1. Macroeconomics
The study of the entire economy. Used to predict economic performance by looking at the past and current performance of the economy.

2. In order to do this: Measurements called NIPAs are used
National Income and Product Accounts track the following items in the nations economy
Production
Income
Consumption
The tracking process is called National Income Accounting is measured in dollars
Provides information about the nations economic activities

3. The amount of money in the economy is controlled by the Federal Reserve. When deciding how much money to allow into the economy, the FED looks at economic indicators.

4. What are some of these economic indicators?
GDP= Gross Domestic Product (GNP)
NNP= Net National Product
NI = National Income
PI = Personal Income
DI = Disposable Income
CPI = Consumer Price Index
PPI = Producer Price Index
Inflation
Businesses Cycle

5. GDP = Gross Domestic Product
Is the total dollar value of all final goods and services produced within a country during 1 calendar year
Measures total production (output)
Does not include used cars or second-hand clothing

6. Real GDP v. Nominal GDP
Nominal GDP: current GDP, expressed in current prices of the period being measured
Real GDP: adjusted for the price changes, allows economists to determine if production increased or decreased, regardless of the changes in the purchasing power of the U.S. dollar

7. Limitations of the GDP
It is not an entirely accurate measure of output and economic growth for the following reasons:
1. Gathering necessary data to calculate GDP is slow and time-consuming. Initial GDP figures are often inaccurate, and the Commerce Department often has to issue revised figures.
2. GDP only measures market transactions – exchanges of goods and services for money that are recorded in the marketplace. This does not include nonmarket activities- transactions that do not involve money and are not recorded

8. Limitations of the GDP
3. Underground economic activity not included in GDP: illegal and unreported legal activities 4. Imperfect indicator of economic growth in a nation and overall wellbeing. The value of many “goods” (things that make the society better) and the detriment of many “bads” (things that make society worse) are not recorded.

9. GNP = Gross National Product
Was used until 1991 by the Commerce Department to measure economic growth
Measures the total dollar value of all final output produced with factors of production owned by residents of a country.
UN and most countries used GDP, so U.S. switched, making international economic comparisons easier

10. NNP= Net National Product
GDP includes money invested in capital goods
Investment includes money spent on replacing defective or outdated equipment and machinery
When this is subtracted from the GNP = NNP
Does not include investment spent to maintain current equipment: more representative of nation’s actual output of new goods and services in a year

11. NI = National Income
Determines total income paid to the owners of a nation’s factors of production
Sum of employees’ and proprietors’ income, real and estimated rental income, corporate profits, and net interest
Calculated by subtracting subsides and indirect taxes ( taxes included in final price of goods and services) from net national product.

12. PI= Personal Income
Total amount of income earned by people in a given nation
Subtract from national income all income that does not go to people (taxes, money reinvested)
Add money individuals receive from government transfer payments

13. DPI= Disposable Personal Income
The total amount of income available to a nation’s people to spend or save
Subtract personal taxes (income, estate, gift, property, motor vehicle) and nontax payments (fines/passports) from personal income.

14. GDP Activity Final Goods and Services Manicures Bread Cruise missiles
Who would purchase these things?
Manicures
Bread
Cruise missiles
New Factory
Dresses
Increase in automobile inventory
C Consumers – household purchases of consumer goods and services
I Investments – purchases of businesses of capital goods, such as factories, tools etc.
G Governments – government purchases of goods and services

15. Pepperonia v. Anchovia Each student will get a Final Good or Service
First determine which category you fall under
C, G or I
Second add how many “parms” (dollars) are made under each category
Third calculate your countries GDP
C+G+I=GDP
Forth calculate each component’s percentage share of total GDP
Fifth as a group create a pie chart using the percentages gathered from step 4. Each category should be represented by a different color.