0. Introduction to macroeconomics and national income accounting

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4. Macroeconomics is ... the study of the economy as a whole
it deals with broad aggregates
but uses the same style of thinking about economic issues as in microeconomics.
See the introduction to chapter 20 in the main text.

5. Some key issues in macroeconomics
Inflation
the rate of change of the general price level
Unemployment
a measure of the number of people looking for work, but who are without jobs
Output
real gross national product (GNP) measures total income of an economy
it is closely related to the economy's total output
See Section 20-1 in the main text.

6. More key issues in macroeconomics
Economic growth
increases in real GNP, an indication of the expansion of the economy’s total output
Macroeconomic policy
a variety of policy measures used by the government to affect the overall performance of the economy
See Section 20-1 in the main text.

7. Inflation in the UK,
See Section 20-2 in the main text, and Figure 20-1.
This version shows a longer period.
Source: Economic Trends Annual Supplement, Labour Market Trends

8. Inflation in selected European countries
Data on the Harmonised Indices of Consumer Prices, taken from Labour Market Trends, February 2000.

9. Inflation in UK, USA and Germany
Data taken from Table 20-4 in the main text

10. Unemployment in the UK, 1950-99
Data relate to the claimant count.
Source: Economic Trends Annual Supplement, Labour Market Trends

11. Unemployment in selected European countries
Data from Labour Market Trends, February 2000.

12. Unemployment in UK, USA and Germany
Data taken from Table 20-4 in the main text

13. Economic growth in UK, USA and Germany
Data taken from Table 20-4 in the main text

14. The circular flow of income, expenditure and outputS
Households
Firms Y
Animation sequence for the circular flow with no government and no international trade.:
1 begin with two sets of agents, Households and Firms
2 Firms produce output
3 which flows as income to households
4 who allocate their income partly to Consumption and partly to Saving
5 Household C is augmented by Firms' investment, to create total expenditure (C + I).
… so we have the circular flow
This is discussed in Section 20-4 of the main text.

15. Government in the circular flowY
C + I + G I C S
Households
Firms
Government
C + I + G - Te Te G
B - Td
Y + B - Td
No build-up this time, the whole Figure will spiral in to cue, adding the government into the circular flow. This is also in Section 20-4.

16. Adding the foreign sector
To incorporate the foreign sector into the circular flow
we must recognize that residents of a country will buy imports from abroad
and that domestic firms will sell (export) goods and services abroad.
See Section 20-4 in the main text.

17. GDP and GNP Gross domestic product (GDP) Gross national product (GNP)
measures the output produced by factors of production located in the domestic economy
Gross national product (GNP)
measures the total income earned by domestic citizens
GNP = GDP + net income from abroad
See Section 20-4 of the main text.
Income from abroad tends to be relatively small for the UK, but may be substantial for countries such as Egypt or the Philippines where there are large flows of repatriated income from workers abroad.

18. Three measures of national output
Expenditure
the sum of expenditures in the economy
Y = C + I + G + X - Z
Income
the sum of incomes paid for factor services
wages, profits, etc.
Output
the sum of output (value added) produced in the economy
See Section 20-4 in the main text.
We use Z for imports because we have used I for investment, and will sue M for money...

19. National income accounting: a summary
X - Z I
NYA G
GDP at
market
prices
NYA
GNP
(and
GNI) at
market
prices
NNP
at basic
prices
Deprec'n
National
income
Indirect
taxes
Wages
and
salaries
Self-
employment
Profits,
rents
See Figure 20-5 in the main text.
Animation provides one block at a time from the left.

20. What GNP does and does not measure
Some care is needed:
to distinguish between real and nominal measurements
to take account of population changes
to remember that GNP is not a comprehensive measure of everything that contributes to economic welfare
See Section 20-5 of the main text.

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