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Principle of Macroeconomic Chapter 2 Note (National income / GDP / Approach)

 




Chapter 2

What is National income?

国民收入

 

Refer to the total value that created by all of the owner’s production factor (Including labor, capital, land, etc.) in a certain period of time. For example, the wages, interest rates, profit, and rents.

指在一定时期内所有者所有生产要素(包括劳动力,资本,土地等)创造的总价值。 例如,工资,利率,利润和租金。

Gross Domestic Product

国内生产总值

Refer to the total market value of the final product, goods, or service produce in a certain period of time using the production factor inside the certain area or country even the foreign enterprises.

指使用特定地区或国家(甚至外国企业)内部的生产因子在一定时间内生产的最终产品,商品或服务的总市值。Advantage:

  • Easier to calculate
  • More accurate result
  • Effective to reflect the development and changes of national economy

Disadvantage:

  • Could not reflect the result of social labor accurately. Such as the unpaid housework for the family.
  • Did not measures the cost for development
  • Did not reflect the gap between rich and poor
  • Did not reflect people’s demand and needs

Different approach in calculate GDP

Expenditure Approach

  • include all of the total spendings on all final goods and service in a certain period

Such as

  • Personal consumption expenditure, Durable goods, Non-durable goods, investment and etc.

 

Income Approach

  • Measures the funds generated by production factors in producing final goods and services include Rent fee, income wages, salary, profit, interest and etc.

Such as

  • National Income, compensation of an employee, rental income, net interest, net income product, personal income, and saving.

Gross National Product

Refer to the total market value of the final product, goods, or service that produce in a certain period of time using the production factor inside and outside the certain area or country as long as it is domestic enterprises and citizens.

指在一定时期内使用一定区域或国家内外的生产因子生产的最终产品,商品或服务的总市场价值,只要它是国内企业和公民即可。

Types of Gross Domestic Product

Real GDP

  • The market value of all final products that calculated using the price of a certain year as the base year

*      使用某年的价格作为基准年计算出的所有最终产品的市场价值

Nominal GDP

  • The market value of all final products that calculated based on the current year’s prices.

*      根据当年价格计算的所有最终产品的市场价值。

Different of Real GDP ad Nominal GDP example question.

  • In 2018, popcorn (25 prices), movie (28 prices), book (15 prices). Popcorn (1000 sales), movie (1200 sales), book (800 sales)

GDP 2018

item

price

sales

 

popcorn

25

1000

25000

movie

28

1200

33600

book

15

800

12000

 

 

GDP

70600

 

  • In 2019, popcorn (27 prices), movie (30 prices), book (18 prices). Popcorn (1200 sales), movie (1500 sales), book (1000 sales)

GDP 2019 (Nominal GDP)

item

price

sales

 

popcorn

27

1200

32400

movie

30

1500

45000

book

18

1000

18000

 

 

GDP

95400

 

  • Use 2018 data(price) as the base year to count real GDP

 

 GDP 2018 (Real GDP)

item

price

sales

 

popcorn

25

1200

30000

movie

28

1500

42000

book

15

1000

15000

 

 

GDP

87000




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