Macro Econ Test 2

(In) Net Investment = (Ig) Gross investment - Depreciation

(Xn) Net Exports = (Xg) Exports - (M) Imports

Idea that all goods and services are boiled down to a monetary value

• GDP Excludes non production transactions
  Public transfer payments - social security, wealth-fare, veterans
• • Private transfer payments - gifts
  • Stock market transactions - buying or selling of stokes bond
  • Second hand sales

There are many stages of goods. RAW goods, intermediate goods, finished goods. In order to avoid multiple counting finished goods are the only ones counted in GDP

• Gross Domestic Product - Measures total output of finished goods over a given period within a given countries borders.
• Measures:
• • Finished goods
  • Produced within a country
  • For a set period of time

• GDP = C + Ig + G+ Xn
• + (C) Consumption by households
• + (Ig) Investments expenditures by business
• + (G) Government purchases of goods and services
• + (Xn) Expenditures by foreigners

• GDP =
• //START NI
• + Wages (income earned by population)
• + Rents (income earned by landlords)
• + Interest (Interest earned by banks and business providing loans. Also includes interest earned on accounts)
• + Proprietors Income (Income owned by sole-proprieterships owners)
• + Corporate Profits ( Income earned by big business)
• + Tax on Imports Exports
• + Statistical Adjustment
• //END NI
• 
  
• - NFFI (Net foreign Factor Income)
• + Consumption of fixed income (depreciation)

• Income earned by the people of a nation domestic or foreign. As opposed to domestic income
• + Wages (income earned by population)
• + Rents (income earned by landlords)
• + Interest (Interest earned by banks and business providing loans. Also includes interest earned on accounts)
• + Proprietors Income (Income owned by sole-proprieterships owners)
• + Corporate Profits ( Income earned by big business)
• + Tax on Imports Exports
• + Statistical Adjustment

• The difference between money received by foreign workers domestically and money received from domestic workers foreignly.
• NFFI is subtracted from GDP but added in GNP.

NDP = GDP - Depreciation (consumption of fixed capital)

NI = NDP - Statistical Discrepancy + NFFI

• DI = GDP - Taxes - G
• or
• DI = Consumption + Savings

• National Income
• - Taxes
• - Social Security
• - Corporate Income tax
• - Undistributed corporate profits
• + Transfer payments

Average propensity to consume relative to income

Average propensity to save relative to income

Marginal propensity to consume relative to income

Marginal propensity to save relative to income

Unemployment / Size of Labor Force

Employed + Unemployed

Size of Labor Force = Total population - 16 or Institutionalized

Okun's law suggests a GDP gap of 2% for every 1% that the unemployment rate exceeds its natural rate.
GDP Gap = ((Current Unemployment - Natural Unemployment) * 2)

Okun's Law is GDP GAP due to unemployment

GDP Gap = ((Current Unemployment - Natural Unemployment) * 2)

Potential GDP * GDP Gap = Lost GDP

(Current Year - Base Year) / Base Year

The amount of time it takes to double an amount at a given rate
70 / Rate

[(Current Year - Base Year)/Base Year] * 100

(Current Real GDP / Current Population)