For my midterms, my professor had us present the principles of macroeconomics. In this presentation, we will cover: - Introduction to Macroeconomics - GDP - GDP Approaches (Expenditure Approach & Income Approach) - Nominal & Real GDP - Price Index - Economic Growth / Economic Growth Rate - GDP Per Capita/Per Person - Population Growth Rate - Economic Growth Theories - Malthusian Theory - Neoclassical Growth Theory - New Growth Theory - New Growth Theory Perpetual Motion

1. Macroeconomics:
Midterm Examination
Presented by Group 2409
JIRAYAPORN SEENAY 58-51024-25552
YOUSEF OSMAN 15-51044-25586
TEVI DAMRAY 13-51044-18346
THANATHIP DAENG-UDOM 56-51054-16077
DUJFAH TUNGSUJARITPHUN 58-51044-25521
BUSARI TAIWO BOLANLE 15-51044-24012

2. Introduction to Macroeconomics
GDP, GDP Approaches
Nominal & Real GDP

3. What is Macroeconomics?
 Macroeconomics studies the behavior of the economy as a
whole and not just on specific companies, but entire
industries and economies.
 Macroeconomics focuses on 4 groups:
1. Households
2. Firms
3. Government
4. Rest of the world

4. Firms Government Households
Rest of the world
Taxes
Wages, Interest,
Transfer
Payments
Wages, Interest, Dividends, Profits & Rent
Purchase of
Goods & Services
Taxes
Purchase of Goods & Services

5. Gross Domestic Product (GDP)
 Gross Domestic Product (GDP) represents the total monetary
value of all goods and services produced within a calendar
year.
 A monetary measure.
 Includes only final goods/services.
 GDP can increase in 2 ways: Increase in Quantity and Increase
in Price.
 Two approaches to calculate GDP:
 Expenditure Approach
 Income Approach

6. Expenditure Approach & Income Approach
Expenditure Approach:
 Measures the total amount
spent on the goods produced
by a country in a year.
 Calculated using the formula:
 GDP = C + I + G + Xn
 Where:
 C = Consumption by
household/Personal Consumption
 I = Private Domestic Investment
 G = Government Purchases
 Xn = Net exports
Income Approach:
 Measures the total incomes
earned by households in a nation
in a year.
 Calculated using the formula:
 GDP = R + I + P + W
 Where:
 R = Rent
 I = Interest
 P = Profit
 W = Wages

7. Nominal GDP & Real GDP
Nominal GDP :
 The value of GDP calculated
using the prices when the
output was produced and is
“unadjusted”
 Nominal GDP is the GDP
without the effects of
inflation or deflation
Real GDP:
 Is the value of GDP as
calculated using the prices
of a “base year” and is
“adjusted”
 Real GDP is GDP after giving
the effects of inflation
or deflation.

8.  Percentage numbers that measure the change in price of
goods and services between two time periods.
 To calculate the Price Index in a Given Year:
= Price of G/S
in specific year______ x 100
Price of G/S in
Base year
 Real = Nominal GDP x 100
GDP Price index
Price Index

9. Nominal GDP & Real GDP Example
 In a country that only sells apples:
 Year 1: An apple is $0.50 for 1 kg, 2000 kg of apples were sold.
GDP in year 1 is $1, 000.
 Year 2: An apple is $0.55 for 1 kg, 2,182 kg of apples were sold.
GDP in year 2 is $1,200
Price index = 0.55 x 100
0.50
= 110%
Real GDP = 1, 200 x 100
110
= $ 1, 091

10. Economic Growth

11. Economic Growth
 Economic Growth is an increase in the capacity of an
economy to produce goods and services.
 Higher economic growth is positively associated with an
increased quality of life or standard of living.
 Measured in currency.
 Economic changes can be positive or negative.

