This document provides an overview of macroeconomics and the macroeconomic environment. It discusses key topics such as the components of the economy, economic growth, productivity, and macroeconomic performance measures. The circular flow model and factors that influence economic growth like savings, investment, expectations and shocks are also examined. Macroeconomic objectives and how performance is measured using indicators like GDP, unemployment and inflation are outlined.
This paper discusses the Irish economy’s recent growth performance and considers its medium-and-long-term prospects for growth. A range of policy reforms to increase the economy’s long-run potential output are identified. The best way to sustain productivity growth is to increase investment in education and skills, particularly early years learning; to increase investment in the production, diffusion and use of new ideas, and to increase investment in productivity enhancing infrastructure.
This document provides an overview of business cycles, unemployment, and inflation in the United States. It discusses how GDP and the economy fluctuate in cycles, with alternating periods of expansion and recession. Unemployment rates and types of unemployment, including frictional, structural, cyclical, and seasonal, are also examined. Key labor market indicators like the unemployment rate and labor force participation rate are defined. The concept of potential GDP and the natural rate of unemployment are introduced.
This document discusses economic growth and factors that influence it. It defines economic growth as an increase in potential GDP over time, measured by expanding production capabilities. Growth rates are calculated by comparing GDP values between years. Economic growth increases standards of living by raising GDP per capita. While population growth reduces growth in GDP per person, productivity gains can outweigh this effect and allow sustained increases in living standards over long periods. Factors driving productivity and growth include investment in physical and human capital, technology advances, and strong economic institutions.
This document provides an overview of macroeconomics topics including:
1) The key issues in macroeconomics are economic growth versus business cycle fluctuations and unemployment versus inflation.
2) Macroeconomic performance is measured using indicators like GDP, GDP per capita, unemployment and inflation rates.
3) Examples of macroeconomic data are provided for countries like the US, China, Mexico, Japan and Greece for 2014.
This document discusses various economic theories related to economic growth and development. It covers theories by Adam Smith, Thomas Malthus, David Ricardo, Karl Marx, Joseph Schumpeter, and John Maynard Keynes. The key ideas are that economic growth depends on factors like capital accumulation, innovation, savings and investment rates, and aggregate demand. Government intervention may be needed to stimulate demand and investment to increase employment and growth.
Potential GDP
0
ASLR1
ASLR2
Long-run aggregate supply increases when productivity or the quantity of resources increases permanently. This shifts the long-run aggregate supply curve rightward, increasing the potential GDP of the economy.
Income-Led Growth in Korea: Evaluation and ProspectsKang-Kook Lee
The document summarizes Kang-Kook Lee's presentation on income-led growth in South Korea. It discusses the Moon government's strategy of raising wages and household incomes to boost demand, evaluations of this strategy, and prospects. While the direction of the strategy is seen as correct, the real implementation has been problematic due to de facto austerity and a lack of redistribution. More political support and effective policy measures are needed to strengthen income-led growth.
This chapter discusses key macroeconomic concepts including:
1) The two major issues in macroeconomics are economic growth and business cycles which include unemployment and inflation.
2) Important measures used to evaluate macroeconomic performance are GDP, GDP per capita, unemployment rate, inflation rate, and potential GDP.
3) Macroeconomic policies implemented by governments include fiscal policy related to government spending and taxation and monetary policy which controls money supply and interest rates. These policies aim to promote growth, reduce unemployment, and lower inflation.
This paper discusses the Irish economy’s recent growth performance and considers its medium-and-long-term prospects for growth. A range of policy reforms to increase the economy’s long-run potential output are identified. The best way to sustain productivity growth is to increase investment in education and skills, particularly early years learning; to increase investment in the production, diffusion and use of new ideas, and to increase investment in productivity enhancing infrastructure.
This document provides an overview of business cycles, unemployment, and inflation in the United States. It discusses how GDP and the economy fluctuate in cycles, with alternating periods of expansion and recession. Unemployment rates and types of unemployment, including frictional, structural, cyclical, and seasonal, are also examined. Key labor market indicators like the unemployment rate and labor force participation rate are defined. The concept of potential GDP and the natural rate of unemployment are introduced.
This document discusses economic growth and factors that influence it. It defines economic growth as an increase in potential GDP over time, measured by expanding production capabilities. Growth rates are calculated by comparing GDP values between years. Economic growth increases standards of living by raising GDP per capita. While population growth reduces growth in GDP per person, productivity gains can outweigh this effect and allow sustained increases in living standards over long periods. Factors driving productivity and growth include investment in physical and human capital, technology advances, and strong economic institutions.
This document provides an overview of macroeconomics topics including:
1) The key issues in macroeconomics are economic growth versus business cycle fluctuations and unemployment versus inflation.
2) Macroeconomic performance is measured using indicators like GDP, GDP per capita, unemployment and inflation rates.
3) Examples of macroeconomic data are provided for countries like the US, China, Mexico, Japan and Greece for 2014.
This document discusses various economic theories related to economic growth and development. It covers theories by Adam Smith, Thomas Malthus, David Ricardo, Karl Marx, Joseph Schumpeter, and John Maynard Keynes. The key ideas are that economic growth depends on factors like capital accumulation, innovation, savings and investment rates, and aggregate demand. Government intervention may be needed to stimulate demand and investment to increase employment and growth.
Potential GDP
0
ASLR1
ASLR2
Long-run aggregate supply increases when productivity or the quantity of resources increases permanently. This shifts the long-run aggregate supply curve rightward, increasing the potential GDP of the economy.
Income-Led Growth in Korea: Evaluation and ProspectsKang-Kook Lee
The document summarizes Kang-Kook Lee's presentation on income-led growth in South Korea. It discusses the Moon government's strategy of raising wages and household incomes to boost demand, evaluations of this strategy, and prospects. While the direction of the strategy is seen as correct, the real implementation has been problematic due to de facto austerity and a lack of redistribution. More political support and effective policy measures are needed to strengthen income-led growth.
This chapter discusses key macroeconomic concepts including:
1) The two major issues in macroeconomics are economic growth and business cycles which include unemployment and inflation.
2) Important measures used to evaluate macroeconomic performance are GDP, GDP per capita, unemployment rate, inflation rate, and potential GDP.
3) Macroeconomic policies implemented by governments include fiscal policy related to government spending and taxation and monetary policy which controls money supply and interest rates. These policies aim to promote growth, reduce unemployment, and lower inflation.
The document discusses business cycles, unemployment, inflation, and the Philippine experience. It covers theories of business cycles and the different phases. It also defines unemployment and inflation, and discusses the government's policies in response to the Philippine recession in the 1980s to promote economic recovery.
The document discusses economic growth in several countries and regions. It provides data showing some of the fastest growing countries in 2015, with Papua New Guinea having the highest growth rate at 19.33%. It also discusses factors that have contributed to rapid economic growth in many African countries in recent years, such as rising commodity prices and increasing foreign direct investment. The document analyzes sources of economic growth in China, finding that over 60% has come from increasing capital and labor inputs, while 30-40% has come from rising productivity.
This document provides an overview of business cycles, unemployment, and inflation. It discusses the phases of the business cycle including expansion, recession, peaks and troughs. It also examines causes of business cycles and different types of unemployment including frictional, structural, cyclical, and seasonal unemployment. Key labor market indicators like the unemployment rate, labor force participation rate, and natural rate of unemployment are defined. The relationship between actual and potential GDP over the business cycle is also explored.
(1) Economic growth is the expansion of an economy's production capabilities over time, as measured by the increase in potential GDP. Growth occurs through increases in population, productivity, capital, technology and other factors.
