Output and growth

Output and Growth

What is National Output?

• The total value of output of goods and services produced in a country is called national output.

What is National Income?

• National output is produced by using the factors of production like land, labour, capital and enterprise.

• The firms pay these factors of productions.

• This way, the total income earned in the macro economy is the national income.

What is national expenditure?

• People and organizations spend on goods and services which are produced in the economy.

• The total money spend on these goods and services are the income to those people and firms that make and supply goods and service.

• National output=National income=National expenditure

Gross Domestic Product(GDP)

• The monetary value of all the finished goods and services produced within a country's borders in a specific time period.

Gross National Product (GNP)

• GDP, plus any income earned by residents from overseas investments, minus income earned within the domestic economy by overseas residents. (Net Property Income from Abroad)

• GNP is a measure of a country's economic performance, or what its citizens produced .

• GNP=GDP+ Net property income from abroad

Depreciation/Capital consumption

• The amount spent on repair or replacement of old, worn-out capital.

Net National Product(NNP)

• This consists of all the goods and services available plus any additions to the capital goods in existence.

• Money value of the total new output of an economy in a period of time.

• NNP=GNP-Depreciation

CalculationOutput 2000 2005

Agriculture, forestry and fishing

10 12

Mining and quarrying 15 12

Manufacturing 57 65

Construction 20 30

Transport 13 18

Insurance, banking and finance 18 25

Distributive trades 25 40

Other services 22 32

GDP

NPIA 5 10

GNP

Depreciation 20 28

NNP

Calculate GDP,GNP and NNP for 2000 and 2005

What happened to the national income between 2000 and 2005?

Real national income and Money national income

• Money national income: National income carried out in money value.

• Real national income: The amount of goods and services the national income can buy.

year output price NI

2006 1000 $60 $60000

year output price NI

2005 1000 $50 $50000

Use of National Income figures

• Resource allocation.• Comparison of living

standard with in the country.

• Comparison of living standard between countries.

Economic growth

• The increase in the amount of goods and services the whole economy can produce over and above what is produced in the last year.

• It is the increase in the real output of the economy over time.

Nominal/Money GDP

• GDP expressed in terms of money.

• A gross domestic product (GDP) figure that has not been adjusted for inflation.

Real GDP

• What money GDP can buy.• An inflation-adjusted measure

that reflects the value of all goods and services produced in a given year, expressed in base-year prices.

• Real GDP per capita= Real GDP divided by the size of population.

Economic growth and living standard

• Type of products produced.• Distribution of output.• Size of population.

How to achieve growth?

• The discovery of more natural resources.

• The discovery of gas, oil, coal, gold, variety of other products…..


• Investment in capital.• Investment of

production of new capital equipments.


• Technical progress.• Better production techniques,

better organization and management, better training, better transport, better communications….

HOW TO ACHIEVE GROWTH?

• Increase in the quantity and quality of human resources.

• Education, improved healthcare increase the quality.

• Increase in the size of working population, increase in working hours, etc increase the quantity.


• Reallocation of resources.• Moving from primary to

manufacturing and service sectors….

Benefits of Growth

• Higher level of consumption

Benefits of Growth

• Higher level of Output

Benefits of Growth

• Higher level of tax revenue

Costs of Economic Growth

• Opportunity Costs.(If the economic growth is achieved by producing more capital goods, then the opportunity cost is the consumer goods which could have been produced.)


• Over use of scarce resources.(Future generation will suffer)


• Threats to the environment.


• Technical unemployment.

Sustainable Growth

• Economic growth attained without harming the environment and without depleting the scarce resource(without harming the future generation).

What is economic growth?

• Increase in the production of real output over a long period of time is called economic growth.

• The trend rate of growth is the long run average rate for a country over a period of time.

Economic Cycle

• There will be a tendency for ups and downs in the short run.

• Ups and downs in national income is called economic cycle.