A. Circular diagram of an economy
- Linkages among:
- Households
- Firms
- Government
- Foreign sector
B. Measuring GDP: The Expenditure Aproach
- Four components of aggregate expenditure [Table 1]
a. Consumption (C)
- Spending on consumption goods and services
- Examples: Mineral water, "Full Monty"
b. Investment (I)
- Spending on capital goods
- Examples: Computers, 18-wheelers, houses
c. Government spending (G)
- Spending by the govt. on goods and services
- Examples: Toilet seats, submarines
- Note: G Does not include transfer payments (WHY?)
d. Net exports (X-IM)
- Net demand by foreigners for our goods and services
- Exports (X): Wheat, "Baywatch"
- Imports (IM): Cars, VCRs
- GDP = Aggregate expenditure
C. Measuring GDP: The Factor Incomes Approach
- Begin with National income [Table 2]
- Compensation of employees
- Net interest
- Rental income
- Corporate profits
- Proprietors' income
- Obtain Net National Product [Table 3]
- NNP = NI + Indirect taxes - Subsidies
- Obtain Gross National Product
- Obtain Gross Domestic Product
- GDP = GNP - Net factor income from abroad
D. Incomes
- National Income
- NI = Wages + Interest + Profits + Rent + Proprietors' income
- Personal income
- PI = NI - (Corporate profits taxes + Payroll taxes etc.) + Transfer payments
- Disposable income
- DI = Personal income - Personal taxes
E. Saving
- Household saving
- Government saving
- T - G
- Budget surplus/deficit
- National saving
- Borrowing from abroad
- IM - X
- Trade deficit/surplus
F. The Saving-Investment Relationship
- S = I + (G - T) + (X - IM)
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Table 1. Gross Domestic Product [Billions of dollars]
Line |
|
2001 |
1 |
Gross domestic product |
10,082.2 |
2 |
Personal consumption expenditures |
6,987.0 |
3 |
Durable goods |
835.9 |
4 |
Nondurable goods |
2,041.3 |
5 |
Services |
4,109.9 |
6 |
Gross private domestic investment |
1,586.0 |
7 |
Fixed investment |
1,646.3 |
8 |
Nonresidential |
1,201.6 |
9 |
Structures |
324.5 |
10 |
Equipment and software |
877.1 |
11 |
Residential |
444.8 |
12 |
Change in private inventories |
-60.3 |
13 |
Net exports of goods and services |
-348.9 |
14 |
Exports |
1,034.1 |
15 |
Goods |
733.5 |
16 |
Services |
300.6 |
17 |
Imports |
1,383.0 |
18 |
Goods |
1,167.2 |
19 |
Services |
215.8 |
20 |
Government consumption expenditures and gross investment |
1,858.0 |
21 |
Federal |
628.1 |
22 |
National defense |
399.9 |
23 |
Nondefense |
228.2 |
24 |
State and local |
1,229.9 |
Table 2. National Income by Type of Income [Billions
of dollars]
Line |
|
2001 |
1 |
National income |
8,122.0 |
2 |
Compensation of employees |
5,874.9 |
3 |
Wage and salary accruals |
4,950.6 |
4 |
Government |
810.8 |
5 |
Other |
4,139.8 |
6 |
Supplements to wages and salaries |
924.3 |
7 |
Employer contributions for social insurance |
353.9 |
8 |
Other labor income |
570.4 |
9 |
Proprietors' income with inventory valuation and capital consumption adjustments |
727.9 |
10 |
Farm |
19.0 |
11 |
Proprietors' income with inventory valuation adjustment |
26.7 |
12 |
Capital consumption adjustment |
-7.7 |
13 |
Nonfarm |
708.8 |
14 |
Proprietors' income |
621.6 |
15 |
Inventory valuation adjustment |
.9 |
16 |
Capital consumption adjustment |
86.3 |
17 |
Rental income of persons with capital consumption adjustment |
137.9 |
18 |
Rental income of persons |
204.4 |
19 |
Capital consumption adjustment |
-66.5 |
20 |
Corporate profits with inventory valuation and capital consumption adjustments |
731.6 |
21 |
Corporate profits with inventory valuation adjustment |
675.1 |
22 |
Profits before tax |
670.2 |
23 |
Profits tax liability |
199.3 |
24 |
Profits after tax |
470.9 |
25 |
Dividends |
409.6 |
26 |
Undistributed profits |
61.2 |
27 |
Inventory valuation adjustment |
5.0 |
28 |
Capital consumption adjustment |
56.5 |
29 |
Net interest |
649.8 |
|
Addenda: |
|
30 |
Corporate profits after tax with inventory valuation and capital consumption adjustments |
532.3 |
31 |
Net cash flow with inventory valuation and capital consumption adjustments |
911.8 |
32 |
Undistributed profits with inventory valuation and capital consumption adjustments |
122.7 |
33 |
Consumption of fixed capital |
789.1 |
34 |
Less: Inventory valuation adjustment |
5.0 |
35 |
Equals: Net cash flow |
906.8 |
Table 3. Gross Domestic Product, Gross
National Product, Net National Product, National Income, and Personal
Income [Billions of dollars]
Line |
|
2001 |
1 |
Gross domestic product |
10,082.2 |
2 |
Plus: Income receipts from the rest of the world |
316.9 |
3 |
Less: Income payments to the rest of the world |
295.0 |
4 |
Equals: Gross national product |
10,104.1 |
5 |
Less: Consumption of fixed capital |
1,329.3 |
6 |
Private |
1,106.8 |
7 |
Capital consumption allowances |
1,168.4 |
8 |
Less: Capital consumption adjustment |
61.6 |
9 |
Government |
222.4 |
10 |
General government |
187.7 |
11 |
Government enterprises |
34.8 |
12 |
Equals: Net national product |
8,774.8 |
13 |
Less: Indirect business tax and nontax liability |
774.8 |
14 |
Business transfer payments |
42.5 |
15 |
Statistical discrepancy |
-117.3 |
16 |
Plus: Subsidies less current surplus of government enterprises |
47.3 |
17 |
Equals: National income |
8,122.0 |
18 |
Less: Corporate profits with inventory valuation and capital consumption adjustments |
731.6 |
19 |
Net interest |
649.8 |
20 |
Contributions for social insurance |
726.1 |
21 |
Wage accruals less disbursements |
.0 |
22 |
Plus: Personal interest income |
1,091.3 |
23 |
Personal dividend income |
409.2 |
24 |
Government transfer payments to persons |
1,137.0 |
25 |
Business transfer payments to persons |
33.4 |
26 |
Equals: Personal income |
8,685.3 |
|
Addenda: |
|
27 |
Gross domestic income |
10,199.4 |
28 |
Gross national income |
10,221.4 |
29 |
Net domestic product |
8,752.9 |
Source: Bureau of Economic Analysis
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