(2) The US has experienced steady economic growth since the 1950s, driven primarily by productivity gains. Labor productivity has increased on average 1.5-2.8% annually due to advances in technology, education, capital investment and other factors.
(3) While economic growth has lifted living standards in the US, growth has slowed recently and the country lags others in math/science skills. Sustained growth requires continued productivity improvements through education, innovation and efficient resource allocation.
This document discusses the importance of federal statistics for evidence-based policymaking. It notes that federal statistical programs have seen declining budgets as a share of GDP since 1980. Rigorous data and analysis from agencies like BEA, BLS, and SSA inform major policy decisions in areas like monetary policy, program funding, and administration. The document calls for continued investment in statistical innovation to address complex challenges around issues like long-term fiscal gaps, health care costs, education, and teacher effectiveness.
THE 2012 GLOBAL AGRICULTURAL PRODUCTIVITY REPORT®
The Global Harvest Initiative (GHI) is a private sector policy voice for agricultural productivity growth throughout the value chain to sustainably meet the demands of a growing world.
GHI releases an annual Global Agricultural Productivity Report® (GAP Report®) to serve as a benchmark to analyze agricultural productivity growth.
The 2012 GAP Report® focuses on the most recent global agricultural productivity growth rate and compares it to the rate required to meet estimated demand growth. The report also analyzes global and regional productivity, as each region faces unique opportunities and challenges.
In 2010, GHI’s inaugural GAP Report® calculated that global agricultural total factor productivity (TFP) must grow by an average rate of at least 1.75 percent annually to double agricultural output by 2050. Recent findings indicate that global TFP is rising at an average annual rate of 1.84 percent.
But regional differences exist, and achieving necessary food production by 2050 requires improving the productivity of farmers in every major region, and across all scales of agriculture, from the smallholder to the commercial exporter.
Meeting future demand requires improving practices in growing and handling crops and livestock, and improving transportation, processing, and food production through infrastructure and capital investment.
This document analyzes economic growth and productivity in Vietnam between 1985-2006 as the country transitioned to a market economy. It finds that:
1) Vietnam experienced remarkable economic growth since initiating economic reforms in 1986, with real GDP per capita doubling between 1992-2005.
2) Productivity growth was largely driven by the industrial sector. Technical progress contributed around 20% to economic growth over the study period.
3) The document aims to provide a more detailed analysis of productivity growth, economic growth, and production efficiency for Vietnam and its economic sectors during 1985-2006 using a stochastic frontier production function framework.
This document summarizes the key economic structures and dimensions of Nepal's economy. It outlines the main sectors (primary, secondary, tertiary), their contribution to GDP, and expected growth rates. The primary sector includes agriculture, forestry and fishing. The secondary sector includes manufacturing and construction. The tertiary sector or service sector makes up the largest portion of GDP at 57.6%. It also discusses economic indices like GDP, income distribution, savings and investment rates, trade issues, employment, privatization policies, and challenges faced by industries in Nepal.
This document discusses various types of economic planning. It begins by defining economic planning as the deliberate direction of economic activity towards chosen ends by a central planning authority. It then discusses the need for planning in underdeveloped countries to increase development rates and mobilize resources. The key aspects of successful plan formulation include establishing a planning commission, collecting statistical data, setting objectives, mobilizing resources, balancing the plan, and implementing proper development policies. The document also compares different approaches to planning such as planning by direction vs inducement, democratic vs totalitarian planning, centralized vs decentralized planning, and structural vs functional planning.
- Section 1 discusses economic growth, defining it as a persistent increase in real GDP and potential output. It examines how growth is presented on a PPC curve and discusses the determinants and measurement of economic growth.
- Section 2 defines economic development as the process of improving living standards and quality of life for all citizens through improvements in economic, social, and cultural aspects. It discusses different approaches to defining and measuring development.
- Section 3 likely discusses factors affecting the economic growth and development process, including investments, savings, productivity, technology, education and other macroeconomic factors.
This document discusses economic growth and income distribution in Indonesia. It provides definitions of economic growth and economic development, and methods for measuring economic growth. It then outlines several economic theories that can explain growth, such as classical, Schumpeter, Harrod-Domar, and neo-classical theories. Key factors determining economic growth in Indonesia are identified as land, population, capital goods, technology, and entrepreneurship. The document also discusses indicators for measuring income inequality like the Lorenz curve and Gini coefficient, and causes of uneven income distribution. Statistics from Badan Pusat Statistik show Indonesia's GDP growth of 2.8% in Q2 2012, led by trade, utilities, and construction sectors.
Economic growth refers to an increase in real GDP or real GDP per capita over time. It is important because it lessens the burdens of scarcity. Two key factors that lead to long-term economic growth are increases in the quantity of labor through population growth and increases in the quality of labor through productivity gains. Together, steady growth in the labor force and productivity allow countries to experience sustainable increases in real GDP and living standards over generations.
The document discusses various measures used to assess economic performance and well-being, including GDP, inflation, unemployment, balance of payments, exchange rates, as well as non-economic measures like quality of life, environment, health, education, and taxation. It provides details on how each indicator is defined and calculated, factors that influence them, and their impacts.
This document discusses economic growth and factors used to measure it. Economic growth is defined as an increase in a country's real output of goods and services over time, as well as potential output at full employment. It can be measured through increases in GDP, GNI, and per capita income. However, per capita income is a better measure when population growth outpaces overall growth. GDP is often used as a proxy for standard of living, though it does not directly measure it. GNI includes the total value of final goods and services produced domestically plus net income from overseas investments and remittances. The document also questions whether rapid growth is sustainable and if it truly improves human development.
Here are my responses to your review questions:
1. Some key government policies that can promote economic growth discussed in the document include encouraging saving and investment, education and training, securing property rights and maintaining political stability, promoting free trade, controlling population growth, and promoting research and development.
2. The influx of more women in universities could positively influence the economy by expanding the overall human capital and skills in the labor force. Educating and training more women would increase productivity over the long run and potentially lead to more innovation. It could also help reduce gender imbalances in the labor market and certain occupations. Overall, greater educational attainment and workforce participation of women has the potential to boost economic growth.
Catherine Mann, Chief Economist at the OECD, welcomed participants to the joint OECD-NBER conference on productivity research. The conference aims to inform approaches to economic challenges by assessing the productivity slowdown and highlighting complexity in new dimensions like the environment and government. Bringing together OECD and academic researchers strengthens links, highlights data, provides a broad canvas for research, and promotes complementary empirical and theoretical analysis. Productivity growth contributes substantially to GDP per capita and growth. Raising productivity involves factor augmentation through investments in knowledge-based capital and skills, as well as reallocating labor to more productive firms. The productivity slowdown presents new challenges to understand causes like factor augmentation, reallocation, structural barriers to entry and
Economic growth can be caused by increases in total demand, improvements to the labor force through quality and quantity, progression of technology, and investment. However, different countries experience economic growth through different means depending on their unique economic circumstances and histories. Sustained long-term growth is often attributed to capital deepening through investment and technological advances, while short-term growth may result from increases in total demand.
GDP or Gross Domestic Product is used to measure the total value of goods and services produced in a country over a period of time. The document provides GDP growth rate forecasts and actuals for Pakistan from Q1 2016 to Q4 2016 and 2020, as well as GDP data for various other countries like Bangladesh, China, India, Sri Lanka, Australia, Malaysia, South Korea, UK, and US from different time periods ranging from 1994 to 2016. It also outlines what GDP is, how it is calculated, and which organizations report GDP data for the different countries.
