1 ch2: the measurement and structure of the national economy abel and bernake: macro ch2 williamson:...

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Ch2: The Measurement and Structure of

the National Economy

Abel and Bernake: Macro Ch2Williamson: Macro Ch2

Froyen: Macro Ch2Mankiw: Macro Ch2

Mankiw: Principle of Econ Ch23,24,28

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Macro VariablesY: national income or GDPP: price level (cost of living) π: inflation rater: interest rateu: unemployment rate (Ch3)

主計處網站：http://www.stat.gov.tw/ct.asp?xItem=15139&ctNode=3565

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The Definition of GDP 國內生產毛額 Gross domestic product (GDP) is a measure of the i

ncome and expenditures of an economy. It is the market value of final goods and service

s newly produced within a country during a fixed period of time.

台灣 2009 年 GDP ：約 12.5 兆新台幣 ( 台灣資料請參考 Ch1&2.xls) GNP ( Gross National Product): 國民生產毛額

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The Definition of GDP “GDP is the Market Value . . .”

Output is valued at market prices.(1) traded in the market(2) weighted with market prices

“. . . Of All Final . . .”(1) records only the value of final goods, not intermediate goods:

No double counting ( 不重複計算 )(2) Or Σ(value added) ：附加價值的加總eg, 小麥（ $1 ）麵粉（ $3 ）麵包（ $6 ）

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The Definition of GDP “. . . Goods and Services . . . “

both tangible goods (food, clothing, cars) and intangible services (haircuts, housecleaning, doctor visits).

“. . . Newly Produced . . .” currently produced, not transactions involving goods

produced in the past. (No second-hand trade) “ . . . Within a Country . . .”

within the geographic confines of a country. “ “. . . In a Fixed Period of Time.”

within a specific interval of time, usually a year or a quarter (three months).

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The measurement of GDP:

Identity: GDP = total output

= total income

= total expenditure

illustrated with the circular-flow diagram.

3 approach:

1. Production approach ( 產出面 )

Y= output=Σ value-added

2. Expenditure approach ( 支出面 )

3. Income approach ( 所得面 )

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The Circular Flow

Expenditure ($)

Households Firms

Income ($)

Factor Market (Labor, capital,

Land)

Output market

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Output=Income=Expenditure

For an economy as a whole, income must equal expenditure because:

Every dollar of spending by some buyer is a dollar of income for some seller. ( 供需圖形 )

output must equal expenditure because:

Unsold output goes into inventory, assuming thatfirms purchase their unsold output.

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Expenditure Approach:The expenditure components of GDP

C: consumption I: investment G: government spending NX: net exports

Y = C + I + G + NX

aggregate expenditurevalue of

total output

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Consumption (C)

durable goods last a long time ex: cars, TV sets, furniture, home appliances

nondurable goodslast a short time ex: food, clothing , fuel

serviceswork done for consumers ex: education, health care, financial services, transportation

Definition: The value of all goods and services bought by households. Includes:

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Investment (I)

Defn 1: Spending on [the factor of production] capital.Defn 2: Spending on goods bought for future use

Includes: business fixed investment

Spending on plant and equipment that firms will use to produce other goods & services.

residential fixed investmentSpending on housing units by consumers and landlords.

inventory investmentThe change in the value of all firms’ inventories.

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Investment vs. Capital

Investment is spending on new capital.

Example (assumes with depreciation):

t 期期初 Kt=20, 折舊率 δ=0.2, 毛投資 It=5 ，Kt+1=?

淨投資＝？

1 (1 )t t tK K I

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Stocks vs. Flows

A flow is a quantity measured per unit of time.

Flow Stock

A stock is a quantity measured at a point in time.

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Stocks vs. Flows -

Govt budget deficitGovt debt

Annual savingWealth

Investment

(education)

Capital

(human capital)

flowstock

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Government spending (G)

G includes all government spending on goods and services..

Not all government expenditures are purchases of goods and services:

Not in G: payments that are not made in exchange for current goods and services

(1) transfers, including Social Security payments, welfare, and unemployment benefits

(2) interest payments on the government debt

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Net exports: NX = EX – IM

Net exports: exports minus importsExports: goods produced in the country that are

purchased by foreignersImports: goods produced abroad that are purcha

sed by residents in the country

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Table 2.1 Expenditure Approach to Measuring GDP in the United States, 2008

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Table 2.1 台灣國內生產毛額 - 依支出分 , 2009資料來源：主計處　 　 新台幣百萬元 占 GDP 比重

