method of calculation

4 Gross Domestic Product
= W + I + R + P Income method of calculation

5 GDP (consumption)? America Ore, Inc. American Steel, Inc.
American Motors, Inc. Total factor income Value of Sales $4200 (ore) $9000 (steel) $21,500 (car) Intermediate goods 4200 (iron ore) 9000 (steel) Wages 2000 3700 10,000 15,700 Interest payments 1000 600 2600 Rent 200 300 500 Profit 2200 Total expenditure by firm 4200 9000 21,500 Value added by firm 4800 12,500 GDP (consumption)?

6 GDP (value added)? America Ore, Inc. American Steel, Inc.
American Motors, Inc. Total factor income Value of Sales $4200 (ore) $9000 (steel) $21,500 (car) Intermediate goods 4200 (iron ore) 9000 (steel) Wages 2000 3700 10,000 15,700 Interest payments 1000 600 2600 Rent 200 300 500 Profit 2200 Total expenditure by firm 4200 9000 21,500 Value added by firm 4800 12,500 GDP (value added)?

7 GDP (income method)? America Ore, Inc. American Steel, Inc.
American Motors, Inc. Total factor income Value of Sales $4200 (ore) $9000 (steel) $21,500 (car) Intermediate goods 4200 (iron ore) 9000 (steel) Wages 2000 3700 10,000 15,700 Interest payments 1000 600 2600 Rent 200 300 500 Profit 2200 Total expenditure by firm 4200 9000 21,500 Value added by firm 4800 12,500 GDP (income method)?

8 Remember… GDP doesn’t measure…
Intermediate goods Non-market activities (plumber doing his own plumbing; mom’s helping other mom’s) Leisure and the increased productive capacity because of a healthy workforce Improvements in technology Black market activities Environmental impact AR-15 v. Encyclopedias Distribution of income (do the 10% get 90%?)

9 GDP estimates from CIA Rank country GDP (purchasing power parity)
Date of Information 1 European Union $ 15,700,000,000,000 2012 est. 2 United States $ 15,660,000,000,000 3 China $ 12,380,000,000,000 4 India $ 4,735,000,000,000 5 Japan $ 4,617,000,000,000 6 Germany $ 3,194,000,000,000 7 Russia $ 2,509,000,000,000 8 Brazil $ 2,362,000,000,000 9 United Kingdom $ 2,323,000,000,000 10 France $ 2,253,000,000,000

10 Better picture of GDP? Calculate the per capita GDP to measure economic well being in a country (vis a vis other countries) Per capita GDP = GDP / total population

11 Per Capita GDP … CIA Rank country GDP - per capita (PPP)
Date of Information 1 Qatar $ 102,800 2012 est. 2 Liechtenstein $ 89,400 2009 est. 3 Luxembourg $ 80,700 4 Macau $ 74,900 2011 est. 5 Bermuda $ 69,900 2004 est. 6 Singapore $ 60,900 7 Jersey $ 57,000 2005 est. 8 Falkland Islands (Islas Malvinas) $ 55,400 2002 est. 9 Norway $ 55,300 10 Hong Kong $ 50,700 11 Brunei $ 50,500 12 United States $ 49,800 13 United Arab Emirates $ 49,000

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