Chapter 2: The Data of Macroeconomics

2.1 Measuring the value of economic activity

a. Gross Domestic Product

b. The circular flow of income

c. Stocks versus flows and the treatment of inventories.

d. Adding apples and oranges (the index number problem)

e. Intermediate goods versus final goods (the role of value-added)

f. The imputed value of housing and other services

2.2 Real GDP versus nominal GDP

a. The GDP deflator

b. Reporting as a seasonally-adjusted annual rate

c. Determining an economic recession

2.3 The Components of Expenditures

a. Consumption (durables, nondurables, and services)

b. Investment (business fixed investment, residential housing, and change in inventories.)

c. Government purchases (federal, state and local)

d. Net exports (exports minus imports)

2.4 Other Measures

a. GDP versus GNP

b. NNP = GNP - Depreciation

c. Components of national income (five)

1. Compensation to employees

2. proprietors’ income

3. Rental income

4. Corporate profits

5. Net interest

d. Personal income versus disposable income

2.5 Measures of Price Changes

a. Consumer price index

b. GDP deflator

c. Producer price index

d. Spot commodity price indexes

2.6 Labor market measures

a. Population and the labor force (labor force participation rate)

b. The unemployment rate

c. Okun’s Law: Percent change in real GDP = 3% - 2 x Change in unemployment rate.