This document provides an overview of the global macroeconomic environment. It discusses the key components of the economy including households, firms, government, banking, and the external sector. It also explains macroeconomic objectives such as economic growth, unemployment, and inflation. Various metrics for measuring macroeconomic performance are presented such as GDP, GDP per capita, unemployment rates, and inflation rates.
The document discusses several key concepts related to economics of production and growth including: production functions, diseconomies of scale, features of economic growth such as increasing output through more/better resources, barriers to growth like poor infrastructure, the difference between economic growth and development, determinants of growth, stages of growth, and growth strategies like balanced/unbalanced growth and big push strategies.
The document discusses business cycles, unemployment, inflation, and the Philippine experience. It covers theories of business cycles and the different phases. It also defines unemployment and inflation, and discusses the government's policies in response to the Philippine recession in the 1980s to promote economic recovery.
The document discusses economic growth in several countries and regions. It provides data showing some of the fastest growing countries in 2015, with Papua New Guinea having the highest growth rate at 19.33%. It also discusses factors that have contributed to rapid economic growth in many African countries in recent years, such as rising commodity prices and increasing foreign direct investment. The document analyzes sources of economic growth in China, finding that over 60% has come from increasing capital and labor inputs, while 30-40% has come from rising productivity.
This document provides an overview of business cycles, unemployment, and inflation. It discusses the phases of the business cycle including expansion, recession, peaks and troughs. It also examines causes of business cycles and different types of unemployment including frictional, structural, cyclical, and seasonal unemployment. Key labor market indicators like the unemployment rate, labor force participation rate, and natural rate of unemployment are defined. The relationship between actual and potential GDP over the business cycle is also explored.
(1) Economic growth is the expansion of an economy's production capabilities over time, as measured by the increase in potential GDP. Growth occurs through increases in population, productivity, capital, technology and other factors.
(2) The US has experienced steady economic growth since the 1950s, driven primarily by productivity gains. Labor productivity has increased on average 1.5-2.8% annually due to advances in technology, education, capital investment and other factors.
(3) While economic growth has lifted living standards in the US, growth has slowed recently and the country lags others in math/science skills. Sustained growth requires continued productivity improvements through education, innovation and efficient resource allocation.
This document discusses the importance of federal statistics for evidence-based policymaking. It notes that federal statistical programs have seen declining budgets as a share of GDP since 1980. Rigorous data and analysis from agencies like BEA, BLS, and SSA inform major policy decisions in areas like monetary policy, program funding, and administration. The document calls for continued investment in statistical innovation to address complex challenges around issues like long-term fiscal gaps, health care costs, education, and teacher effectiveness.
THE 2012 GLOBAL AGRICULTURAL PRODUCTIVITY REPORT®
The Global Harvest Initiative (GHI) is a private sector policy voice for agricultural productivity growth throughout the value chain to sustainably meet the demands of a growing world.
GHI releases an annual Global Agricultural Productivity Report® (GAP Report®) to serve as a benchmark to analyze agricultural productivity growth.
The 2012 GAP Report® focuses on the most recent global agricultural productivity growth rate and compares it to the rate required to meet estimated demand growth. The report also analyzes global and regional productivity, as each region faces unique opportunities and challenges.
In 2010, GHI’s inaugural GAP Report® calculated that global agricultural total factor productivity (TFP) must grow by an average rate of at least 1.75 percent annually to double agricultural output by 2050. Recent findings indicate that global TFP is rising at an average annual rate of 1.84 percent.
But regional differences exist, and achieving necessary food production by 2050 requires improving the productivity of farmers in every major region, and across all scales of agriculture, from the smallholder to the commercial exporter.
Meeting future demand requires improving practices in growing and handling crops and livestock, and improving transportation, processing, and food production through infrastructure and capital investment.
This document analyzes economic growth and productivity in Vietnam between 1985-2006 as the country transitioned to a market economy. It finds that:
1) Vietnam experienced remarkable economic growth since initiating economic reforms in 1986, with real GDP per capita doubling between 1992-2005.
2) Productivity growth was largely driven by the industrial sector. Technical progress contributed around 20% to economic growth over the study period.
3) The document aims to provide a more detailed analysis of productivity growth, economic growth, and production efficiency for Vietnam and its economic sectors during 1985-2006 using a stochastic frontier production function framework.
This document summarizes the key economic structures and dimensions of Nepal's economy. It outlines the main sectors (primary, secondary, tertiary), their contribution to GDP, and expected growth rates. The primary sector includes agriculture, forestry and fishing. The secondary sector includes manufacturing and construction. The tertiary sector or service sector makes up the largest portion of GDP at 57.6%. It also discusses economic indices like GDP, income distribution, savings and investment rates, trade issues, employment, privatization policies, and challenges faced by industries in Nepal.
This document discusses various types of economic planning. It begins by defining economic planning as the deliberate direction of economic activity towards chosen ends by a central planning authority. It then discusses the need for planning in underdeveloped countries to increase development rates and mobilize resources. The key aspects of successful plan formulation include establishing a planning commission, collecting statistical data, setting objectives, mobilizing resources, balancing the plan, and implementing proper development policies. The document also compares different approaches to planning such as planning by direction vs inducement, democratic vs totalitarian planning, centralized vs decentralized planning, and structural vs functional planning.
- Section 1 discusses economic growth, defining it as a persistent increase in real GDP and potential output. It examines how growth is presented on a PPC curve and discusses the determinants and measurement of economic growth.
- Section 2 defines economic development as the process of improving living standards and quality of life for all citizens through improvements in economic, social, and cultural aspects. It discusses different approaches to defining and measuring development.
- Section 3 likely discusses factors affecting the economic growth and development process, including investments, savings, productivity, technology, education and other macroeconomic factors.
This document discusses economic growth and income distribution in Indonesia. It provides definitions of economic growth and economic development, and methods for measuring economic growth. It then outlines several economic theories that can explain growth, such as classical, Schumpeter, Harrod-Domar, and neo-classical theories. Key factors determining economic growth in Indonesia are identified as land, population, capital goods, technology, and entrepreneurship. The document also discusses indicators for measuring income inequality like the Lorenz curve and Gini coefficient, and causes of uneven income distribution. Statistics from Badan Pusat Statistik show Indonesia's GDP growth of 2.8% in Q2 2012, led by trade, utilities, and construction sectors.
Economic growth refers to an increase in real GDP or real GDP per capita over time. It is important because it lessens the burdens of scarcity. Two key factors that lead to long-term economic growth are increases in the quantity of labor through population growth and increases in the quality of labor through productivity gains. Together, steady growth in the labor force and productivity allow countries to experience sustainable increases in real GDP and living standards over generations.
The document discusses various measures used to assess economic performance and well-being, including GDP, inflation, unemployment, balance of payments, exchange rates, as well as non-economic measures like quality of life, environment, health, education, and taxation. It provides details on how each indicator is defined and calculated, factors that influence them, and their impacts.
This document discusses economic growth and factors used to measure it. Economic growth is defined as an increase in a country's real output of goods and services over time, as well as potential output at full employment. It can be measured through increases in GDP, GNI, and per capita income. However, per capita income is a better measure when population growth outpaces overall growth. GDP is often used as a proxy for standard of living, though it does not directly measure it. GNI includes the total value of final goods and services produced domestically plus net income from overseas investments and remittances. The document also questions whether rapid growth is sustainable and if it truly improves human development.
Here are my responses to your review questions:
1. Some key government policies that can promote economic growth discussed in the document include encouraging saving and investment, education and training, securing property rights and maintaining political stability, promoting free trade, controlling population growth, and promoting research and development.
