Diferencia con las placas Lynx

Figure 2.4 displays three alternative measures of the unemployment rate published by the Bureau of Labor Statistics (BLS). In the figure, U3 is the standard measure of the unem-ployment rate—the number of working-age people who are actively searching for work as a percentage of the total labor force. The time series U4 adds to both the number of unemployed, and to the labor force, the num-ber of discouraged workers. A discouraged worker in the Current Population Survey (CPS) carried out monthly by the BLS is a working-age person who is neither employed nor unemployed, but is available to work, looked for work sometime during the previ-ous 12 months, and has a job-market-related reason for not searching for work. Finally, the time series U5 adds marginally attached working age persons to both the number of unemployed and the labor force to calcu-late the unemployment rate. The marginally attached are working-age persons who are neither employed nor unemployed, available to work, and looked for work sometime dur-ing the previous 12 months. All discouraged workers are marginally attached, but a per-son could be marginally attached and not discouraged. For example, a person would be classified as discouraged if he or she had

been searching for work, but had stopped searching because of a lack of appropriate job openings. However, a person who is not searching, available to work, and putting zero effort into job search for no apparent reason, would be classified as marginally attached but not discouraged.

Figure 2.5 shows that the three alternative unemployment rate measures—U3, U4, and U5—move together closely over time. Thus, each measure captures changes in labor market conditions in much the same way. An inter-esting feauture of Figure 2.5 is that the gaps between U3 and U4, and between U3 and U5, rose after the beginning of the most recent recession in late 2007. For example, the mea-sures of U3, U4, and U5 in January 2000 were 4.0%, 4.2%, and 4.8%, respectively. In April 2012, these measures were 8.1%, 8.7%, and 9.5%, respectively. Thus, in January 2000, discouraged workers accounted for 0.2 per-centage points in U4, and marginally attached workers accounted for 0.8 percentage points in U5. However, in April 2012, these numbers had increased to 0.6 percentage points and 1.4 percentage points, respectively. Thus, discour-aged and marginally attached workers became much more important during the recent severe recession.

Figure 2.5 Alternative Measures of the Unemployment Rate

In the figure, U3 denotes the conventional unemployment rate, U4 includes discouraged workers, and U5 includes all marginally attached workers. The differences between U4 and U3, and between U5 and U3, increase during the recent recession, which began at the end of 2007.

19943 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 4

5 6 7 8 9 10 11 12

Year

Unemployment Rate

U3 U4 U5

Rate” contains a discussion of how alternative measures of unemployment can correct for some potential measurement problems, and how the alternative unemployment meaures can be used.

Partly because of problems in interpreting what movements in the unemployment rate mean, macroeconomists often focus attention on the level and growth rate of employment when they analyze the implications of labor market activity. Empirically, sometimes we have a greater interest in the behavior of the participation rate or the employment/population ratio than in the unemployment rate. Theoretically, many of the models we analyze in this book do not explain the behavior of unemployment, but we analyze the unemployment rate and its determinants in detail in Chapter 6.

So far, we have learned how aggregate economic activity is measured in the NIPA, how nominal GDP can be decomposed to obtain measures of real GDP and the price level, what the relationships are among savings, wealth, and capital, and what the key

measurement issues in the labor market are. Before we begin our study of macroeco-nomic theory in Chapter 4, in Chapter 3 we deal with business cycle measurement, deriving a set of key business cycle facts that focus our theoretical discussion in the following chapters.

Chapter Summary

• Gross Domestic Product (GDP) is measured in the National Income and Product Accounts (NIPA) of the United States. GDP can be measured via the product approach, the expenditure approach, or the income approach, which each yield the same quantity of GDP in a given period if there is no measurement error.

• GDP must be used carefully as a measure of aggregate welfare, because it leaves out home production. Further, there are problems with GDP as a measure of aggregate output, because of the existence of the underground economy and because government output is difficult to measure.

• It is useful to take account of how much of nominal GDP growth is accounted for by inflation and how much is growth in real GDP. Two approaches to measuring real GDP are choosing a base year and chain-weighting. The latter is the current method used in the NIPA. Chain-weighting corrects for the bias that arises in real GDP calculations when a base year is used and there are changes in relative prices over time. Problems with real GDP measurement arise because it is difficult to account for changes in the quality of goods over time and because new goods are introduced and others become obsolete.