12. Economic Growth Rate
 An economic growth rate is a measure of economic
growth from
one period to another.
 It is expressed in percentage.
Formula:
Growth rate = Real GDP in _ Real GDP in
of real GDP current year previous year x 100
Real GDP in previous year

13. Example:
 If real GDP in the current year is $8.4 trillion and if real GDP in
the previous year was $8.0 trillion, growth rate of real GDP is:
Growth rate = Real GDP in _ Real GDP in
of real GDP current year previous year x 100
Real GDP in previous year
= $8.4 trillion - $8.0 trillion x 100
$8.0 trillion
= 5%

14. GDP Per Person
 GDP Per Person is a measurement of the total
economic output of a country divided by the number
of people.
 It's used to compare the standard of living between
countries and over time.
 = GDP .
Population of the country.

15. Population Growth Rate
 Population Growth Rate is the increase in the number of
individuals in a population.
 It is expressed in percentage.
 Growth of = Pop. In the _ Pop. In the
Population current year previous year x 100
Pop. In the previous year

16. Example 1:
Current year:
 In the current year, when real GDP $8.4 trillion, the population is
404 million.
 GDP per = $8.4 trillion
person $202 million
= $41, 584

17. Example 1:
Previous year:
 In the previous year, when real GDP was $8.0 trillion, the population
was 400 million.
 GDP per = $8.0 trillion
person $200 million
= $40, 000

18. Example 1:
Use these two values of real GDP per person in the growth formula to calculate
the growth
rate of real GDP per person.
It is:
Growth rate of real = $41,584 - $40,000 x 100
GDP per person $40,000
= 4%

19. Example 2:
The growth rate of real GDP per person can also be
calculated by using the formula:
Growth of real = Growth rate of – Growth rate of
GDP per person real GDP population

20. Example 2:
 If real GDP in the current year is $8.4 trillion and if real GDP
in the previous year was $8.0 trillion, growth rate of real GDP is:
Growth rate = Real GDP in _ Real GDP in
of real GDP current year previous year x 100
Real GDP in previous year
= $8.4 trillion - $8.4 trillion x 100
$8.0 trillion
= 5%

21. Example 2:
Current year:
 When real GDP was $8.4 trillion, population was 202
million.
Previous year:
 When real GDP was $8.0 trillion, population was 200
million.
Growth of = 202 million – 200 million x 100
Population 200 million
= 1 %

22. Example 2:
Growth of real = Growth rate of – Growth rate of
GDP per person real GDP population
Growth of real = 5 % - 1 %
GDP per person
= 4%

23. Economic Growth Theories

24. Classical Growth Theory (Malthusian
Theory)
 The theory on economic growth that states that economic
growth will end because of an increasing population and
limited resources.
 Classical Growth Theory economists believed that
advancement in technology will temporary increase real GDP
per person and that would cause a population explosion that
would consequently decrease real GDP.

25. Classical Growth Theory (Malthusian
Theory)
 When income exceeds the standard of income, the
population grows.
 The increasing of population decreases the amount
of capital per hour of labor
 Labor productivity and real GDP per person
decrease.
 When technological change occurs, real GDP per
person is always pushed back toward the subsistence
level.

26. Neoclassical Growth Theory
 Neoclassical Growth Theory states that GDP per
person will increase as long as technology keeps
advancing.
 Is an economic theory that outlines how a steady
economic growth rate can be accomplished with the
proper amounts of the three driving forces:
 Labor
 Capital
 Technology.

27. Neoclassical Growth Theory predicts:
 Real GDP growth rate will equals the population
growth rate plus labor productivity growth.
 Technological advances bring profit opportunities.
 Business expand and new businesses are created to
exploit the new technology.
 Investment and saving increase, so capital per hour
of labor increases too.

28. New Growth Theory
• New Growth Theory states that our unlimited wants will
lead us to ever greater productivity and perpetual
economic growth.
• Economic growth results from the increasing returns
associated with new knowledge.
• Growth of the economy increases as knowledge increases
because it creates opportunities for boundless growth.

29. Innovations
 Increases in technological systems is generally considered to
be great innovation.
 Improvements in the ways in which we do things is often just
as useful.
 Eg: The innovation of the assembly line by Henri Ford to
maximize the efficiency in the production process.
 Toyota has adapted the assembly line and now takes 18
hours to make one car whereas before, it took a day to only
make the rim of the car.

30. New Growth Theory Perpetual Motion
Innovation
Higher
Profit
Lower Profit
Competition

31. THANK YOU!!!