2. The influx of more women in universities could positively influence the economy by expanding the overall human capital and skills in the labor force. Educating and training more women would increase productivity over the long run and potentially lead to more innovation. It could also help reduce gender imbalances in the labor market and certain occupations. Overall, greater educational attainment and workforce participation of women has the potential to boost economic growth.
Catherine Mann, Chief Economist at the OECD, welcomed participants to the joint OECD-NBER conference on productivity research. The conference aims to inform approaches to economic challenges by assessing the productivity slowdown and highlighting complexity in new dimensions like the environment and government. Bringing together OECD and academic researchers strengthens links, highlights data, provides a broad canvas for research, and promotes complementary empirical and theoretical analysis. Productivity growth contributes substantially to GDP per capita and growth. Raising productivity involves factor augmentation through investments in knowledge-based capital and skills, as well as reallocating labor to more productive firms. The productivity slowdown presents new challenges to understand causes like factor augmentation, reallocation, structural barriers to entry and
Economic growth can be caused by increases in total demand, improvements to the labor force through quality and quantity, progression of technology, and investment. However, different countries experience economic growth through different means depending on their unique economic circumstances and histories. Sustained long-term growth is often attributed to capital deepening through investment and technological advances, while short-term growth may result from increases in total demand.
GDP or Gross Domestic Product is used to measure the total value of goods and services produced in a country over a period of time. The document provides GDP growth rate forecasts and actuals for Pakistan from Q1 2016 to Q4 2016 and 2020, as well as GDP data for various other countries like Bangladesh, China, India, Sri Lanka, Australia, Malaysia, South Korea, UK, and US from different time periods ranging from 1994 to 2016. It also outlines what GDP is, how it is calculated, and which organizations report GDP data for the different countries.
This document provides an overview of the global macroeconomic environment. It discusses the key components of the economy including households, firms, government, banking, and the external sector. It also explains macroeconomic objectives such as economic growth, unemployment, and inflation. Various metrics for measuring macroeconomic performance are presented such as GDP, GDP per capita, unemployment rates, and inflation rates.
The document discusses several key concepts related to economics of production and growth including: production functions, diseconomies of scale, features of economic growth such as increasing output through more/better resources, barriers to growth like poor infrastructure, the difference between economic growth and development, determinants of growth, stages of growth, and growth strategies like balanced/unbalanced growth and big push strategies.
The document discusses economic development and the differences between economic growth and development. It defines development as sustained increases in production accompanied by changes in economic structure and efficiency. It also discusses key indicators and characteristics of developing countries, including the need for structural changes in the economy like shifting workers from agriculture to industry. The goal of development is to increase real income and provide more goods and opportunities to improve people's welfare, with innovation and investments in infrastructure and technology playing important roles. The Philippines has seen increases in GDP, investment, and exports in recent years, showing signs of economic development.
The latest seminar series organised jointly by the Royal Statistical Society (RSS), the Royal Economic Society (RES), the Economic Statistics Centre of Excellence (ESCoE), Office for National Statistics (ONS) and the Society of Professional Economists (SPE). Part of a wider effort to ensure that UK economic statistics keep pace with the changing shape of modern economies and societies, and continue to meet users’ needs.
Economic growth can be measured as an increase in real GDP or real GDP per capita over time. Real GDP in the US has increased over sixfold since 1950, growing at an average annual rate of 3.1%. Real GDP per capita has increased over threefold, growing at around 2% per year. Factors that determine economic growth include increases in the quantity and quality of labor, capital, technology, and efficiency. Productivity growth, driven by technological advances, education, and capital investment, has been a major contributor to economic growth. While some argue that sustained growth may not be environmentally sustainable, most economists view economic growth as increasing living standards and enabling solutions to problems through human innovation.
Harnessing Science and Technology: Reviving the Philippine Manufacturing SectorNEDAhq
Keynote address of Socioeconomic Planning Secretary and NEDA Director-General Arsenio M. Balisacan during the 35th Annual Scientific Meeting of the National Academy of Science and Technology (NAST), Manila Hotel,10 July 2013
1. Economic growth leads to long-term increases in standards of living as measured by real GDP per capita. Small differences in growth rates can lead to large differences over long periods due to compounding.
2. Real GDP per capita is determined by average labor productivity and the proportion of the population that is employed. The main determinants of average labor productivity are human capital, physical capital, technology, entrepreneurship, and the policy environment.
3. While economic growth provides benefits like higher incomes, it also imposes costs like reduced leisure and potential environmental damage. Government policies aim to promote growth through investments in education, infrastructure, and R&D, while also addressing external costs.
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Supply-side policies aim to improve the productive potential of an economy through various market-based and state intervention approaches. Market-led policies focus on making markets more competitive through deregulation and tax cuts, while state intervention aims to address market failures. The goals are to increase productivity, investment, skills, and competitiveness. This can generate higher long-run economic growth and living standards. However, supply-side policies face limitations such as long time lags and risks of unintended consequences from government intervention in markets. Evaluating their impact requires considering both supply and demand-side factors.
Supply-side policies aim to improve the long-term productive capacity of an economy by focusing on incentives, productivity, and efficiency. They can involve both market-led policies to reduce regulations and interventionist policies like infrastructure investment. Examples include tax cuts, education and training programs, and regional development initiatives. The goals are to increase GDP growth, wages, and living standards through higher productivity and competitiveness.
Supply-side policies aim to improve the productive potential of an economy through various market-led and state intervention approaches. Market-led policies focus on making markets more competitive through deregulation and tax cuts, while state intervention aims to overcome market failures. The objectives of supply-side policies include improving skills, productivity, investment, and competitiveness. Successful supply-side policies could achieve sustained low inflation growth and reduce unemployment. However, the effects of supply-side policies can take a long time to materialize and not all policies effectively pick winners. Evaluating their impact also requires considering demand-side conditions and issues like inequality and sustainability.
Mba1014 global economic environment 200413Stephen Ong
This document discusses globalization and its impact on businesses. It begins with an introduction to globalization and defining it as the deepening interdependence between countries through increased cross-border trade and financial flows. It then provides statistics on major economies and discusses factors driving globalization like declining trade barriers and technological advances. The document also covers debates around globalization, how it affects companies, and challenges they face in the global marketplace.
This document discusses Gross Domestic Product (GDP) and economic growth. It defines GDP as the dollar value of all final goods and services produced within a country's borders in a given year. Real GDP, which accounts for inflation, is used to measure economic growth from year to year. The document also discusses factors that influence GDP, such as aggregate supply and demand, as well as limitations of using GDP to measure quality of life. It then covers business cycles and the different phases of expansion and contraction. Finally, it discusses aspects that contribute to long-term economic growth, such as capital deepening, population changes, technology, government policies, foreign trade, and productivity.
This document discusses Gross Domestic Product (GDP) and economic growth. It defines GDP as the dollar value of all final goods and services produced within a country's borders in a given year. Real GDP, which accounts for inflation, is used to measure economic growth from year to year. The document also discusses factors that influence GDP, such as aggregate supply and demand, as well as limitations of using GDP to measure a country's overall wealth and citizens' quality of life. It then explains the business cycle of economic expansion and contraction, and how indicators like business investment, interest rates, consumer expectations, and external shocks can impact the cycle. The document concludes by defining economic growth as an increase in real GDP per capita over time
AS Macro Revision National Income and Standard of Livingtutor2u
This document provides an overview of key concepts related to measuring national income and standards of living, including:
1) National income measures the monetary value of goods and services produced in an economy over a period of time, usually one year. It is used to track economic growth, changes in living standards, and income distribution.
2) Gross domestic product (GDP) is the total value of national output and can be calculated in three ways: expenditure, factor incomes, or value of output. GDP per capita is used to measure standards of living.
