曼昆宏观经济学 23章英文答案

23

MEASURING A NATION’S

INCOME

WHAT’S NEW IN THE SIXTH EDITION:

There is a new

In the News

box on ―Beyond Gross Domestic Product.‖

LEARNING OBJECTIVES:

By the end of this chapter, students should understand:

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why an economy’s total income equ

als its total expenditure.

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how gross domestic product (GDP) is defined and calculated.

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the breakdown of GDP into its four major components.

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the distinction between real GDP and nominal GDP.

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whether GDP is a good measure of economic well-being.

CONTEXT AND PURPOSE:

Chapter 10 is the first chapter in the macroeconomic section of the text. It is the first of a two-chapter

sequence that introduces students to two vital statistics that economists use to monitor the

macroeconomy

—

GDP and the consumer price index. Chapter 10 develops how economists measure

production and income in the macroeconomy. The following chapter, Chapter 11, develops how

economists measure the level of prices in the macroeconomy. Taken together, Chapter 10 concentrates

on the

quantity

of output in the macroeconomy while Chapter 11 concentrates on the

price

of output in

the macroeconomy.

The purpose of this chapter is to provide students with an understanding of the measurement and

the use of gross domestic product (GDP). GDP is the single most important measure of the health of the

macroeconomy. Indeed, it is the most widely reported statistic in every developed economy.

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KEY POINTS:

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Because every transaction has a buyer and a seller, the total expenditure in the economy must equal

the total income in the economy.

Gross domestic product (GDP) measures an economy’s total expenditure on newly produced goods

and services and the total income earned from the production of these goods and services. More

precisely, GDP is the market value of all final goods and services produced within a country in a given

period of time.

GDP is divided among four components of expenditure: consumption, investment, government

purchases, and net exports. Consumption includes spending on goods and services by households,

with the exception of purchases of new housing. Investment includes spending on new equipment

and structures, including households’ pur

chases of new housing. Government purchases include

spending on goods and services by local, state, and federal governments. Net exports equal the value

of goods and services produced domestically and sold abroad (exports) minus the value of goods and

services produced abroad and sold domestically (imports).

Nominal GDP uses current prices to value the economy’s production of goods and services. Real GDP

uses constant base-

year prices to value the economy’s production of goods and services. The GDP

defla

tor―calculated from the ratio of nominal to real GDP―measures the level of prices in the

economy.

GDP is a good measure of economic well-being because people prefer higher incomes to lower

incomes. But it is not a perfect measure of well-being. For example, GDP excludes the value of

leisure and the value of a clean environment.

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CHAPTER OUTLINE:

Regardless of whether microeconomics is taught before macroeconomics or vice

versa, students need to be reminded of the differences between the two areas of

study. Begin by defining the two terms and contrasting and comparing their focus.

I.

Review of the Definitions of Microeconomics and Macroeconomics

A.

Definition of

microeconomics: the study of how households and firms make decisions

and how they interact in markets

.

B.

Definition of

macroeconomics: the study of economy- wide phenomena including

inflation, unemployment, and economic growth

.

II.

The Economy’s Income and Expenditure

A.

To judge whether or not an economy is doing well, it is useful to look at Gross Domestic Product

(GDP).

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Chapter 23/Measuring a Natio

n’s Income

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Students have heard of GDP and they are often interested in learning more about

what it is. The basic point that you must get across is that GDP is a measure of

both

aggregate production and aggregate income in a nation over a period of one year.

You can demonstrate this by using the circular-flow diagram and explaining that

production generates income, which provides the purchasing power that generates

the demand for the products.

1.

GDP measures the total income of everyone in the economy.

2.

GDP measures total expenditure on an economy’s output of goods and services.

B.

For an economy as a whole, total income must equal total expenditure.

1.

If someone pays someone else $$100 to mow a lawn, the expenditure on the lawn service

($$100) is exactly equal to the income earned from the production of the lawn service ($$100).

2.

We can also use the circular-flow diagram from Chapter 2 to show why total income and total

expenditure must be equal.

Figure 1

a.

Households buy goods and services from firms; firms use this money to pay for resources

purchased from households.

b.

In the simple economy described by this circular-flow diagram, calculating GDP could be

done by adding up the total purchases of households or summing total income earned by

households.

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c.

Note that this simple diagram is somewhat unrealistic as it omits saving, taxes,

government purchases, and investment purchases by firms. However, because a

transaction always has a buyer and a seller, total expenditure in the economy must be

equal to total income.

III. The Measurement of Gross Domestic Product

A.

Definition of

gross domestic product (GDP): the market value of all final goods and

services produced within a country in a given period of time

.

To put GDP in terms that students may understand better, explain to them that GDP

represents the amount of money one would need to purchase one year’s worth of

the eco

nomy’s production of all final goods and services.

Have a contest and see which student can come closest in guessing the level of GDP

for the United States last year.

B.

―GDP Is the Market Value . . .‖

a.

When you hire someone to mow your lawn, that production is included in GDP.

b.

If you mow your own lawn, that production is not included in GDP.

D.

―. . . Final . . .‖

1.

Intermediate goods are not included in GDP.

Make sure that students realize that investment goods (such as structures and

vehicles used in production) are not intermediate goods. Investment goods represent

products purchased for final use by business firms.

1.

GDP includes all items produced and sold legally in the economy.

2.

The value of housing services is somewhat difficult to measure.

a.

If housing is rented, the value of the rent is used to measure the value of the housing

services.

b.

