The basical macroeconomics indicators

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The basical macroeconomics indicators

The level of Macroeconomics is concerned either on with the economy as a whole or with the basic subdivisions of aggregates - such as government, household and business sectors - which make up the economy. An aggregate is a collection of the specific economics units which are treated as if they were one unit. Macroeconomics overviews all economy by generally outlining the maine aggregates which construct the economy.

That's why such words as total, general are always used in Macroeconomics. That is the part of economics concerned with the economy as a whole, with such major aggregates as house-holds, business and governmental sectors and with totals for the ec. So, the basical Macroeconomics indicators are: Gross National Product (GNP), Price level, Interest Reate and Employment.

GNP: It is generally agreed that the best available indicator of economy health is its annual output of goods and services, or so-called aggregate output. This is called GNP and is de-fined as the total market value of all final goods & services produced in ec in one year. The definition of the GNP is very explicit and merits comments. First, GNP measures the market value of annual output. Second, GNP is a monetary measure. To measure all output accurately we should count all goods and services only once. That is why GNP increase reaseludes only final goods and services and ignores transactions involving intermediate goods and services. By Final meant such goods and services that are purchased for final use and not to be sold in future (resale), or other processing or manufacturing.

Directly opposite goods and services are called intermediate. Intermediate goods and services are excluded from GNP cause it could involve double counting. A lot of nonproduction transactions must be carefully excluded from GNP: financial transaction (public transfer payments - to increase reassessed them to GNP would be to overstate this year's production, private transfer payments - simply transfer of funds to one person to another, security transactions - buying or selling stocks in the stock market.) secondhand sales.

Such sales either reflect no current production or they involve double counting. Actually GNP can be determined either by adding up all that is spent to buy this year's total output or by summing up all the increasereaseomes derived from the production of this year's output. The formula GNP can be determined looks like this:

GNP = C + Ig + G + Xn

Where C stands for personal consumption expenditures (expenditures by households on durable consumer goods: automobiles, houses, VCRs, and so on, nondurable consumer goods: milk, bread, beer, toothpaste, clothes, etc., consumer expenditures for services of lawers, doctors, barbers), Ig means Gross Private Domestic Investment, G governmental purchases of goods and services, and Xn stands for Net Exports, is the amount by which foreign spending on American goods and services exceeds American spending on foreign goods and services. All these categories of expenditures shown above increasereaselude all possible types of spending. Added together they reflect the year's GNP.

Measuring the price level. The price level is stated as an index number. A price index measures the combined price of particular collections of goods & services, called a "marked basket":

Price index in a given year = Price of market basket in a given year ? Price of the same basket in the base year ? 100%

The Federal government computes price indexes so several different collections (or market baskets) of goods and services. The best known of these indexes are Consumer Price Index (CPI) which measures the prices of a fixed market basket of some 300 consumer goods and services purchased by a typical urban consumer. The GNP price index or GNP deflator, however, is more useful than the CPI for measuring the overall price level. GNP deflator also increasereaseludes the prices of investment goods, goods and services purchased by government, and g & s which enter into world trade.

This paragraph summary:

1. GNP is a basic measure of society's economic performance, is the market value of all final goods and services produced in a year. Intermediate goods, nonproduction transactions and secondhand sales are excluded from calculating GNP;

2. By the expenditures approach GNP is determined by adding consumer purchases of goods and services, gross investment spending by businesses, government purchases of goods and services and net exports;

3. Gross investment can be divided into: replacement investment (required to maintain the nation's stock of capital at its existing level), and net investment (the net increasereaserease in the stock of capital). Positive net investment is associated with a grown economy, negative - with a decreaselining economy;

4. By the increasereaseome or allocations approach GNP is calculated as a sum of compensation to employees, rents, interest, proprietors' increasereaseome, corporate increasereaseome taxes, dividends, undistributed corporate profits, and the two nonincreasereaseome charges (capital consumption allowance & indirect business taxes);

5. Other important national increasereaseome accounting measures are derived from the GNP. Net national product (NNP) is GNP less the capital consumption allowance. National increasereaseome (NI) is total increasereaseome earned by resource suppliers, it is found by subtracting indirect business taxes from NNP. Personal increasereaseome (PI) is the total increasereaseome paid to households prior to any allowance for personal taxes. Disposable increasereaseome (DI) is personal increasereaseome after personal taxes have been paid. DI measures the amount of increasereaseome households have available to consume or save;

6. Price indexes are computed by comparing the price of a specific collection or "market basket" of output in a given period to the price (cost) of the same market basket in a base period and multiplying the outcome (quotient) by 100. The GNP deflator is the price indexused to adjust normal GNP to account for inflation or deflation and thereby to obtain real GNP;

7. Nominal (current dollar) GNP measures each year's output valued in terms of the prices prevailing in that year. Real (constant dollar) GNP measures each year's output valued in terms of the prices prevailing in a selected base year. Because it is adjusted for price level changes, real GNP measures the level of production activity: macroeconomics gross price

Nominal GNP ? Price index (in hundredths) = Real GNP

8. The various national increasereaseome accounting measures exclude nonmarket and illegal transactions, changes in leisure and product quality, the composition and distribution of output, and the environmental effects of production. Nevertheless, these measures are reasonably accurate and very useful indicators of the nation's economic performance.

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