3) Other indicators like the Gini coefficient and Human Development Index provide alternatives to GDP per capita by incorporating additional economic, social, and environmental factors.
This document summarizes an economic briefing given by Cielito F. Habito, Ph.D. to the Ateneo Graduate School of Business on June 4, 2013. The summary includes:
1) The Philippine economy has shown signs of improvement in recent years based on key indicators like inflation, unemployment, and GDP growth, but still lags behind other Asian countries and inequality remains high.
2) Growth is expected to continue being driven by government spending, private investment, remittances, and new economic opportunities. However, threats like fiscal problems in Europe, an appreciating peso, political instability, and failure to promote inclusive growth could undermine sustained growth.
3) Achieving truly inclusive growth that
Tennant Company reported earnings for the second quarter of 2015. Key points include:
- Consolidated net sales were $215.4 million, up nearly 4% organically over the prior year.
- Earnings were $0.79 per diluted share.
- Growth was led by strong strategic account sales in North America and new products.
- The company reaffirmed its 2015 EPS guidance of $2.40 to $2.70 per share.
Ayala upse forum the state of the economy-29_jan2015_finalnedaph
The Philippine economy has experienced a resurgence in growth since 2010, with average growth of 6.3% from 2010-2014. This is the highest 5-year average growth in over 40 years. Private consumption and the services sector have driven growth, though investment and industry are becoming larger drivers. While growth has been strong, poverty and employment remain challenges. Deepening reforms are needed to sustain growth and make it more inclusive, such as increasing infrastructure spending, investing in human capital, improving disaster preparedness, and addressing conflicts.
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Mba1014 macro economic environment 200413
1. Go Global !Go Global !
Managerial Economics :Managerial Economics :
The Macroeconomic
Environment
By
Stephen OngStephen Ong
Visiting Fellow, Birmingham City UniversityVisiting Fellow, Birmingham City University
Visiting Professor, College of Management,Visiting Professor, College of Management,
Shenzhen UniversityShenzhen University
April 2013April 2013
2. Learning Objectives
• To identify the componentTo identify the component
parts of the economyparts of the economy
• To explain the Circular FlowTo explain the Circular Flow
ModelModel
• To define the fiveTo define the five
macroeconomic objectivesmacroeconomic objectives
• To explain howTo explain how
macroeconomic performancesmacroeconomic performances
are measuredare measured
3. AgendaAgenda
1. Components of the Economy
2. The Circular Flow Model
3. Macroeconomic objectives
4. Macroeconomic performance
measures
5. 1. Components of the Economy
1.Firms
2.Households
3.Government
4.Banking sector
5.External (overseas) sector
6. 6
1. Economic Growth1. Economic Growth
• Increase in real GDP or real GDP perIncrease in real GDP or real GDP per
capita over some time periodcapita over some time period
• Percentage rate of growthPercentage rate of growth
• Growth as a goalGrowth as a goal
• Arithmetic of growth:Arithmetic of growth: Rule of 70Rule of 70
Approximate
number of years
required to double
real GDP
=
70
annual percentage rate
of growth
7. 7
1.1 Economic Growth1.1 Economic Growth
• Growth U.S. real GDP 1950-2005Growth U.S. real GDP 1950-2005
– Increased 6 foldIncreased 6 fold
– 3.5% per year3.5% per year
• Growth in U.S. real GDP per capitaGrowth in U.S. real GDP per capita
– Increased more than 3 foldIncreased more than 3 fold
– 2.3% per year2.3% per year
• QualificationsQualifications
– Improved products and servicesImproved products and services
– Added leisureAdded leisure
– Other impactsOther impacts
8. 8
1.2 Modern Economic Growth1.2 Modern Economic Growth
• Began with the IndustrialBegan with the Industrial
Revolution in late 1700’sRevolution in late 1700’s
• Ongoing increases in livingOngoing increases in living
standardsstandards
• Time for leisureTime for leisure
• Social changeSocial change
• DemocracyDemocracy
• Human lifespan doubledHuman lifespan doubled
9. 9
1.3 Modern Economic Growth1.3 Modern Economic Growth
• Began in BritainBegan in Britain
• Has spread slowlyHas spread slowly
• Starting date main cause ofStarting date main cause of
worldwide differences in livingworldwide differences in living
standardsstandards
• Catching up is possibleCatching up is possible
• Leader countries invent technologyLeader countries invent technology
• Follower countries adopt technologyFollower countries adopt technology
– Can grow fasterCan grow faster
10. 10
1.4 Real GDP Per Capita1.4 Real GDP Per Capita
Real GDPReal GDP Real GDPReal GDP AverageAverage
annualannual
per capita,per capita, per capita,per capita, growthgrowth
rate,rate,
CountryCountry 19601960 20042004 1960-20041960-2004United States $12,892 $36,098 2.3%
United Kingdom 10,323 26,762 2.2
France 8,531 26,168 2.5
Ireland 5,294 28,957 3.9
Japan 4,509 24,661 3.9
Singapore 4,219 29,404 4.4
Hong Kong 3,322 29,642 5.0
South Korea 1,458 18,424 5.8
Figures are in 1996 dollars Source: Penn World Table
11. 11
1.5 Modern Economic Growth1.5 Modern Economic Growth
• Growth-promotingGrowth-promoting
institutional structuresinstitutional structures
– Strong property rightsStrong property rights
– Patents and copyrightsPatents and copyrights
– Efficient financial institutionsEfficient financial institutions
– Literacy and widespread educationLiteracy and widespread education
– Free tradeFree trade
– Competitive market systemCompetitive market system
12. 12
1.6 Ingredients of Growth1.6 Ingredients of Growth
• Supply factorsSupply factors
– Increases in quantity andIncreases in quantity and
quality of natural resourcesquality of natural resources
– Increases in quality andIncreases in quality and
quantity of human resourcesquantity of human resources
– Increases in the supply (orIncreases in the supply (or
stock) of capital goodsstock) of capital goods
– Improvements in technologyImprovements in technology
13. 13
1.7 Ingredients of Growth1.7 Ingredients of Growth
• Demand factorDemand factor
– Households, businesses, andHouseholds, businesses, and
government must purchasegovernment must purchase
the economy’s expandingthe economy’s expanding
outputoutput
• Efficiency factorEfficiency factor
– Must achieve economicMust achieve economic
efficiency and full employmentefficiency and full employment
15. 15
1.9 Labour and Productivity1.9 Labour and Productivity
• Size of
employed
labour force
• Average
hours of
work
Labour
Inputs
(hours of
work)
• Quantity of
capital
• Education and
training
• Technological
advance
• Allocative
efficiency
• Other
Labour
Productivity
(average
output per
hour)
Real
GDP
Real GDP = hours of work x labour productivity
x
=
16. 1.10 U.S. Economic Growth1.10 U.S. Economic Growth
Annual Averages for Five Decades
0
1
2
3
4
5
1950-1959 1960-1969 1970-1979 1980-1989 1990-1999 2000-2005
Year
AverageAnnualIncrease(Percent)
Real GDP
Real GDP Per Capita
Source: Bureau of Economic Analysis
17. 17
1.11 Accounting for Growth1.11 Accounting for Growth
Accounting for Growth of U.S. Real GDP,
1953-2013 (average annual percentage changes)
Item
1953 Q2
to
1973 Q4
1973 Q4
to
1995 Q2
1995 Q2
to
2001 Q1
2001 Q1
to
2007 Q3
2007 Q3
to
2013 Q4*
Increases in Real GDP
Increases in
Quantity of Labour
Increases in
Labour Productivity
3.6
1.1
2.5
2.8
1.3
1.5
3.8
1.4
2.4
2.6
-0.1
2.7
2.8
0.3
2.5
Source: Economic Report of the President, 2008*Beyond 2007 are Projections
18. 18
• Factors affecting productivityFactors affecting productivity
growthgrowth
– Technological advance (40%)Technological advance (40%)
– Quantity of capital (30%)Quantity of capital (30%)
– Education and training (15%)Education and training (15%)
– Economies of scale andEconomies of scale and
resource allocation (15%)resource allocation (15%)
1.12 Accounting for Growth
19. 19
Average Test Scores of Eighth Grade
Students in Math and Science, Top 10
Countries and the United States, 2003
Singapore
South Korea
Hong Kong
Taiwan
Japan
Belgium
Netherlands
Estonia
Hungary
Malaysia
United States
1
2
3
4
5
6
7
8
9
10
15
605
589
586
585
570
537
536
531
529
508
504
Singapore
Taiwan
South Korea
Hong Kong
Estonia
Japan
Hungary
Netherlands
United States
Australia
1
2
3
4
5
6
7
8
9
10
578
571
558
556
552
552
543
536
527
527
Mathematics Science
1.13 Accounting for Growth
20. 20
1.14 Productivity Growth1.14 Productivity Growth
• Accelerated rate of growthAccelerated rate of growth
– 1.4% per year 1973-19951.4% per year 1973-1995
– 2.9% per year 1995-20052.9% per year 1995-2005
• Affects real output, real income,Affects real output, real income,
and real wagesand real wages
• Pay higher wages withoutPay higher wages without
lowering profitlowering profit
21. 21
1.15 Accelerated Productivity1.15 Accelerated Productivity
GrowthGrowth
• Microchip/informationMicrochip/information
technologytechnology
• New firms and increasingNew firms and increasing
returnsreturns
• Sources of increasing returnsSources of increasing returns
– More specialized inputsMore specialized inputs
– Spreading of development costsSpreading of development costs
– Simultaneous consumptionSimultaneous consumption
– Network effectsNetwork effects
– Learning by doingLearning by doing
• GGlobal competitionlobal competition
22. 22
1.16 Economic Growth1.16 Economic Growth
• Is accelerated productivity growthIs accelerated productivity growth
sustainable?sustainable?
