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    Economic Categories V2

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    Shanna Cielo Jean Berondo
    The document provides information on key economic categories and concepts including: - Normative vs positive economics, with normative reflecting opinions and positive focusing on economic reality. - Microeconomics deals with human behavior as it relates to individuals, firms, and markets while macroeconomics examines behavior and choices at the level of the whole economy. - Market participants that demand and supply goods and services including households, businesses, governments, and the rest of the world. - Approaches to calculating GDP using expenditure, income, and other methods such as considering components like consumption, investment, government spending, exports and imports.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Economic Categories V2

    Uploaded by

    Shanna Cielo Jean Berondo
    22 views21 pages
    The document provides information on key economic categories and concepts including: - Normative vs positive economics, with normative reflecting opinions and positive focusing on economic reality. - Microeconomics deals with human behavior as it relates to individuals, firms, and markets while macroeconomics examines behavior and choices at the level of the whole economy. - Market participants that demand and supply goods and services including households, businesses, governments, and the rest of the world. - Approaches to calculating GDP using expenditure, income, and other methods such as considering components like consumption, investment, government spending, exports and imports.

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    The document provides information on key economic categories and concepts including: - Normative vs positive economics, with normative reflecting opinions and positive focusing on economic reality. - Microeconomics deals with human behavior as it relates to individuals, firms, and markets while macroeconomics examines behavior and choices at the level of the whole economy. - Market participants that demand and supply goods and services including households, businesses, governments, and the rest of the world. - Approaches to calculating GDP using expenditure, income, and other methods such as considering components like consumption, investment, government spending, exports and imports.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    22 views21 pages

    Economic Categories V2

    Uploaded by

    Shanna Cielo Jean Berondo
    The document provides information on key economic categories and concepts including: - Normative vs positive economics, with normative reflecting opinions and positive focusing on economic reality. - Microeconomics deals with human behavior as it relates to individuals, firms, and markets while macroeconomics examines behavior and choices at the level of the whole economy. - Market participants that demand and supply goods and services including households, businesses, governments, and the rest of the world. - Approaches to calculating GDP using expenditure, income, and other methods such as considering components like consumption, investment, government spending, exports and imports.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 21

    ECONOMIC

    CATEGORIES
    Study & Analysis
    WE ARE THEORIST !

    Economic Theory/Model

    Simplification of economic reality


    used to make predictions about
    the real world
    “Economy must focus
    on what should work
    rather than how does
    it work…”
    Normative Vs. Positive

    Normative Economics- Reflects


    someone’s opinion

    Positive Economics-
    Talks on economic reality that can be
    supported/ rejected by reference to the
    facts
    Macroeconomics Microeconomics

    Deals with human behavior and


    Deals with human behavior and choices as they relate to a
    choices as they relate to an relatively small units: an
    entire economy individual, a firm, an industry, a
    single market
    ■ Market Economic
    System
    ■ Command
    Economic
    System
    ■ Mixed Economic
    System
    Market
    Participants
    Market Participants:

    Households
    *Consumers: demand
    goods and services
    produced
    *Resource Owners: supply
    the resources used to
    produce goods and
    services
    Businesses (Firms,
    Governments and the rest of
    the world)
    Demand the resources to supply
    the households with goods and
    services demanded
    Sunk Cost

    A cost you have already paid and


    cannot recover, regardless of what
    you do now.
    Calculating GNP/GNI
    Calculating GNP

    GNP = GDP + Net Factor Income (Net income inflow from


    abroad – Net income outflow to foreign countries)

    Net Factor Income

    Difference between the factor income earned from abroad by


    normal residents of a country and the factor income earned
    by non-residents (foreigners) in the domestic territory of that
    country.
    Compute the GNP of the Taiwan with a GDP
    of 550M in 2010-2011, with an attributes of
    net income from African employees of 150M
    in the country and 250M net income of
    Taiwanese working in Africa.
    GNP= GDP+ Net Factor Income
    = 550 million + (250 million + (- 150 million) )
    GNP= 650 million

    GNP= 650 million


    A country possess a yearly gross national
    product of 340 million. Part of it includes a
    gross domestic product of 330 million and an
    income inflow of 80 million. How much is the
    country’s net income outflow?
    GNP= GDP+ Net Factor Income(Net income inflow from abroad – Net income outflow to foreign countries)
    340 million = 330 million + ( 80 million -outflow )
    340 million = 410 million –outflow
    340 million-410 million=-outflow
    -70 million= -outflow
    outflow= 70 million

    Net income outflow to foreign countries= 70 million


    Australia earned a yearly gross national
    product of 499 billion, gross domestic product
    of 470 billion and an income outflow of 10
    billion. How much is the country’s net income
    inflow?

    GNP= GDP+ Net Factor Income(Net income inflow from abroad – Net income outflow to foreign countries)
    499 billion = 470 billion + ( inflow + (-10 billion) )
    499 billion = 460 billion + inflow
    499 billion-460 billion= inflow
    39 billion = inflow

    Net income inflow to foreign countries= 39billion


    Approaches in Calculating GDP

    1. Expenditure Approach

    GDP= C + G + I + (X - M)

    GDP = C + G + I + (X - M)
    GDP = $304 + $156 + $124 + $18
    GDP = $602

    http://www.econport.org/content/handbook/NatIncAccount/CalculatingGDP/Examples.html
    Approaches in Calculating GDP

    2. Income Approach

    GDP = NI + Indirect Business Taxes + Depreciation

    NI = W + R + i + PR
    GDP = $492 + $74 + $36
    NI = $67 + $75 + $150 + $200 GDP = $602
    NI = $492

    http://www.econport.org/content/handbook/NatIncAccount/CalculatingGDP/Examples.html
    Components (Billions of Amount Cost
    Dollars)
    Expenditure Approach Income Approach
    Interest Income $ 503
    Depreciation $ 1 693 GDP = NI + Indirect Business Taxes +
    GDP= C + G + I + (X - M) Depreciation
    Wages $ 7 774
    C – Household Consumptions Gross Private Investment $ 1 900 NI – Net Income
    G – Government Purchases NI= W+R+i+PR
    I – Gross Private Investment
    X – Exports
    Business Profits $ 1 495 W – Wages
    R – Rental Income
    i – interest income
    M – Imports
    X-M – Net Exports
    Indirect Business Taxes $ 1 941 PR – Business Profits

    Rental Income $ 35
    NI= W+R+i+PR
    GDP= C + G + I + (X - M)
    Exports
    Imports
    $ 2 520 = $ 7 774+ $ 35 + $ 503 + $ 1 495
    = $ 5 900+ $ 4 121+ $ 1 900 + $ 1000 NI= $ 9 807
    ($ 2 520- $ 1000) Government Purchases $ 4 121 GDP = NI + Indirect Business Taxes +
    Household Consumption $ 5 900 Depreciation
    = $ 9 807 + $ 1 941 + $ 1 693

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