For housing that is owned (or mortgaged), the government estimates the rental value

and uses this figure to value the housing services.

3.

GDP does not include illegal goods or services or items that are not sold in markets.

1.

To add together different items, market values are used.

2.

Market values are calculated by using market prices.

C.

―.

. . Of All . . .‖

2.

The value of intermediate goods is already included as part of the value of the final good.

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Chapter 23/Measuring a Natio

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3.

Goods that are placed into inventory are considered to be ―final‖ and included in GDP as a

firm’s inventory investment.

b.

The goal is to count the production when the good is finished, which is not necessarily

the same time that the product is sold.

F.

―. . . Produced . . .‖

1.

Only current production is counted.

2.

Used goods that are sold do not count as part of GDP.

G.

―. . . Within a Country . . .‖

1.

GDP measures the production that takes place within the geographical boundaries of a

particular country.

2.

If a Canadian citizen works temporarily in the United States, the value of his output is

included in GDP for the United States. If an American owns a factory in Haiti, the value of the

production of that factory is not included in U.S. GDP.

Students sometimes have trouble understanding that the production of a foreign firm

operating in the United States is part of U.S. GDP. Help them make the connection by

using the circular-

flow diagram. Show them that, even if it is a foreign firm, the firm’s

workers are living in the United States and buying clothes, groceries, and other

goods in the United States. Thus, the workers in the foreign firm operating in the

United States are fueling the domestic economy.

H.

―. . . in

a Given Period of Time.‖

1.

The usual interval of time used to measure GDP is a quarter (three months).

3.

In addition, data are generally adjusted for regular seasonal changes (such as Christmas).

I.

In addition to summing expenditure, the government also calculates GDP by adding up total

income in the economy.

1.

The two ways of calculating GDP almost exactly give the same answer.

2.

The difference between the two calculations of GDP is called the

statistical discrepancy

.

2.

When the government reports GDP, the data are generally reported on an annual basis.

E.

―. . . Goods and Services . . .‖

1.

GDP includes both tangible goods and intangible services.

a.

Goods that are sold out of inventory are counted as a decrease in inventory investment.

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J.

FYI: Other Measures of Income

It can be a challenge to teach all of these definitions without putting your students to

sleep. Concentrate on the measures that will mean the most to students as the

semester progresses.

A.

Gross National Product (GNP) is the total income earned by a nation’s permanent residents.

1.

GNP includes income that American citizens earn abroad.

2.

GNP excludes income that foreigners earn in the United States.

B.

Net National Product (NNP) is the total income of a nation’s residents (GNP) minus losses from

depreciation (wear and tear on an economy’s stock of equipment and structures).

C.

Nati

onal income is the total income earned by a nation’s residents in the production of goods and

services.

1.

National income differs from NNP by excluding indirect business taxes and including business

subsidies.

2.

NNP and national income also differ due

to ―statistical discrepancy.‖

E.

Disposable personal income is the income that households and noncorporate businesses have left

after taxes and other obligations to the government.

IV.

The Components of GDP

A.

GDP (

Y

) can be divided into four components: consumption (

C

), investment (

I

), government

purchases (

G

), and net exports (

NX

).

Y

?

C

?

I

?

G

?

NX

Students will ask why GDP is called ―

Y

.‖

Remind them that in equilibrium GDP

expenditures must be equal to income. The ―

Y

‖ stands for income because the letter

―

I

‖ is used for investment.

D.

Personal income is the income that households and noncorporate businesses receive.

B.

Definition of

consumption: spending by households on goods and services, with the

exception of purchases of new housing

.

C.

Definition of

investment: spending on capital equipment, inventories, and structures,

including household purchases of new housing

.

1.

GDP accounting uses the word ―investment‖ differently from how w

e use the term in

everyday conversation.

2.

When a student hears the word ―investment,‖ he or she thinks of financial instruments such

as stocks and bonds.

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Chapter 23/Measuring a Natio

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3.

In GDP accounting, investment means purchases of investment goods such as capital

equipment, inventories, or structures.

D.

Definition of

government purchases: spending on goods and services by local, state,

and federal governments

.

1.

Salaries of government workers are counted as part of the government purchases component

of GDP.

2.

Transfer payments are not included as part of the government purchases component of GDP.

Spend some time in class distinguishing between government purchases and transfer

payments. Point out that transfer payments are actually negative taxes representing

payments from the government to individuals (with no good or service provided in

return) rather than payments from individuals to the government. Define net taxes

as the difference between taxes and transfers.

E.

Definition of

net exports: spending on domestically produced goods by foreigners

(exports) minus spending on foreign goods by domestic residents (imports)

.

Table 1

F.

Case Study: The Components of U.S. GDP

1.

Table 1 shows these four components of GDP for 2009.

2.

The data for GDP come from the Bureau of Economic Analysis, which is part of the

Department of Commerce.

Make sure that you point out Table 1. Call attention to the importance of

consumption and the negative number in the net exports column.

V.

Real Versus Nominal GDP

A.

There are two possible reasons for total spending to rise from one year to the next.

1.

The economy may be producing a larger output of goods and services.

2.

Goods and services could be selling at higher prices.

B.

When studying GDP over time, economists would like to know if output has changed (not prices).

C.

Thus, economists measure real GDP by valuing output using a fixed set of prices.

D.

A Numerical Example

Make sure that you do this example or a similar numerical example in class. If you

feel comfortable improvising, let the students pick two goods and then make up an

example with them.

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