Download - Lecture 3 measuring a nations income
Macroeconomics
Lecture 3
Measuring a Nations’s Income GDP
Questions?
1. Name the six types of capital 2. What type of capital is water? 3. What were the two inventions the Wright Brothers developed? 4. What is capital? 5. Are entrepreneurs the same thing as inventors? 6. Name two elements of cultural capital. 7. What incentivized the development of kerosene? 8. What is horizontal fracking? 9. What type of capital are you developing when you go to college? 9. What type of capital are you developing when you write a book? 10. If you want to change someone's economic system, what should you change?
11. What does GDP stand for? 12. What is the definition of GDP? 13. What is GDP per capita?
StudentIntroductions
1978China Changed Worldview
Deng Xiaoping
Worldview
Political
Legal
Economic
Free to Trade
GDP Per
Capita
Saudi Arabia $25,000
India $1,500Pakistan $1,261
Bangladesh $800
16.7 times more 19.8 times more 31.2 times more
Science
HardSoft
Most people
Most of the time
Economics is a Soft Science
GDPGross Domestic Product
The market value of all final goods and services produced in a country in
a given time
GDPHow much stuff a
country makes
GDP Per CapitaGDP Per Person
Average GDP
Market ValueWhat something
would sell for
Market ValueOne Apple
plusOne Orange
= Three Dollars
AllEverything except...
Stuff you don’t sell
FinalIntermediate
Final
Final
Intermediate
Goods and Services
Goods
Services
ProducedNew Stuff
Does not include the sale of used goods
Within a Country
In a given period of timeYear Y/Y
Quarter Q/QAnnualized: Q x 4
PercentageChange
new number - old numberold number
This Year - Last YearLast Year
This Year = 75Last Year = 60Percentage Change?
75 - 6060
1560
.25 or 25%
How do you calculate
GDP?
GDP =C = ConsumptionI = InvestmentG = GovernmentX = ExportsM = Imports
GDP =C + I + G + (X - M)
ConsumptionSpending by
households on goods and services, except new housing
InvestmentSpending on capital
equipment, inventories, and structures, including new
housing
GovernmentSpending on goods and services from
local, state, and federal governments.
Net ExportsExports minus
imports
Net ExportsForeigners buying
exports minus domestic residents
buying foreign goods
What is GDP?C = 105I = 40G = 25X = 30M = 20
What is GDP?C = 105I = 40G = 25E = 30I = 20
GDP= C + I + G + (X - M)= 105 + 40 + 25 +(30-20)= 105 + 40 + 25 +10= 180
GDP per Person
GDP per CapitaAverage GDP per
person
GDP $75 trillion
Population 7.5 billion
GDP Per Capita $10,000
GDP $18 trillion
Population 318 million
GDP Per Capita $56,600
United States
GDP $11 trillion
Population 1.4 billion
GDP Per Capita $7,857
China
https://fred.stlouisfed.org
Public Data Explorer
Intellectual
Financial Physical
Human
Culture
Entrepreneur
trust knowledge skills personality health relationships
natural resources time buildings equipmentthings than make things
money and risksavers and borrowers time is money
(1+r)n
insurance limited liability corporations
ideas technologymethods
Cultural Capital
Determines the relationship of
entrepreneurs to capital
Human Capital
I look for three things in hiring people.
The first is personal integrity, the second is
intelligence, and the third is a high energy level.
But of you don’t have the first, the other two will kill
you.
- Warren Buffett, CEO, Berkshire Hathaway
Integrity Competence
Trust
Trust Knowledge and Skills Health and Nutrition Social Relationships
Human Capital