1. Chapter Five: Macroeconomic Measurement: The Current Approach

2. An Overview of National Accounting

3. Type of Capital Value in Trillions of Dollars at the End of the Year Equipment and software (businesses and government) 7.0 Structures (businesses and government)21.5 Residences17.6 Inventories 2.2 Consumer durable goods 4.7 Total Value of Manufactured Capital53.0 Table 5.1: The Estimated Size of U.S. Manufactured Capital Stock, 2011 Sources: BEA, Fixed Asset Accounts Table 1.1 and NIPA Table 5.9, and authors’ calculations

4. Measuring Gross Domestic Product

5. Sector and Subsector Production by Sector (trillions of dollars) Production by Subsector (trillions of dollars) Households and institutions production1.93 Private households 1.07 Nonprofit institutions 0.86 Business production11.87 Government production1.87 Federal government 0.62 State and local governments 1.26 Total: Gross domestic product15.68 Table 5.2: Gross Domestic Product, Product Approach, 2012 Source: BEA, NIPA Table 1.3.5, published 1/30/2013. Note: Totals may not add up exactly due to rounding.

6. Table 5.3: Gross Domestic Product, Spending Approach, 2012 Sector and Type of Spending Spending by Sector (trillions of dollars) Spending by Type (trillions of dollars) Household and institutions spending 11.12 (personal consumption expenditures) Durable goods 1.22 Nondurable goods 2.56 Services 7.34 Business spending 2.06 (gross private domestic investment) Fixed investment 2.00 Change in private inventories 0.06 Net foreign sector spending -0.57 (net exports of goods and services) Exports 2.18 Less: Imports 2.75 Government spending 3.07 (government consumption expenditures and gross investment) Federal 1.21 State and local 1.85 Total: Gross domestic product15.68 Source: BEA, NIPA Table 1.1.5, published 1/30/2013 Note: Totals may not add up exactly due to rounding.

7. Table 5.4: Gross Domestic Product, Income Approach, 2011 Types of Income and Adjustments Income and Adjustments (trillions of dollars) National income13.36 Less: Net income receipts from the rest of the world0.25 Plus: Depreciation (consumption of fixed capital) 1.94 Plus: Statistical discrepancy 0.03 Total: Gross domestic product15.08 Source: BEA, NIPA, Table 1.7.5, published 1/30/2013, and authors’ calculations

8. Growth, Price Changes, and Real GDP

9. (1)(2)(3)(4) Description Price per Pound Quantity (Pounds) Contribution to Nominal GDP [column (2) × column (3)] Year 1 Apples$1.00100$100 Oranges$2.0050$100 $200 Year 2 Apples$1.50100 $150 Oranges$2.0075$150 $300 Table 5.5: Calculation of Nominal GDP in an “Apples-and-Oranges” Economy

10. Table 5.6: Calculation of Constant-Dollar Real GDP (1)(2)(3)(4) Description Price per Pound in Base Year Quantity (Pounds) Contribution to Real GDP [column (2) × column (3)] Year 1 (Base) Apples$1.00100$100 Oranges$2.0050$100 $200 Year 2 Apples$1.00100$100 Oranges$2.0075$150 $250

11. Nominal GDP Figure 5.1 Real versus Nominal GDP, Chained 2005 Dollars, 1980–2012 Source: BEA NIPA Tables 1.1.5 and 1.1.6, published 1/30/2013

12. Table 5.7: Calculation of a Constant-Weight Price Index (1)(2)(3)(4) Description Price per Pound Quantity in Base Year Sum of (Prices × Base Quantities) [column (2) × column (3)] Year 1 Apples$1.00100$100 Oranges$2.0050$100 $200 Year 2 Apples$1.50100$150 Oranges$2.0050$100 $250

13. Appendix: Chained Dollar Real GDP

14. Type of MeasureYear 1Year 2 Nominal GDP$200$300 Fisher quantity index (current to previous year) ———1.225 Chain-type quantity index100 100 ×1.225 = 122.5 Real GDP (chained Year 1 dollars) (122.5  $200)/100 = $200= $245 Table 5.8: Deriving GDP in Chained (Year 1) Dollars