Measuring economics activity

1. Laura Kartika Puspa
C1G021032
International Economics Development
Jendral Soedirman University
Measuring Economics
Activity

2. What is Macroeconomics?
Why we should measuring the
economics activity?
1. Measure the health of the whole
economy
2. Guide government policies to fix
problems
Three major economic goals :
• Promote Economic Growth
• Limit Unemployement
• Keep Prices Stable (Limit Inflation)

3. HOW?
Income Approach – measures all the money earned by factors of production of an
economy in a given period of time, we will call this GROSS NATIONAL
INCOME (GNI)
Output Approach – measures the value of all the finished goods and services in a country
over a period of time, we will call this GROSS DOMESTIC
PRODUCT (GDP)

4. GDP VS. GNI
What is the distinction between GDP versus GNI?
One way to look at the difference between GNI and GDP is that the measurement of GNI is
based on ownership, whereas that of GDP is based on location. For example, if a US-owned
corporation has operations in Japan, then its profits from this country will not count
toward the US GDP but toward the GNI.
GDP is an important measurement for economists and investors because it is
a representation of economic production and growth. Both economic production and
growth have a large impact on nearly everyone within a given economy.

5. Two Ways of calculating GDP :
1. Expenditures Approach – add up all the spending on final goods and sevices produced
in a given year.
𝐺𝐷𝑃 = 𝐶 + 𝐼 + 𝐺(𝑋 − 𝑀)
2. Income Approach – add up all the income that resulted from selling all final goods
and sevices produced in a given year
𝐼𝑛𝑐𝑜𝑚𝑒 = 𝑅 + 𝑊 + 𝑖𝑟 + 𝑃𝑅
These are called FACTOR PAYMENTS.

6. Real GDP VS. NOMINAL GDP
• Nominal GDP is GDP measured in current prices. It doesn't account for
inflation from year to year
• Real GDP expressed in constant, or unchanging, dollars. Real GDP adjusts for
inflation

7. How to calculating real GDP?
GDP Deflator -> a price index that allows us to calculate real GDP from nominal
GDP. It shows how much inflation has increased from the base year.
𝑅𝑒𝑎𝑙 𝐺𝐷𝑃 =
𝑁𝑜𝑚𝑖𝑛𝑎𝑙 𝐺𝐷𝑃
𝐺𝐷𝑃 𝐷𝑒𝑓𝑙𝑎𝑡𝑜𝑟
× 100
NB : GDP -> Inflated by inflation
Real GDP -> Deflated to base year values

8. Green GDP
● Neither GDP or GNI account for environtmental sustainability
● Both GDP & GNI include the incurred cost of environtmental clean-up
● Green GDP = GDP – value of environment degradation – expenditure
to clean up environmental problems

9. Conclusions
It is important to measure economic activity to find out how sick the
national economy is, and the data is not just a formality calculation, but
the data is important for us to analyze so that the government can find
a common thread from existing economic problems. Likewise, we as
citizens, if we don’t really understand how to measure value in the
economy, so we don’t even realize how sick the economy is.

10. TERIMA KASIH