• Is economic growth desirable andIs economic growth desirable and
sustainable?sustainable?
• The antigrowth viewThe antigrowth view
– Environmental and resource issuesEnvironmental and resource issues
• In defense of economic growthIn defense of economic growth
– Higher standard of livingHigher standard of living
– Human imagination can solveHuman imagination can solve
environmental and resource issuesenvironmental and resource issues
23. 23
1.17 Economic Growth in China1.17 Economic Growth in China
• Growth averages past 25 years:Growth averages past 25 years:
– 9% annual growth output9% annual growth output
– 8% annual growth output per capita8% annual growth output per capita
• Labour more productiveLabour more productive
• More international tradeMore international trade
• Transition to market economyTransition to market economy
• Joined WTO 2001Joined WTO 2001
• Financial system remains weakFinancial system remains weak
• Income inequality acrossIncome inequality across
geographic areasgeographic areas
25. 2. Performance and Policy2. Performance and Policy
• Real GDPReal GDP
– Corrects for price changesCorrects for price changes
• Nominal GDPNominal GDP
– Uses current pricesUses current prices
• UnemploymentUnemployment
• InflationInflation
– Increase in overall level ofIncrease in overall level of
pricesprices
26. 26
2.1 Economic Performance2.1 Economic Performance
• Output growthOutput growth
– 3.1% per year 1995-20053.1% per year 1995-2005
• Unemployment rateUnemployment rate
– 4.6% in 20074.6% in 2007
• Inflation rateInflation rate
– 2.7% in 20072.7% in 2007
27. 27
2.2 Economic Growth2.2 Economic Growth
• Standard of living measuredStandard of living measured
by output per personby output per person
• No growth in living standardsNo growth in living standards
prior to Industrial Revolutionprior to Industrial Revolution
• Modern economic growthModern economic growth
– Output per person risesOutput per person rises
– Not experienced by allNot experienced by all
countriescountries
28. 28
2.3 GDP Per Person 20072.3 GDP Per Person 2007
ZimbabweZimbabwe $188$188
United States $45,845
Canada $38,345
Japan $33,576
United Kingdom $35,134
South Korea $24,782
France $33,187
Russia $14,692
Saudi Arabia $23,243
Burundi $371
Tanzania $1,256
North Korea $1,900
India $2,659
China $5,292
Mexico $12,774
U.S. dollars based on purchasing power parity (PPP)
29. 29
2.4 Savings and Investment2.4 Savings and Investment
• SavingSaving
– Tradeoff current for futureTradeoff current for future
consumptionconsumption
• InvestmentInvestment
– Financial investmentFinancial investment
– Economic investmentEconomic investment
• Banks and financialBanks and financial
institutionsinstitutions
30. 30
2.5 Shocks2.5 Shocks
• Demand shocks and flexibleDemand shocks and flexible
pricesprices
– Price falls if demand lowPrice falls if demand low
– Sales unchangedSales unchanged
• Demand shocks and stickyDemand shocks and sticky
pricesprices
– Maintain inventoryMaintain inventory
– Sales changeSales change
– Business cyclesBusiness cycles
31. 31
2.6 Expectations2.6 Expectations
• The future is uncertainThe future is uncertain
• Expectations affectExpectations affect
investmentinvestment
• ShocksShocks
– What happens is not what youWhat happens is not what you
expectedexpected
• Demand shocksDemand shocks
• Supply shocksSupply shocks
34. How sticky is
How long ago since
the price changed ?
Months Months
Dry cleaning McDonald’s
Meal
Newspaper Small Car
Haircut Milk
Taxi fare Electricity
Medical services Airfare
Magazine Petrol
Personal Computer Teh tarik
35. 35
2.8.1 Sticky Prices2.8.1 Sticky Prices
• Explain fluctuations in GDPExplain fluctuations in GDP
• Average months between price changesAverage months between price changes
Months Months
Coin-operated Laundry
Machine
46.4 Beer 4.3
Newspaper 29.9 Microwave
Ovens
3.0
Haircut 25.5 Milk 2.4
Taxi fare 19.7 Electricity 1.8
Vet services 14.9 Airfare 1.0
Magazine 11.2 Gasoline 0.6
PC Software 5.5
36. 36
2.8.1 Sticky Prices2.8.1 Sticky Prices
• Many prices sticky in shortMany prices sticky in short
runrun
– Consumers prefer stable pricesConsumers prefer stable prices
– Firms want to avoid price warsFirms want to avoid price wars
• All prices flexible in long runAll prices flexible in long run
– Firms adjust to unexpected,Firms adjust to unexpected,
but permanent changes inbut permanent changes in
demanddemand
37. 37
2.9 Inventory Management2.9 Inventory Management
• Computerized inventory trackingComputerized inventory tracking
• Unexpected changes in demandUnexpected changes in demand
easier to observeeasier to observe
• Firms make better output andFirms make better output and
employment decisionsemployment decisions
• Less severe business cyclesLess severe business cycles
• Only two mild recessions sinceOnly two mild recessions since
adoptionadoption
– Possible explanationPossible explanation
59. 4. Macroeconomic Performance4. Macroeconomic Performance
MeasuresMeasures
Economic growth – GDP vs GNI
Inflation
Unemployment
Balance of Payments
Exchange rate
60. 60
4.1 Gross Domestic Product4.1 Gross Domestic Product
• Measure of aggregate outputMeasure of aggregate output
• Monetary measureMonetary measure
• Avoid multiple countingAvoid multiple counting
– Market value final goodsMarket value final goods
– Ignore intermediate goodsIgnore intermediate goods
– Count value addedCount value added
61. 61
4.1 Gross Domestic Product4.1 Gross Domestic Product
• Exclude financialExclude financial
transactionstransactions
– Public transfer paymentsPublic transfer payments
– Private transfer paymentsPrivate transfer payments
– Stock (and bond) marketStock (and bond) market
transactionstransactions
• Second hand salesSecond hand sales
– Sell used car to a friendSell used car to a friend
62. 62
4.2 Two Approaches to GDP4.2 Two Approaches to GDP
• Income approachIncome approach
– Count income derived fromCount income derived from
productionproduction
– Wages, rental income, interestWages, rental income, interest
income, profitincome, profit
• Expenditure approachExpenditure approach
– Count sum of money spentCount sum of money spent
buying the final goodsbuying the final goods
– Who buys the goods?Who buys the goods?
