Professional Documents
Culture Documents
macroeconomics
fifth edition
N. Gregory Mankiw
PowerPoint Slides
by Ron Cronovich
Two definitions:
1. Total expenditure on
domestically-produced
final goods and services
2. Total income earned by
domestically-located
factors of production
In
Inevery
everytransaction,
transaction,
the
thebuyers
buyersexpenditure
expenditure
becomes
becomesthethesellers
sellersincome.
income.
Thus,
Thus,the
thesum
sumof ofall
all
expenditure
expenditureequals
equals
the
thesum
sumof ofall
allincome.
income.
Labor
Households Firms
Goods
(bread
)
Expenditure
($)
%% of
of
$$billions
billions GDP
GDP
Consumption
Consumption $7,303.7
$7,303.7 69.9%
69.9%
Durables
Durables 871.9
871.9 8.3
8.3
Nondurables
Nondurables 2,115.0
2,115.0 20.2
20.2
Services
Services 4,316.8
4,316.8 41.3
41.3
%
% of
of
$$billions
billions GDP
GDP
Investment
Investment $1,593.2
$1,593.2 15.2%
15.2%
Business
Businessfixed
fixed 1,117.4
1,117.4 10.7
10.7
Residential
Residentialfixed
fixed 471.9
471.9 4.5
4.5
Inventory
Inventory 3.9
3.9 0.04
0.04
stock flow
a persons wealth a persons saving
# of people with # of new college
college degrees graduates
the govt. debt the govt. budget deficit
-100
-100
-200
-200
$$billions
billions
-300
-300
-400
-400
-500
-500
1970
1970 1975
1975 1980
1980 1985
1985 1990
1990 1995
1995 2000
2000
CHAPTER 2 The Data of Macroeconomics slide 21
An important identity
Y = C + I + G + NX
where
Y = GDP = the value of total output
C + I + G + NX = aggregate expenditure
In your country,
which would you want
to be bigger, GDP or GNP?
Why?
10,000
8,000
6,000
4,000
2,000
(billions of U.S. dollars)
0
1965 1970 1975 1980 1985 1990 1995 2000
Nominal
GDP
Real deflator
GDPGDP = 100
cost of inflation
basket CPI rate
2002 $350 100.0 n.a.
2003 370 105.7 5.7%
2004 400 114.3 8.1%
2005 410 117.1 2.5%
Medical care
Recreation
16.2%
Education
Communication
40.0%
Other goods and
services
14 CPI
12
10
6
GDP deflator
4
-2
1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998
Year
2 1993
1975
0
-2 1982
-3 -2 -1 0 1 2 3 4
Change in
unemployment rate
CHAPTER 2 The Data of Macroeconomics slide 60
Chapter Summary
1. Gross Domestic Product (GDP) measures
both total income and total expenditure on
the economys output of goods & services.