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MEASURING ECONOMIC PERFORMANCE

MEASURING ECONOMIC PERFORMANCE. Study unit 2. MACROEOCONOMIC OBJECTIVES. Economic growth Full employment Price stability Balance of payments stability Equitable income distribution. DOMESTIC PRODUCTION. Domestic production vs. national production Domestic production

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MEASURING ECONOMIC PERFORMANCE

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  1. MEASURING ECONOMIC PERFORMANCE Study unit 2

  2. MACROEOCONOMIC OBJECTIVES • Economic growth • Full employment • Price stability • Balance of payments stability • Equitable income distribution

  3. DOMESTIC PRODUCTION • Domestic production vs. national production • Domestic production • Total production is an indication of macroeconomic activity. • Domestic production measured by GDP • Definition of GDP • Market value • Final products and services • Within the boarders of the country • Consumption of fixed capital

  4. DOMESTIC PRODUCTION • Domestic production • Calculating GDP. • Income method • Expenditure method • Value added method • GDP at market prices according to Income method: • Compensation of employees (wages) • Net operating surplus • Consumption of fixed capital • Taxes on production and products • Less: subsidies on production and products

  5. GDP ACCORDING TO INCOME AND EXPENDITURE APPROACHES

  6. DOMESTIC PRODUCTION • Domestic production • GDP at market prices according to Expenditure method: • Consumption by households • Consumption by government • Gross capital formation • Exports of goods • Less: Imports of goods • Residual

  7. GDP ACCORDING TO VALUE ADDED APPROACH

  8. DOMESTIC PRODUCTION • Domestic production • GDP at market prices vs. GDP at factor cost • GDP at market price Add: Subsidies on products Subsidies on production Less: Taxes on production Taxes on products GDP at factor cost • Nominal GDP vs. Real GDP

  9. DOMESTIC PRODUCTION • Domestic production • GDP at market prices vs. GDP at factor cost • GDP at market price Add: Subsidies on products Subsidies on production Less: Taxes on production Taxes on products GDP at factor cost • Nominal GDP vs. Real GDP

  10. DOMESTIC PRODUCTION • Domestic production • Nominal GDP vs. Real GDP • Nominal GDP indicates the monetary value of production • Real GDP indicates changes in physical output. • Nominal GDP is calculated either by: • Prices of products for current year x Quantities of the products of current year • Real GDP x CPI ÷ 100 • Real GDP is calculated: • Prices of products of the previous year x Quantities of the products current year • Nominal GDP x 100 ÷ CPI

  11. Nominal GDP vs. Real GDP

  12. DOMESTIC PRODUCTION • GDP per capita • Definition • Formula = Real GDP ÷ Population • Three measures that we use to measure the inequality: • Lorenz-curve • Gini coefficient • Quantile ratio

  13. NATIONAL PRODUCTION • National Production • Definition • GNP = GDP at market price Add: Primary income receipts Less: Primary income payments • Factors which influence GNP: • Stage of a country’s economic development • Level of production of the country’s production system • The living standards of a country’s citizens • The nature and extent of a country’s natural resources

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