Macro Economics in detail

1. Macro-Economics Presentation
Presenting By:
 Muhammad Shahmeer (AF-1022)
 Usman Mehmood (AF-1010)

2. GROSS DOMESTIC PRODUCT
(GDP)

3. WHAT IS GDP ???

4. DEFINITION
GDP is the broadest quantitative measure of a
national total economic Activities.

5. DEFINITION
GDP is the total value of everything produced by
all the people and the companies of a country.

6. DEFINITION
The gross domestic product (GDP) is the most
comprehensive measure of a nation’s total output
of goods and services.

7. Types of GDP

8. Nominal GDP
Nominal GDP is a GDP which evaluated at current market
prices, it includes changes in prices due to inflation or a
rise in the overall price level.

9. Real GDP
Real gross domestic product (GDP) is the inflation-
adjusted dollar value of all goods and services produced
during a stated period.

10. How to calculate real GDP
Real GDP = Nominal GDP / GDP Index Price
For Example
Nominal GDP in a year = $123 Billion
GDP Index price = $1.1 Billion
Real GDP= 123 / 1.1
Real GDP= $111.81 Billion

12. HOW TO CALCULATE GDP???

13. Formula
GDP = C + I +G + X
C = Consumption.
I = Gross investments.
G = Government Purchases.
X = Net Export.

14. FOR EXAMPLE
Total consumption of a Country in a year is $90 Billion, Total
Government purchases is $20 Billion, Investment is $15 billion
and Net Export is -$6 billion in this year. Calculate GDP in this
year.
GDP = C + G+ I + X
GDP = 90 + 20 + 15 + (-6)
GDP = 90 + 20 + 15 – 6
GDP = $119 Billion

15. Components Of GDP

17. 1-Consumption (C)
Total Spending of good and services by Household in
a Country
Includes:
 Spending on Food
 Rents
 Spending on Education & etc.

18. Durable Goods
The products have long life and usable for a long time
period.
Include:
 Refrigerator
 Washing Machine
 Cars & etc.

19. Non-Durable Good
The products that we not store for a long time, these are use in
daily routine life.
Include:
 Milk
 Vegetables
 Fruits & etc.

20. Services
Intangible Activity to help peoples to get money.
Includes
Transportation
Medical Treatment
Education & etc.

21. 2-INVESTMENT ( I )

22. 2-Investment ( I )
Spending money with the hope that it will generate
income in future.
Includes:
 Start a Business
 Purchase Shares
 Purchase a Property

24. 3-Government Spending (G)
Spending by a public sector on Development of a
country.
Includes:
 Spending on Infrastructure
 Spending on Power projects
 Military Expense & etc.

25. 4-Net Export (X) or (X-N)

26. 4-Net Exports (X)
Difference between Export and Import of a country
within a Year. Its also called Balance of Trade.
For Example
Exports of country is $28 Billions and Imports is
$20 Billions in a Year.
Net Exports = 28-20 = $8 Billions

27. Impact of GDP on Economic
Activities

28. Impact of GDP on Economic
Activities
 Business Planning
 Change in value of Currency
 Government Policies
 Interest Rate Changes