• Private saving is private disposable income minus consumption, while government saving is government receipts minus government spending and transfers. The government surplus is equal to government saving. National saving is the sum of private and government saving and is equal to investment expenditures plus the current account surplus. National saving is just the accumulation of national wealth, which comes in the form of additions to the capital stock (investment) and additions to domestic claims on foreigners (the current account surplus).

• The labor market variables we focus on are those measured in the household survey of the Bureau of Labor Statistics. The working-age population consists of the employed, the unem-ployed (those searching for work), and those not in the labor force. Three key labor market variables are the unemployment rate, the participation rate, and the employment/population ratio. The unemployment rate is sometimes used as a measure of labor market tightness, but care must be taken in how the unemployment rate is interpreted in this respect.

Key Terms

Gross domestic product (GDP) The dollar value of final output produced during a given period of time within a country’s borders. (p. 37)

National Income and Product Accounts (NIPA) The official U.S. accounts of aggregate economic activity, which include GDP measurements. (p. 37) Product approach The approach to GDP measure-ment that determines GDP as the sum of value added to goods and services in production across all produc-tive units in the economy. (p. 37)

Expenditure approach The approach to GDP mea-surement that determines GDP as total spending on all final goods and services production in the economy.

(p. 37)

Income approach The approach to GDP measure-ment that determines GDP as the sum of all incomes received by economic agents contributing to production. (p. 37)

Intermediate good A good that is produced and then used as an input in another production process. (p. 38)

Value added The value of goods produced minus the value of intermediate goods used in production.

(p. 39)

Income–expenditure identity Y = C + I + G + NX, where Y is aggregate income (output), C is consump-tion expenditures, I is investment expenditures, G is government expenditures, and NX is net exports.

(p. 41)

Gross national product (GNP) GNP= GDP plus net factor payments to U.S. residents from abroad. (p. 43) Underground economy All unreported economic activity. (p. 44)

Consumption Goods and services produced and consumed during the current period. (p. 44)

Investment Goods produced in the current period but not consumed in the current period. (p. 45) Fixed investment Investment in plant, equipment, and housing. (p. 45)

Inventory investment Goods produced in the cur-rent period that are set aside for future periods. (p. 45) Net exports Expenditures on domestically produced goods and services by foreigners (exports) minus expenditures on foreign-produced goods and services by domestic residents (imports). (p. 46)

Government expenditures Expenditures by federal, state, and local governments on final goods and ser-vices. (p. 46)

Transfers Government outlays that are transfers of purchasing power from one group of private economic agents to another. (p. 46)

Price index A weighted average of prices of some set of goods produced in the economy during a particular period. (p. 46)

Price level The average level of prices across all goods and services in the economy. (p. 46)

Inflation rate The rate of change in the price level from one period to another. (p. 46)

Nominal change The change in the dollar value of a good, service, or asset. (p. 46)

Real change The change in the quantity of a good, service, or asset. (p. 46)

Chain-weighting An approach to calculating real GDP that uses a rolling base year. (p. 48)

Implicit GDP price deflator Nominal GDP divided by real GDP, all multiplied by 100. (p. 49)

Consumer price index (CPI) Expenditures on base year quantities at current year prices divided by total expenditures on base year quantities at base year prices, all multiplied by 100. (p. 49)

Flow A rate per unit time. (p. 57)

Stock Quantity in existence of some object at a point in time. (p. 57)

Private disposable income GDP plus net factor pay-ments, plus transfers from the government, plus inter-est on the government debt, minus taxes. (p. 57) Private sector saving Private disposable income minus consumption expenditures. (p. 57)

Government saving Taxes minus transfers, minus interest on the government debt, minus government expenditures. (p. 58)

Government surplus Identical to government sav-ing. (p. 58)

Government deficit The negative of the government surplus. (p. 58)

National saving Private sector saving plus govern-ment saving. (p. 58)

Current account surplus Net exports plus net factor payments from abroad. (p. 58)

Capital stock The quantity of plant, equipment, housing, and inventories in existence in an economy at a point in time. (p. 58)