國內需求

民間消費7,610,863 60.83

private consumption

政府消費1,608,957 12.86

government consumption

固定資本形成毛額2,341,610 18.71

gross fixed capital formation

存貨增加-164,311 -1.31

increase in stocks

合計 11,397,119 91.08

國外需求

商品及服務輸出7,826,618 62.55

exports of goods and servics

商品及服務輸入6,711,059 53.63

imports of goods and servics

合計 1,115,559 8.92

對國內生產毛額的支出 Expenditures on GDP 12,512,678 100.00

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Taiwan’ GDP (Y) 組成　 C I G EX IM 　 S

歷年平均 59.18 22.62 16.55 38.16 36.51 　 24.26

1951-1960 71.17 15.99 19.07 9.42 15.65 　 9.76

1961-1970 61.98 21.71 18.41 20.81 22.91 　 19.61

1971-1980 52.45 30.09 15.84 45.60 43.98 　 31.71

1981-1990 51.29 22.60 16.20 52.17 42.26 　 32.51

1991-2000 57.90 24.38 15.51 46.50 44.30 　 26.58

2001-2009 59.88 21.15 12.77 61.88 55.69 　 27.34

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What Is Not Counted in GDP?

Market value Problem: misses nonmarket items such as homemakin

g, the value of environmental quality, and natural resource depletion There is some adjustment to reflect the undergroun

d economy Government services (that aren’t sold in markets) a

re valued at their cost of production

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GNP vs. GDP Gross National Product (GNP):

Total income earned by the nation’s factors of production.

Gross Domestic Product (GDP):Total income earned by domestically-located factors of production.

GNP=GDP + (factor payments from abroad) – (factor payments to abroad)

=GDP+NFP

(NFP: net factor payments from abroad)

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Income Approach:

National income (NI) 國民所得≡ factors income

≡ wages + net interest income

+ rental income + profits

NNP (net national product)

≡ GNP- depreciation NI ≡ NNP-indirect business taxes

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Table 2.2 Income Approach to Measuring GDP in the United States, 2008

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Numerical example by Williamson

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Calculate GDP from each approach

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Income approach 相關所得 （一般教科書） Personal income (PI) 個人所得 =NI

+ net Govt transfer to individuals- corporate retained earnings+ interest income on gov’t bonds

=NI + (government transfers to individuals - Social insurance contributions)-(corporate profits- Dividends)+(personal interest income - net interest)

Disposable Personal income 個人可支配所得 = PI- personal income tax

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Private-sector disposable income Private disposable income 私部門可支配所得 ( 加入廠商 ) ≡PI+ corporate retained earnings + depreciation

= NI + depreciation ＋ net Govt transfer to individuals (TR) + interest income on govt bonds (INT)

- personal income tax (Tp) = NNP –indirect tax (Tb) + depreciation ＋ TR + INT – Tp =

= = (2.4)

其中， Y≡GDP T≡ indirect taxes (Tb) + personal income tax (Tp)

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Private Saving 私部門儲蓄

Private Saving

= private disposable income – consumption

Spvt = (2.6)

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Government Saving 公部門儲蓄

Government SavingSgovt = govt receipts - Government outlays

= govt tax revenue (T) - [government purchases of goods and services (G)

+ transfers (TR)

+ interest payments on government debt (INT)]

= net government income

– government purchases of goods and services

= (2.7)

一般簡化： net T ≡ (T – TR – INT)

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Gov’t budget constraint (Gov’t BC): Gov’t Surplus and Deficit （預算盈餘與赤字）

Sg >0 budget surplus

Sg <0 budget deficit

Budget Deficit ≡ D ≡ ?

Gov’t Bond （公債）： Bg

Gov’t issue new bonds to finance Budget Deficit Bg = D ≡ △(G + TR+ INT) – T ，

亦即 Gov’t BC: G + TR+ INT = T + Bg△

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National Saving 國民儲蓄

Measures of aggregate saving:

National Saving= private saving + government saving

S = Spvt + Sgovt

= [Y + NFP – T + TR + INT – C]

+ [T – TR – INT – G]

=

= (2.8)

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S, I and CA

Expenditure approach of GDP:

Income approach of GDP:

→ (2.9)

(2.10)

其中，經常帳 current account balance CA ≡ NX + NFP

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The Uses of Private Saving

S = Spvt + Sgovt

(2.11)

Private saving is used in three ways:investment (I)government budget deficit (–Sgovt)current account balance (CA)

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Saving and Wealth

National wealth

= domestic physical assets + net foreign assets Country’s domestic physical assets

(capital goods and land) Country’s net foreign assets

= foreign assets (foreign stocks, bonds, and capital goods owned by domestic residents)

minus foreign liabilities (domestic stocks, bonds, and capital goods owned by foreigners)

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Saving and Wealth

Saving S = wealth △(wealth: deposits/bonds/stocks/houses/capital goods)

= domestic assets + foreign assets△ △ = domestic investment +net capital outflow An economy’s saving can be used to either finance investment at home or to buy assets abroad. National saving (S = I + CA) raises wealth Wealth matters because the economic well-being of a

country depends on it.

