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GDP/GNP
Measuring the Economy
economic indicator A statistic about the economy. Allows analysis of economic performance and
predictions of future performance. Include various indices, earnings reports, and
economic summaries.
Conference BoardLeading Economic Indicators
Average weekly hours, manufacturing
Average weekly initial claims for unemployment insurance
Manufacturers' new orders, consumer goods and materials
Manufacturers' new orders, nondefense capital goods
Building permits, new private housing units
Stock prices, 500 common stocks
Money supply, M2
Interest rate spread, 10-year Treasury bonds less federal funds
Index of consumer expectations
Measures manufacturing activity and is determined monthly based on five indicators: new orders, production, supplier deliveries, inventories, and employment.
Institute for Supply Management Index
Major US Stock Indices
•moneycentral.msn.com
30 Year T Bond Yield
-5
0
5
10
15
201
97
7
19
79
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
30 Y Treasury 30Y-2Y Spread
30 – 2 Year Yield Spreads
Two Measurements
GDP GNP
Gross Domestic Product Dollar value of all G/S
produced within a countries borders in a given year.
Foreign producers in US?
US companies oversees?
Gross National Product Dollar value of all G/S
produced by citizens of a country during a given year.
Foreign producers in the US?
US companies oversees?
Two Calculations
Sales Salaries
Add together the receipts for all recorded transactions Black market Barter Inflation Variety
Add together the salaries of all income earned Under the table Efficiency Double counting Distribution
What GDP does NOT tell us! Non-market Activities
Some people do activities for themselves that others pay for Oil changes/lawn care
Quality of Life Production might be predicated on over-worked employees
Medical internists
Distribution of Wealth There may be a few uber-rich people and many incredibly
poor Loss of US middle class
Inflation Values may rise without increasing production
2 Turtle Doves/automobiles
More on the limitations of GDP Underground Activity
Illegal activities do not get recorded by governments Drug sale/prostitution
Per Capita Income Some countries have huge populations while
others do not US average is just under $50,000
Variety of Goods Economies can be narrowly focused
Oil production
Negative Externality Production can result in pollution
Cuyahoga River fire
Publicly Held Federal Debt / GDP
00.10.20.30.40.50.60.70.80.9
1
1947
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
Publicly Held Federal Debt / GDP
Fed Funds Rate
02468
1012
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
-400
-300
-200
-100
0
100
200
300
400
19
88
19
90
19
92
19
94
19
96
19
98
20
00
billio
ns
$
Annualized Growth Rate Real Gross Domestic Product
1996 Dollars
-4
-2
0
2
4
6
8
10
1988
1988
1989
1989
1990
1990
1991
1991
1992
1992
1993
1993
1994
1994
1995
1995
1996
1996
1997
1997
1998
1998
1999
1999
2000
2000
2001
2001
Reflection: Is GDP/GNP a good measure of an economy? How does knowing the statistic’s shortcomings help in evaluating an economy? Give an example of a country who’s GDP/GNP does not accurately measure the economy. State the limitation from the information in your notes.