64. 64
G
D
P
= =
+
Consumption by
Households
Investment by
Businesses
Government
Purchases
Expenditures
By Foreigners
+
+
+
+
+
Wages
Rents
Interest
Profits
Statistical
Adjustments
+
4.3 Two Approaches to GDP
65. 65
4.4.1 Expenditure Approach4.4.1 Expenditure Approach
• Personal consumptionPersonal consumption
expenditures (C)expenditures (C)
– Durable consumer goodsDurable consumer goods
– Nondurable consumer goodsNondurable consumer goods
– Consumer expenditures forConsumer expenditures for
servicesservices
– Domestic plus foreignDomestic plus foreign
producedproduced
67. 67
4.4.2 Expenditure Approach4.4.2 Expenditure Approach
• Gross private domesticGross private domestic
investment (I)investment (I)
– Machinery, equipment, andMachinery, equipment, and
toolstools
– All constructionAll construction
– Changes in inventoriesChanges in inventories
• Creation of new capital assetCreation of new capital asset
• Noninvestment transactionsNoninvestment transactions
68. 68
4.4.3 Expenditure Approach4.4.3 Expenditure Approach
January 1 Year’s GDP December 31
Consumption
& Government
Spending
Depreciation
Net
Investment
Gross
Investment
Stock of
Capital
Increase
Stock of
Capital
Gross Investment
Depreciation
Net Investment
-
=
69. 69
4.4.4 Expenditure Approach4.4.4 Expenditure Approach
• Government purchases (G)Government purchases (G)
– Expenditures for goods and servicesExpenditures for goods and services
– Expenditures for social capitalExpenditures for social capital
– Excludes transfer paymentsExcludes transfer payments
• Net exports (XNet exports (Xnn))
– Add exported goodsAdd exported goods
– Subtract imported goodsSubtract imported goods
– NX = exports - importsNX = exports - imports
• GDP = C+IGDP = C+Ig+G+X+G+Xn
70. 70
Compensation
Rents
Interest
Proprietor’s Income
Corporate Profits
Taxes on Production and
Imports
National Income
Net Foreign Factor Income (-)
Statistical Discrepancy (+)
Consumption of Fixed
Capital (+)
Gross Domestic Product
$ 7874
65
603
1043
1627
1009
$12,221
96
29
1687
$ 13,841
Personal Consumption (C)
Gross Private Domestic
Investment (Ig)
Government Purchases (G)
Net Exports (Xn)
Gross Domestic Product
in Billions
Receipts
Expenditures Approach
Allocations
Income Approach
$ 9734
2125
2690
-708
$ 13,841
4.4.5 U.S. Economy 20074.4.5 U.S. Economy 2007
71. 71
4.4.6 C4.4.6 Comparative GDPomparative GDP
Source: World Bank
Selected Nations GDPs, 2007
United States
Japan
Germany
China
United Kingdom
France
Italy
Canada
Spain
Brazil
Russia
India
South Korea
Mexico
Australia
0 1 2 3 4 5 6 7 8 9 10 12 13
GDP in Trillions of Dollars
72. 72
4.5 Components of National4.5 Components of National
IncomeIncome
• Compensation of employeesCompensation of employees
• RentsRents
• InterestInterest
• Proprietor’s incomeProprietor’s income
• Corporate profitsCorporate profits
– Corporate income taxesCorporate income taxes
– DividendsDividends
– Undistributed corporate profitsUndistributed corporate profits
• Taxes on production and importsTaxes on production and imports
73. 73
4.5.1 Income Approach4.5.1 Income Approach
• From national income to GDPFrom national income to GDP
– Net foreign factor incomeNet foreign factor income
– Statistical discrepancyStatistical discrepancy
– Consumption of fixed capitalConsumption of fixed capital
• Other national accountsOther national accounts
– Net domestic product (NDP)Net domestic product (NDP)
– National income (NI)National income (NI)
– Personal income (PI)Personal income (PI)
– Disposable income (DI)Disposable income (DI)
– DI = C + SDI = C + S
74. 74
4.5.2 U.S. Income Relationships4.5.2 U.S. Income Relationships
20072007
Gross Domestic Product (GDP)
Less: Consumption of Fixed Capital
Equals: Net Domestic Product (NDP)
Less: Statistical Discrepancy
Plus: Net Foreign Factor Income
Equals: National Income (NI)
Less: Taxes on Production and Imports
Less: Social Security Contributions
Less: Corporate Income Taxes
Less: Undistributed Corporate Profits
Plus: Transfer Payments
Equals: Personal Income (PI)
Less: Personal Taxes
Equals: Disposable Income (DI)
$ 13,841
1687
$ 12,154
29
96
$ 12,221
1009
979
467
344
2237
$ 11,659
1482
$ 10,177
76. 76
4.6 Nominal vs. Real GDP4.6 Nominal vs. Real GDP
• GDP is a dollar measure ofGDP is a dollar measure of
productionproduction
• Using dollar values createsUsing dollar values creates
problemsproblems
• Nominal GDPNominal GDP
– Use prevailing priceUse prevailing price
• Real GDPReal GDP
– Reflect changes in priceReflect changes in price
– Use base year priceUse base year price
78. 78
4.6.2 GDP Price Index4.6.2 GDP Price Index
• Use price index to determine realUse price index to determine real
GDPGDP
Price
Index
In Given
Year
= x100
Price of Market Basket
In Specific Year
Price of Same Basket
In Base Year
Real
GDP =
Nominal GDP
Price Index (in hundredths)
79. 79
4.7 Shortcomings of GDP4.7 Shortcomings of GDP
• Nonmarket activitiesNonmarket activities
• LeisureLeisure
• Improved product qualityImproved product quality
• The underground economyThe underground economy
• GDP and the environmentGDP and the environment
• Composition and distribution of theComposition and distribution of the
outputoutput
• Noneconomic sources of well-beingNoneconomic sources of well-being
80. 80
4.7.1 Und4.7.1 Underground Economyerground Economy
Source: Open Assessment, E-Journal
As a percentage of GDP, Selected
Nations, 2007
Mexico
South Korea
India
Italy
Spain
China
Sweden
Germany
France
United Kingdom
Japan
Switzerland
United States
0 5 10 15 20 25 30
Percentage of GDP
81. 81
4.8.1 Sources of Data4.8.1 Sources of Data
• ConsumptionConsumption
– Census Bureau’s Retail Trade SurveyCensus Bureau’s Retail Trade Survey
– Census Bureau’s Survey ofCensus Bureau’s Survey of
ManufacturersManufacturers
– Census Bureau’s Service SurveyCensus Bureau’s Service Survey
• InvestmentInvestment
– All Consumption data sourcesAll Consumption data sources
– Census Bureau’s Housing Starts SurveyCensus Bureau’s Housing Starts Survey
and Housing Sales Surveyand Housing Sales Survey
– Retail Trade SurveyRetail Trade Survey
– Wholesale Trade SurveyWholesale Trade Survey
– Survey of ManufacturingSurvey of Manufacturing
82. 82
• Government PurchasesGovernment Purchases
– Office of Personnel ManagementOffice of Personnel Management
– Construction SurveysConstruction Surveys
– Census Bureau’s Survey ofCensus Bureau’s Survey of
Government FinanceGovernment Finance
• Net ExportsNet Exports
– U.S. Customs ServiceU.S. Customs Service
– BEA Surveys and AnalysisBEA Surveys and Analysis
4.8.2 Sources of Data
94. ConclusionConclusion
“Economic growth is the single mostEconomic growth is the single most
important factor in the success ofimportant factor in the success of
nations in the long run. Economicnations in the long run. Economic
growth involves the growth of potentialgrowth involves the growth of potential
output over the long run. The growth inoutput over the long run. The growth in
output per capita is an importantoutput per capita is an important
objective of government because it isobjective of government because it is
associated with rising average realassociated with rising average real
incomes and rising living standardsincomes and rising living standards”
