CHAPTER 2: MEASURING A NATION’S INCOME B: the value of goods and services produced by other nations’ citizens

within its territory.

I. GDP (GROSS DOMESTIC PRODUCT) C: the value of goods and services produced by a nation’s citizens in
other nations’ territory.
Expenditure GDP = C + I + G + NX
approach NX = Export – Import GDP = A + B => A = GDP – B (1)
GDP = W + i + R + Pr + Dep +Ti GNP = A + C (2)
I = IN + Dep Replace (1) into (2): GNP = GDP + (C – B)
Income
Where:
approach → GNP = GDP + NFA
I = gross investment
IN = net investment
GDP = 𝚺 VA of firms = 𝚺 (G.O – I.I) 2) NFA (Net Factor Income From Abroad)
Value added Where: • If NFA > 0: GNP > GDP
approach G.O: gross output • If NFA = 0: GNP = GDP
I.I: intermediate inputs • If NFA < 0: GNP < GDP
1) Real vs Nominal GDP 3) Others measure of national income
• Net National Product (NNP): NNP = GNP – Dep
Nominal GDP Real GDP
• National Income (NI): NI = NNP – Te
𝑮𝑫𝑷𝒕𝒏 = ∑𝒏𝒊=𝟏 𝒑𝒕𝒊 . 𝒒𝒕𝒊 𝑮𝑫𝑷𝒕𝒓 = ∑𝒏𝒊=𝟏 𝒑𝟎𝒊 . 𝒒𝒕𝒊
• Personal Income (PI): PI = NI – Prretained earnings + Tr
Where: Where:
i: final item 1, 2.., n t = 0: base year • Disposable Income (YD): YD = PI – TPI = C + S
t: the year counting
p: price of each item 4) CPI (Consumer Price Index)
q: quantity of each item • 𝑞𝑖0

2) Economic growth rate (g) • 𝑝𝑖𝑡

𝐺𝐷𝑃𝑟𝑡 − 𝐺𝐷𝑃𝑟𝑡−1
g= x 100
𝐺𝐷𝑃𝑟𝑡−1 • (𝐶𝑜𝑠𝑡 𝑜𝑓 𝑏𝑎𝑠𝑘𝑒𝑡)𝑏 = ∑𝑛 𝑡 0
𝑖=0 𝑝𝑖 . 𝑞𝑖

3) GDP deflator (𝐶𝑜𝑠𝑡 𝑜𝑓 𝑏𝑎𝑠𝑘𝑒𝑡)𝑡 ∑𝑛 0 0

𝑡 𝑖=0 𝑝𝑖 .𝑞𝑖
• 𝐶𝑃𝐼 = x 100 = x 100
𝑁𝑜𝑚𝑖𝑛𝑎𝑙 𝐺𝐷𝑃 (𝐶𝑜𝑠𝑡 𝑜𝑓 𝑏𝑎𝑠𝑘𝑒𝑡)0 ∑𝑛 𝑡 0
𝑖=0 𝑝𝑖 .𝑞𝑖
GDP deflator = x 100 (đơn vị là điểm)
𝑅𝑒𝑎𝑙 𝐺𝐷𝑃
𝑡 𝐶𝑃𝐼𝑡 − 𝐶𝑃𝐼𝑡−1
• 𝜋 = x100%
II. GNP (GROSS NATIONAL PRODUCT) 𝐶𝑃𝐼𝑡−1
1) GNP vs GDP
A: the value of goods and services produced by a nation’s citizens
within its territory.
 CHAPTER 4: AGGREGATE EXPENDITURE
AE = GDP = Y
SIMPLE ECONOMY CLOSED ECONOMY OPEN ECONOMY
AE = C + I AE = C + I + G AE = C + I + G + NX
̅
Case 1: T = 𝑻 ̅
Case 1: T = 𝑻
• C = 𝐶̅ + MPC.(Y - 𝑇̅ ) (YD = Y - 𝑇̅) • C = 𝐶̅ + MPC.(Y - 𝑇̅ ) (YD = Y - 𝑇̅)
• AE = C + I + G • AE = C + I + G + X
C = 𝐶̅ + 𝐼 ̅ + 𝐺̅ + MPC.(Y - 𝑇̅ ) = 𝐶̅ + MPC.(Y - 𝑇̅ ) + 𝐼 ̅ + 𝐺̅ + 𝑋̅ – MPM.Y
C = 𝐶̅ + MPC.YD
(Consumption) Case 2: T = t.Y Case 2: T = t.Y
• C=C ̅ + MPC.(1-t).Y (YD = Y – t.Y) • C=C ̅ + MPC.(1-t).Y (YD = Y – t.Y)
• AE = C + I + G • AE = C + I + G
=C ̅ + I̅ + G
̅ + MPC.(1-t).Y =C̅ + MPC.(1-t).Y + I̅ + G ̅ + 𝑋̅ – MPM.Y

