Chapter 7 Intro to Macroeconomics & Nat'l Income Accounting

Aims

National Income Statistics

Circular Flow Model

Economic growth

Indicator

Full employment/low rate of unemployment

Indicator

Unemployment rate

GDP or National Income

Price stability

Indicator

General Price Level

Favourable balance of trade

Indicator

Balance of trade

Output approach

National output

Income approach

National income = W+R+I+P

Expenditure approach

National expenditure = C+I+G+(X-M)

GDP vs GNP

Factor income from abroad

Factor income paid abroad

Net factor income from abroad

Difficulties in measuring National Income

Non-reported transactions

Non-market transactions

Availability of data

Measuring SOL of a country

limitations

Material

Non-material

Over time and space

Inflation/deflation rates [S&T]

Population size [S&T]

Distribution of income [S&T]

Types of goods being produced [T]

Qualitative changes in consumer goods [S&T]

Statistical coverage and reliability of data [S&T]

Increased monetisation of an economy [T]

Conversion to a common currency [S]

Over time and space

Amount of leisure time [S&T]

Presence of negative externatilities [S&T]

Composite indicators of a country's SOL

Human Development Index (HDI)

Measure of Welfare (MEW)

Life expectancy at birth

Education attainment

Real GDPpc

GNP

Value of leisure time enjoyed by citizens

Value of unpaid work

Economic output in the underground economy

Excludes disamenity

Genuine Progress Indicator (GPI)

Accounts for income inequality when measuring GDP

Includes non-market benefits not included in GDP

Identifies and deducts bads e.g. environmental degradation, human health effects, loss of leisure time, costs of crime

Limitiations

Measuring the indicators

Subjectivity of the composite indicators

Composite indicators only focus on certain aspects of SOL