LESSON 3

Measuring the Economy

Measuring Economy

 The government plans for a better economy from a

perspective of what the economy has been

 Shaping the economy’s future is changing past and

present perspectives extended to the future
Measuring Economy

 The heart of the economy is production whose value

measures both resource input and output of people

 Interplay of resources and outputs tells how well the

economy has perform
Gross National Product (GNP)

 Is the market value of final products, both sold and

unsold, produced by the resources of the economy in a
given period
Market Economy

 an economy in which supply and demand drive economic

decisions, such as the production of goods and services,
investments pricing and distribution .A market economy
promotes free competition among market participants

 Is determined by the supply and demand

 SUPPLY- the amount of commodity, product, or
services available and the desire of buyers for it
considered as factors regulating price.
 
Demand - the economic principle referring to a
consumers’ desire to purchase goods and services and
willingness to pay a price for a specific goods or
services.
What Is the Law of Supply and Demand? 

The law of supply and demand is a theory that explains the

interaction between the sellers of a resource and the buyers
for that resource. The theory defines the relationship
between the price of a given good or product and the
willingness of people to either buy or sell it. Generally, as
price increases, people are willing to supply more and
demand less and vice versa when the price falls.
Gross National Product (GNP)

 total market value of the final goods and services produced by

a nation’s economy during a specific period of time (usually a
year)

 computed before allowance is made for the depreciation or

consumption of capital used in the process of production
How do we get GNP ?

 GNP = C + I + G + ( X – M )

where:

C = individual consumption
G = government expenditures on goods and
services including labor
X = export
I = investment
M = import components
COUNTRY GDP Per Capita

USA $ 20.49 TRILLION $ 65, 281

CHINA $ 13.4 TRILLION $ 10, 276

JAPAN $ 4.9 TRILLION $ 40, 000

Per Capita - the average income earned per person in a given area in a specified year
Gross Domestic Product (GDP)

 Defined as the market value of final products produced within a

country

 GDP is net of GNP after deducting Net Factor Income from other
countries
What is net foreign factor in national income?

•"Net foreign factor income" in the national income

accounts refers to the difference between the
income Americans gain from supplying resources
abroad and the income that foreigners earn by
supplying resources in the U.S.
What is the formula for net income?

•Net Income Formula and Example. You can

calculate net income by using the following
formula: Net Income = Total - Total Expenses. Net
income is found on the last line of the income
statement, which is why it's often referred to as
the bottom line.
Gross Domestic Product (GDP)

 total market value of the goods and services produced by a

country’s economy during a specified period of time

 It includes all final goods and services—that is, those that are
produced by the economic agents located in that country regardless
of their ownership and that are not resold in any form
NOMINAL GDP

- Total market value output produced by the country in a particular financial year

REAL GDP

- Total value of economic output produced in the financial year adjusted

according to the changes in general price level
Types of GDP

Nominal GDP - Without the effects of inflation

- Adjusted according to inflation

Real GDP
GDP = Consumption + Investment + government outlays + net export

GNP = GDP – NFIA ( Net factor income from abroad )

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