Chapter 15

                          Macroeconomics

 

Gross National Product (GNP)

-the total dollar value of all final goods and services produced in the economy during one year's time.

 

Intermediate Goods - goods and services used in the production of final goods.  They are not factored in a nation's GNP.  EG. the steel used in the production of a car is not factored in a nation's GNP.  the car would be a factor.

 

Final Goods - are the goods that are factored in a nation's GNP.  Eg. We do not count the feed for a chicken but we do count the chicken.

 

               **The most important areas counted**

 

 

  I. Consumer Goods

a) durable and nondurable goods

b) services

 II. Investment Goods

a) New Plants and Equipment

b) Private Housing

c) Inventories

 

III. The Government Sector

a) Federal Government

b) State Government

c) Local Government

 

GNP =

 

Personal Consumption Expenditures(64%)

From the Consumer

1/2 are from products sold

(cars... GM, Chrysler, Ford)

1/2 are services

(accountants, lawyers)

 

 

+ Gross Private Domestic Investment(15%)

Total amount spent on capital goods

eg. machinery to produce goods

  capital investment

+ Government Purchases or Expenses(18%)

Salaries, wages(President, Senators)

Defense, Research

(do not include transfer payments = welfare)

 

+ Net Exports (3%)

Goods that leave the country minus goods that enter the country

 

 

Inflation

The economic condition in which the average level of prices goes up

 

 

(not calculated in GNP)

   

Measuring Real GNP

 

Changing current dollars into constant dollars by counting inflation

 

 

Constant Dollar GNP =

                                

                        Current Dollar GNP

                divided

                           Price Index

 

                       The Result

                             Real GNP

 

 

Barter System is classified as

irregular economy

   *EBay Trading*

 

Production Possibilities Curve

          A graphic illustration of the combinations of output an economy can produce if all of its resources are utilized effectively

 

 

 

*Per Capita Income =           GNP/Population

 

 

While using the data obtained from the gross national product, it is necessary to keep in mind the following five things.

 

1.       The GNP must be corrected to reflect the real production and income figure. (Use Formula)

 

2.       The Data should be converted to per Capita figures to make them more meaningful