Paul Samuelson
96. Go Global !Go Global !
Managerial Economics :Managerial Economics :
The Macroeconomic
Environment 2:
The Business Cycle
97. Learning Objectives
To analyse the key macroeconomic
indicators
To explain how the business cycle works
To critically assess the relationship
between the business cycle and company
performance
104. 1.2 Causes of Business1.2 Causes of Business
CyclesCycles
• Shocks and price stickinessShocks and price stickiness
• Supply and productivity shocksSupply and productivity shocks
• Monetary shocksMonetary shocks
• Financial bursts and bubblesFinancial bursts and bubbles
• Unexpected political eventsUnexpected political events
• Common linkCommon link
• Unexpected changes inUnexpected changes in
spendingspending
106. 1.4 Effects on Business1.4 Effects on Business
PerformancePerformance
1.Profitability
2.Share prices and Dividend Policies
3.Investment and Return on Capital
Employed
4.Cash Flow
107. Key Business Performance IndicatorsKey Business Performance Indicators
& Stage of Business Cycle :& Stage of Business Cycle : RecessionRecession
Indicator
(Rise/Fall)
Profits
Share prices
Dividends
Investment
Return on
Capital
Cash flow
Sales revenue
Costs
Bankruptcies
108. Key Business Performance IndicatorsKey Business Performance Indicators
& Stage of Business Cycle :& Stage of Business Cycle : BOOMBOOM
Indicator
(Rise/Fall)
Profits
Share prices
Dividends
Investment
Return on
Capital
Cash flow
Sales revenue
Costs
Bankruptcies
109. 2. Unemployment2. Unemployment
• Twin problems of the business cycleTwin problems of the business cycle
• UnemploymentUnemployment
• InflationInflation
• Measurement of unemploymentMeasurement of unemployment
• Who’s in the labour forceWho’s in the labour force
• Problems with the unemploymentProblems with the unemployment
raterate
• Part-time employmentPart-time employment
• Discouraged workersDiscouraged workers
Unemployment Rate
Unemployed
Labour Force
= x 100
110. 2.1 Unemployment2.1 Unemployment
Under 16
And/or
Institutionalized
(71.8 Million)
2007 data
Total
Population
(303.6 Million)
Not in
Labor Force
(78.7 Million)
Employed
(146.0 Million)
Labor
Force
(153.1 Million)
Unemployed
(7.1 Million) Source: Bureau of Labor Statistics
112. 2.2 Unemployment2.2 Unemployment
• Types of unemploymentTypes of unemployment
• FrictionalFrictional
• StructuralStructural
• CyclicalCyclical
• Full employment definedFull employment defined
• No cyclical unemploymentNo cyclical unemployment
• Natural rate ofNatural rate of
unemploymentunemployment
• Full employment rateFull employment rate
113. 2.3 Unemployment2.3 Unemployment
• Natural rate of unemploymentNatural rate of unemployment
• 1980’s 6%1980’s 6%
• Today 4-5%Today 4-5%
• Aging labour forceAging labour force
• Temp agencies and the internetTemp agencies and the internet
• New welfare laws and workNew welfare laws and work
requirementsrequirements
• Prison population has doubledPrison population has doubled
114. 2.4 Cost of Unemployment2.4 Cost of Unemployment
• Foregone outputForegone output
• Potential outputPotential output
• GDP gapGDP gap
• (Actual output – potential(Actual output – potential
output)output)
• Okun’s LawOkun’s Law
• Each 1% above NRU createsEach 1% above NRU creates
negative 2% output gapnegative 2% output gap
126. 3. Inflation3. Inflation
• Rise in general level ofRise in general level of
pricesprices
• Consumer price index (CPI)Consumer price index (CPI)
• Market basketMarket basket
• 300 goods and services300 goods and services
• Typical urban consumerTypical urban consumer
• 2 year updates2 year updates
CPI
Price of the Most Recent Market
Basket in the Particular Year
Price estimate of the Market
Basket in 1982-1984
= x 100
133. 3.3 Inflation3.3 Inflation
• Types of InflationTypes of Inflation
• Demand pullDemand pull
• Cost-pushCost-push
• Redistributive EffectsRedistributive Effects
• Nominal and real incomeNominal and real income
• Growth in nominal income vs.Growth in nominal income vs.
inflation rateinflation rate
• Anticipated vs. unanticipatedAnticipated vs. unanticipated
inflationinflation
134. 3.4 Inflation3.4 Inflation
• Who is hurt by inflation?Who is hurt by inflation?
• Fixed-income receiversFixed-income receivers
• SaversSavers
• CreditorsCreditors
• Who is unaffected or not hurt byWho is unaffected or not hurt by
inflation?inflation?
• Flexible-income receiversFlexible-income receivers
• Cost-of-living adjustments (COLAs)Cost-of-living adjustments (COLAs)
• DebtorsDebtors
146. ConclusionConclusion
“High unemployment is a central flaw
in modern capitalism... Unemployment
must sometimes be kept above its
socially optimal level to ensure price
stability, and the tension between price
stability and low unemployment is one
of the cruelest dilemmas of modern
society.” Paul Samuelson
147. Core ReadingCore Reading
• Keat, Paul G. and Young, Philip KY (2009)
Managerial Economics, 6th
edition, Pearson
• Samuelson, William F. and Marks, Stephen G.
(2010) Managerial Economics, 6th
edition, John
Wiley
• Pindyck, Robert S. and Rubinfeld, Daniel L.(2013)
Microeconomics, 8th
edition, Pearson
• Samuelson, P.A. and Nordhaus, W. D.Samuelson, P.A. and Nordhaus, W. D.
(2010)(2010)“Economics”“Economics” Irwin/McGraw-Hill, 19Irwin/McGraw-Hill, 19thth
EditionEdition
• Porter, Michael E. (2004)Porter, Michael E. (2004)“Competitive Strategy –“Competitive Strategy –
Techniques for Analyzing Industries and Competitors”Techniques for Analyzing Industries and Competitors”
Free PressFree Press
The Learning Objectives for Chapter 1 are To define globalization and international business and show how they affect each other To understand why companies engage in international business and why international business growth has accelerated To discuss globalization’s future and the major criticisms of globalization To become familiar with different ways in which a company can accomplish its global objectives To apply social science disciplines to understanding the differences between international and domestic business