Employed In the Bureau of Labor Statistics house-hold survey, those who worked part-time or full-time during the past week. (p. 58)

Unemployed In the Bureau of Labor Statistics house-hold survey, those who were not employed during the past week but actively searched for work at some time during the last four weeks. (p. 59)

Not in the labor force In the Bureau of Labor Statis-tics household survey, those who are neither employed or unemployed. (p. 59)

Unemployment rate The number of unemployed divided by the number in the labor force. (p. 59) Participation rate The number in the labor force divided by the working-age population. (p. 59) Employment/population ratio The ratio of total em-ployment to total working-age population. (p. 59)

Labor market tightness Reflects the degree of dif-ficulty firms face in hiring workers, and the ease with which a would-be worker can find a job.

(p. 59)

Marginally attached People of working age who are neither employed nor unemployed, but are available to work and have searched for work in the previous 12 months. (p. 60)

Questions for Review

1. What are the three approaches to measuring GDP?

2. Explain the concept of value added.

3. Why is the income–expenditure identity important?

4. What is the difference between GDP and GNP?

5. Is GDP a good measure of economic welfare? Why or why not?

6. What are two difficulties in the measurement of aggregate output using GDP?

7. What is the largest expenditure component of GDP?

8. What is investment?

9. Is national defense a large fraction of government spending?

10. Why does the base year matter in calculating real GDP?

11. Explain what chain-weighting is.

12. Explain three problems in the measurement of real GDP.

13. What are the differences and similarities among private sector saving, government saving, and national saving?

14. What are the two ways in which national wealth is accumulated?

15. Give two reasons that the unemployment rate may not measure correctly what we want it to measure.

Problems

1. Assume an economy where there are two pro-ducers: a wheat producer and a bread producer.

In a given year, the wheat producer grows 30 million bushels of wheat of which 25 million bushels are sold to the bread producer at $3 per bushel, and 5 million bushels are stored by the wheat producer to use as seed for next year’s crop. The bread producer produces and sells 100 million loaves of bread to consumers for $3.50 per loaf. Determine GDP in this econ-omy during this year using the product and expenditure approaches.

2. Assume an economy with a coal producer, a steel producer, and some consumers (there is no government). In a given year, the coal producer produces 15 million tons of coal and sells it for

$5 per ton. The coal producer pays $50 million in wages to consumers. The steel producer uses

25 million tons of coal as an input into steel pro-duction, all purchased at $5 per ton. Of this, 15 million tons of coal comes from the domestic coal producer and 10 million tons is imported.

The steel producer produces 10 million tons of steel and sells it for $20 per ton. Domestic consumers buy 8 million tons of steel, and 2 million tons are exported. The steel producer pays consumers $40 million in wages. All prof-its made by domestic producers are distributed to domestic consumers.

(a) Determine GDP using (i) the product approach, (ii) the expenditure approach, and (iii) the income approach.

(b) Determine the current account surplus.

(c) What is GNP in this economy? Determine GNP and GDP in the case where the coal producer is owned by foreigners, so that the profits of the domestic coal producer

go to foreigners and are not distributed to domestic consumers.

3. Assume an economy with two firms. Firm A produces wheat and firm B produces bread. In a given year, firm A produces 50,000 bushels of wheat, sells 20,000 bushels to firm B at $3 per bushel, exports 25,000 bushels at $3 per bushel, and stores 5,000 bushels as inventory.

Firm A pays $50,000 in wages to consumers.

Firm B produces 50,000 loaves of bread, and sells all of it to domestic consumers at $2 per loaf. Firm B pays consumers $20,000 in wages. In addition to the 50,000 loaves of bread consumers buy from firm B, consumers import and consume 15,000 loaves of bread, and they pay $1 per loaf for this imported bread.

Calculate gross domestic product for the year using (a) the product approach, (b) the expen-diture approach, and (c) the income approach.

4. In year 1 and year 2, there are two products produced in a given economy, computers and bread. Suppose that there are no intermediate goods. In year 1, 20 computers are produced and sold at $1,000 each, and in year 2, 25 com-puters are sold at $1,500 each. In year 1, 10,000 loaves of bread are sold for $1.00 each, and in year 2, 12,000 loaves of bread are sold for

$1.10 each.