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Real vs Nominal GDP Nominal GDP

values of goods and services at current prices. (Y=PtQt)

Real GDP

values of goods and services at constant prices in the base year. (y=P0Qt):

the measure of real output

0 0

t t t ti i

i

t ti i

i

Y P Q P Q

y P Q P Q

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Table 2.3 Production and Price Data

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Table 2.4 Calculation of Real Output with Alternative Base Years

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The GDP Deflator (GDP 平減指數 =P) The GDP deflator is calculated as follows:

0

Nominal GDPGDP deflator= 100

Real GDP

= 100

/

t t

t

P Q

P Q

the measure of price change

P Y y

亦即

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Y=P*y ， P=Y/y ， y=Y/P Converting Nominal GDP to Real GDP:

20XX20XX

20XX

Nominal GDPReal GDP 100

GDP deflator

y=Y/P

亦即

2007 年：名目每人平均 GDP 為 NT$55 萬＝ 16,768 美金實質每人 GDP=(550,343/96.14)=572,439 (2001 價格 )

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Inflation Rate

The Inflation Rate （ π ）： 通貨膨脹率＝物價上漲率 When π<0 ： deflation ( 通貨緊縮 )

1

1

P in Year 2 - P in Year 1Inflation Rate in Year 2= 100

P in Year 1

t tt

t

P PP

P P

亦 即

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percentage changes

或者取 ln ，全微分可得。＊ percentage change in Z (growth rate of Z)

percentage change in X + percentage change in Y

( )

/

Z XYZ Y X X Y ignore X Y

growth rate

Z X YZ X Y

Y Z XY Z X

Y Z X

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percentage changes

Eg: Nominal GDP rises 9%

and Real GDP rises 4%,

then the inflation rate is approximately 5%.

Y Py

Y y PY y P

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Growth rates of Nominal GDP and Real GDP

台灣名目GDP及實質GDP成長率

-5

0

5

10

15

20

25

30

195119531955195719591961196319651967196919711973197519771979198119831985198719891991199319951997199920012003200520072009

%

%實質國內生產毛額成長率 %名目國內生產毛額成長率

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Measuring the Cost of Living

Consumer Price Index (CPI ）： 消費者物價指數 shows the cost of a basket of goods and services bou

ght by a typical family relative to the cost of the same basket in the base year.

‧used to monitor changes in the cost of living over time. When the CPI rises, the typical family has to spend more dollars to maintain the same standard of living.

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The composition of the CPI’s “basket”

CPI 1995台灣 類別權數（基期＝ ）

1、食物類26%

2、衣著類4%

3、居住類28%

4、交通類14%

5、醫藥保健類5%

6、教養娛樂類17%

7、雜項類6%

1、食物類

2、衣著類

3、居住類

4、交通類

5、醫藥保健類

6 、教養娛樂類

7、雜項類

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How to calculate CPI

Take GDP accounting for example,suppose the base year is 2005, Please calculate CPI.

0

0 0CPI= 100

tP Q

P Q

another measure of price change

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Problems in Measuring the Cost of Living

CPI ： not a perfect measure of cost of living ：(1) Substitution bias

(2) Introduction of new goods

(3) Unmeasured quality changes cause the CPI to overstate the true cost of living.

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CPI vs. GDP Deflatorprices of capital goods included in GDP deflator (if produced domestically) excluded from CPI

prices of imported consumer goods included in CPI excluded from GDP deflator

the basket of goods CPI: fixed GDP deflator: currently produced, changes every year

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Taiwan data:Two measures of inflation

FIGURE Two Measures of Inflation Rates

-10

0

10

20

30

40

50

1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004

Year

Annual Inflation R

ate

(%

)

GDP deflator CPI

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Fig 2.2 Overall PCE inflation rate and core PCE inflation rate, 1960-2008

Source: Federal Reserve Bank of St. Louis FRED database atresearch.stlouisfed.org/fred2/series/PCEPI and PCEPILFE.