MPC ∆𝐶
MPC = 1 – MPS = MPC = 1 – MPS MPC = 1 – MPS
(0 < MPC < 1) ∆𝑌𝐷

• YD = 0 → S = - 𝐶̅ = 𝑆̅

S • YD: ∆𝑌𝐷 = ∆𝐶 + ∆𝑆
(Saving) ⟺ MPC + MPS = 1

• S = 𝑆̅ + MPS.YD

MPS MPS = 1 – MPC =

∆𝑆
MPS = 1 – MPC MPS = 1 – MPC
(0 < MPS < 1) ∆𝑌𝐷

I I = 𝑰̅
(Investment)
G ̅
G=𝑮
(Government)
T = Tx – Tr
Where:
T
T = net taxes
(Taxes)
Tx = taxes collected from Households & Firms
Tr = transfer payment
 X
X = 𝑋̅
(Export)
M
M = MPM.Y
(Import)
MPM
(marginal ∆𝑀
propesity to MPM =
∆𝑌
import)
NX
NX = X – M = 𝑋̅ – MPM.Y
(Net export)
• AE = C + I ̅
Case 1: T = 𝑻 ̅
Case 1: T = 𝑻
= 𝐶̅ + 𝐼 ̅ + MPC.Y (Y = YD) AE = Y AE = Y

• AE = Y 1 −𝑀𝑃𝐶 1
⟺Y= . (𝐶̅ + 𝐼 ̅ + 𝐺̅ ) + . 𝑇̅ ⟺Y= . (𝐶̅ + 𝐼 ̅ + 𝐺̅ + 𝑋̅ ) +
⟺ C + I = 𝐶̅ + 𝐼 ̅ + MPC.Y = Y 1− 𝑀𝑃𝐶 1− 𝑀𝑃𝐶 1− 𝑀𝑃𝐶+𝑀𝑃𝑀

Equilibrium 𝐶̅ + 𝐼 ̅ −𝑀𝑃𝐶
→Y= . 𝑇̅
output 1− 𝑀𝑃𝐶 1− 𝑀𝑃𝐶+ 𝑀𝑃𝑀

Case 2: T = t.Y Case 2: T = t.Y

AE = Y AE = Y

𝐶̅ + 𝐼 ̅ + 𝐺̅ 𝐶̅ + 𝐼 ̅ + 𝐺̅ + 𝑋
̅
⟺Y= ⟺Y=
1− 𝑀𝑃𝐶(1−𝑡) 1− 𝑀𝑃𝐶 (1−𝑡) + 𝑀𝑃𝑀
1 1
Expenditure ̅): m =
Case 1 (T = 𝑻 Case 1: m =
1 1− 𝑀𝑃𝐶 1− 𝑀𝑃𝐶+ 𝑀𝑃𝑀
multiplier m=
(m>1) 1− 𝑀𝑃𝐶 1 1
Case 2 (T = t.Y): m = Case 2: m =
1− 𝑀𝑃𝐶(1−𝑡) 1− 𝑀𝑃𝐶 (1−𝑡)+ 𝑀𝑃𝑀
Tax −𝑀𝑃𝐶 −𝑀𝑃𝐶
multiplier ̅): m’ =
Case 1 (T = 𝑻 ̅): m’ =
Case 1 (T = 𝑻
(m’) 1− 𝑀𝑃𝐶 1− 𝑀𝑃𝐶+ 𝑀𝑃𝑀

Autonomous ̅ + I̅ ̅ + I̅ + G
̅ ̅ + I̅ + G
̅ + X̅
C C C
expenditure