(a) Calculate nominal GDP in each year.

(b) Calculate real GDP in each year, and the percentage increase in real GDP from year 1 to year 2 using year 1 as the base year.

Next, do the same calculations using the chain-weighting method.

(c) Calculate the implicit GDP price deflator and the percentage inflation rate from year 1 to year 2 using year 1 as the base year.

Next, do the same calculations using the chain-weighting method.

(d) Suppose that computers in year 2 are twice as productive as computers in year 1. That is, computers are of higher quality in year 2 in the sense that one computer in year 2 is equivalent to two computers in year 1. How does this change your calculations in parts (a) to (c)? Explain any differences.

5. Assume an economy in which only broccoli and cauliflower are produced. In year 1, 500 million

pounds of broccoli are produced and consumed and its price is $0.50 per pound, while 300 mil-lion pounds of cauliflower are produced and consumed and its price is $0.80 per pound. In year 2, 400 million pounds of broccoli are pro-duced and consumed and its price is $0.60 per pound, while 350 million pounds of cauliflower are produced and its price is $0.85 per pound.

(a) Using year 1 as the base year, calculate the GDP price deflator in years 1 and 2, and cal-culate the rate of inflation between years 1 and 2 from the GDP price deflator.

(b) Using year 1 as the base year, calculate the CPI in years 1 and 2, and calculate the CPI rate of inflation. Explain any differences in your results between parts (a) and (b).

6. Consider an economy with a corn producer, some consumers, and a government. In a given year, the corn producer grows 30 mil-lion bushels of corn and the market price for corn is $5 per bushel. Of the 30 million bushels produced, 20 million are sold to consumers, 5 million are stored in inventory, and 5 million are sold to the government to feed the army.

The corn producer pays $60 million in wages to consumers and $20 million in taxes to the gov-ernment. Consumers pay $10 million in taxes to the government, receive $10 million in inter-est on the government debt, and receive $5 million in Social Security payments from the government. The profits of the corn producer are distributed to consumers.

(a) Calculate GDP using (i) the product approach, (ii) the expenditure approach, and (iii) the income approach.

(b) Calculate private disposable income, pri-vate sector saving, government saving, national saving, and the government deficit.

Is the government budget in deficit or sur-plus?

7. In some countries, price controls exist on some goods, which set maximum prices at which these goods can be sold. Indeed, the United States experienced a period of wage and price controls when the Nixon administration introduced wage and price controls in 1971.

Sometimes the existence of price controls leads to the growth of black markets, where goods are

exchanged at prices above the legal maximums.

Carefully explain how price controls present a problem for measuring GDP and for measuring the price level and inflation.

8. In this chapter, we learned that the quantity of U.S. currency outstanding was $3,490 in March 2012. Suppose that we were to try to use this number to estimate the amount of out-put produced in the underground economy in the United States during 2009. Discuss how we would use this information on the quantity of currency in circulation, and what additional information you would want to have to come up with a good estimate. In your answer, you will need to consider how underground transactions might take place by other means in the United States than through the use of U.S. currency, and how some of U.S. currency is not being used for underground transactions in the United States.

9. Part of Gross Domestic Product consists of pro-duction in the so-called FIRE. sector (finance, insurance, and real estate). Value added is noto-riously difficult to measure in the FIRE sector, as it is hard to determine exactly what the inputs and outputs are. For example, banks are included in the FIRE sector, and we know that they contribute to our well-being by mak-ing borrowmak-ing and lendmak-ing more efficient and by providing transactions services. However, as most of the inputs and outputs associated with a bank are not actual physical quantities, it is much more difficult to measure value added in banking than in the production of apples, for example. Recently, there have been several high-profile financial scandals, for example the Enron affair, and the Madoff scandal in New York, where financial firms and individuals earned large incomes but actually provided little or no financial services. Discuss the implications that such criminal financial activity has for the measurement of GDP.

10. In the United States, a large fraction of trans-actions among banks takes place over Fedwire, which is an electronic payments system

10. In the United States, a large fraction of trans-actions among banks takes place over Fedwire, which is an electronic payments system