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Core Inflation

Core inflation rate excludes commodities with volatile prices and extreme individual price movement

Core inflation reflects changes in inflation that are not transitory but long-lived therefore it helps individuals in making better decisions

The Fed uses the core personal consumption expenditures (PCE) price index to measure the underlying trend in inflation

台灣 新物價指標：庶民經濟《生活物價指數》 2009/5-

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Real and Nominal Interest Rates

Interest represents a payment in the future for a transfer of money in the past.

Nominal interest rate （ R ，名目利率） :

the interest rate usually reported. It is the interest rate that a bank pays.

Real interest rate （ r ，實質利率） :

nominal interest rate corrected for the effects of inflation.

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Real and Nominal Interest Rates You lend out $100 for one year. P=$1/candy Nominal interest rate was 10%. During the year inflation was 6%. Present $100/$1= 100 units of candies $100*(1+10%)/[$1*(1+6%)]=103.7 units of candies Real return= 3.7 units, real rate of return= 3.7% Real interest rate （ real rate of return ）近似 = Nominal interest rate – Inflation rate= 10% - 6% = 4% ( r=R-π)

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Taiwan data ： R, π and r　 Inflation rate (CPI) Nominal R Real r

1961-2007 4.35 5.03 0.68

1961-1970 2.92 4.58 1.66

1971-1980 11.07 6.95 -4.12

1981-1990 3.15 5.95 2.80

1991-2000 2.59 5.06 2.47

2001-2007 0.83 1.51 0.68

　 　 　 　1974 47.50 8.50 -39.00

1980 19.01 9.75 -9.26

1981 16.32 10.25 -6.07

2001-2007 (-) 　 零利率年代

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Taiwan: R and πFIGURE 30.5 The Nominal Interest Rate and the Inflation Rate

-10

0

10

20

30

40

50

1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006

Year

Inte

rest Rate

and Inflation R

ate

in P

erc

ent

Nominal Interest Rate Inflation Rate

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Taiwan: R and rFIGURE 24.3 Nominal and Real Interest Rate

-50

-40

-30

-20

-10

0

10

20

1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006

Year

Real In

tere

st Rate

in P

erc

ent

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R , r, and expectation r =R-π

So r <0 if R<π r >R if π<0

契約訂定名目利率R= re + πe (e: expected ，預期的 )

→ 實現的（ realized ）或實際的 (actual) r =R-π ＝ re + πe -π ，So r < re if πe <π r = re if πe=π r > re if πe >π

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Ch3: 勞動力之分類

臺灣地區總人口

未滿十五歲人口 十五歲以上人口

監管人口 武裝勞動力 （現役軍人）

民間人口

（民間）勞動力 非勞動力

就業者 失業者

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Measurement of Unemployment 人力資源調查：名詞與定義 民間人口：在資料標準週內年滿十五歲。 勞動力（ Labor Force ， LF ）：

可以工作之民間人口，包括就業者及失業者。

就業者（ the Employed ， E ）：從事有酬工作者，或從事十五小時以上無酬家屬工作者。

失業者（ the Unemployed ， U ，「狹義失業人口」）：同時具有： （１）無工作；（２）隨時可以工作； （３）正在尋找工作或已找工作在等待結果。

等待恢復工作者及找到職業而未開始工作亦無報酬者。

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勞參率與失業率 非勞動力（ not in the LF ）：

不屬於勞動力之民間人口，包括因就學、料理家務、高齡、身心障礙、想工作而未找工作及其他原因等而未工作亦未找工作者。

勞動參與率 (labor-force participation rate) ：= 勞動力 / 十五歲以上民間人口

失業率 (unemployment rate) ：= 失業者 / 勞動力

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廣義失業率 廣義失業人口：「狹義失業人口」加上「非勞動力中想工作而未找工作者」。後者：非勞動力人口中有工作意願

但無尋職行動之人口：Discouraged Worker （喪志勞工）

廣義失業率= 廣義失業人口 /( 勞動力 + 喪志勞工 )

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Taiwan data:The Breakdown of the Population in 2009

Copyright©2003 Southwestern/Thomson Learning

AdultPopulation

(1885.5 萬 )

Labor Force(1091.7 萬 )

Employed1027.9 萬

Not in labor force（ 793.7 萬）

Unemployed (63.9 萬 )

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Chapter SummaryChapter Summary GDP GNP NNP NI

3 approach to measure output

GDP=C+I+G+(EX-IM)

Saving and Wealth

Nominal GDP, real GDP

Price index, inflation rate

slide 64

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Chapter SummaryChapter Summary Overall level of prices measured by

the Consumer Price Index (CPI), the GDP deflator

Nominal real interest vs. Real interest rate Labor participation rate

Unemployment rate

slide 65