Macroeconomic Indicators and GDP Calculation Methods
Macroeconomics vs Microeconomics
Macroeconomics deals with the economy as a whole, while microeconomics studies the behavior of markets, prices, and specific products.
Understanding Gross Domestic Product (GDP)
The Gross Domestic Product (GDP) is the monetary value of all final goods and services produced by a country over a period of time, usually a year. In a monetary standard, using the same yardstick and measure allows for the grouping of all goods and services.
Key Characteristics of GDP
- It only takes into account activities that are declared.
- It counts only transactions in goods and services.
- It refers only to the value of final goods, as the value of intermediate goods has already been included by the company.
- It measures the value of what is produced within a country.
- It refers to what is produced in a single year.
Methods of Calculating GDP
- Expenditure Method: GDPmp = c + i + g + (X - M)
- Value-Added Method: PIBcf = VAA + VAB + VAC + ... + VAZ (where VA = value added, and a, b, c, d... z represent firms in an economy).
- Revenue or Income Method: PIBcf = wages + rents + interest + profits + business grants (where cf = cost of production factors).
National Accounting and Economic Indicators
Deflation and Accounting
Deflation is used to eliminate the effect of inflation from a magnitude or value. National Accounting is the set of national indicators that record and report on various economic activities within a country.
GDP vs GNP
- GDPmp: Measures the total value of production of final goods and services for a period of time. It is estimated based on what is produced within the borders of a country, irrespective of the nationality of the persons involved.
- GNPmp: Follows the criterion of nationality or the passport of the people, regardless of where they reside.
Net National Product (PNN)
Regarding PNNpm, when accounting for their participation in the production process, companies treat depreciation as an expense. This is known as the wear experienced by capital goods due to their involvement in the processes of production and distribution.
For PNNcf, the value of the market prices of goods and services does not match the value that families receive because public sector performance introduces market-distorting taxes and subsidies.
National and Disposable Income
National Income: The income that Spanish citizens earn is the sum of their salaries, plus whatever they receive for rent or rents, interest on capital, and business profits.
Personal Disposable Income: The net amount that reaches families is not what the national income indicates, mainly due to the redistribution caused by state intervention.