Macroeconomics Concepts: GNP, GDP, NNP, National Income and Unemployment

Macroeconomic Concepts

Basic macroeconomic concepts:

• GNP (Gross National Product): the total value of all goods and services produced by the nationals of a country in one year, including the productive factors abroad (exports) plus the production corresponding to the factors of other countries (imports) within the country. It is the gross amount of national factor income, which may include depreciation, constant or current prices. The principal advantage of GNP is that it measures a country's global economic activity.
• GDP (Gross Domestic Product): the sum of the total value of all goods and services produced within a country in one year.
• NNP (Net National Product): the part of GNP that remains after subtracting depreciation, that is, the capital consumed or depreciated during the year.
• NNPMP (Net National Product at Market Prices): the NNP valued at market prices, that is, the prices at which output is sold, including indirect taxes.
• NNPFC (Net National Product at Factor Cost): the NNP valued at factor cost, that is, excluding indirect taxes.
• NI (National Income): the current value of goods and services received by the national economy during one year. It is considered a macroeconomic magnitude, as it is significant, and shows how spending on consumption and investment goods is distributed among the factors.

Two Magnitudes Derived from National Income

• Per capita income: NI / total population. It does not indicate the distribution of capital.
• Income per active individual: NI / active population (employed + unemployed).
• PI (Personal Income): the amount that citizens actually receive over a year, which is available to them. It does not include corporate taxes.
• Disposable income: the amount that remains for households after paying direct taxes and receiving transfers.

Aggregate Supply and Aggregate Demand

Aggregate supply and aggregate demand: employment, production and prices can experience large fluctuations under economic policy, as well as external disturbances such as oil price shocks.

• Aggregate supply: the total of all companies in a country that are willing to produce and sell in a given period.
• Aggregate demand: the total amount that the different sectors of the economy are willing to spend in a given period. It is the amount consumed or spent by companies, the state and other agents, and depends on monetary policy, prices, taxes and total expenditure factors, as well as on the economic differences between entities.

Unemployment

Types of unemployment:

• Frictional unemployment: movements of people among regions and between different job positions.
• Structural unemployment: a gap between the supply and demand for a type of labor, with supply increasing while demand for the other decreases.
• Cyclical unemployment: when overall demand falls, employment decreases. It results from a temporary imbalance between aggregate supply and aggregate demand.

Applications and the Efficiency Approach to Welfare

Concepts:

• Effectiveness: the increase in output resulting from the addition of one more unit of input.
• Productivity: the capacity to produce, measured as output / input.
• Technical efficiency: the process of transforming a set of inputs into outputs.
• Cost efficiency: a company is cost-efficient when it uses the most suitable combination of inputs to minimize the cost of obtaining a given level of output.
• Social efficiency: when social benefits are maximized (benefits minus social costs).

The Welfare Perspective

Welfare: the degree of success of welfare is attributed to a combination of factors: personal characteristics, a good social environment, social security, and resources (personal and capital) used in production.

Analogy: the individual can be compared to a production unit.

Welfare unit: for example, housing, where resident satisfaction is taken into account.

Body (or company):

Four basic concepts:

• Final output: the degree of success or effectiveness of the welfare service, depending on the client's situation and the needs and demands for assistance.
• Intermediate output: measures that cannot be expressed in terms of quality or results.
• Inputs: welfare resources, including personnel, physical capital, provisions and other consumables.
• Non-resource inputs: physical factors that are not tangible.

Unemployment in Modern Economics

Unemployment is the dominant social concern of the market economy.

Okun's Law: Arthur Okun, one of the American economists and a postwar advisor, drew attention to the relationship between unemployment and output. Based on the reduced-flow series, he noted that without causing inflation, unemployment could be reduced. Okun stated that for every 2% by which GNP falls below its potential level, unemployment rises by 1%. Variations in GNP and unemployment are described in the short term.

Effects: economic and social effects, including physical and psychological deterioration.

Measurement: the unemployment rate is obtained monthly using a random sampling procedure that divides the population aged 16 and over into three categories: employed (those who worked for pay or had a job but were absent due to illness, strikes or vacations), unemployed (those who did not work, were actively seeking work, and are available to start working), and inactive (those who are neither working nor seeking work).

Unemployment rate: unemployed / active population.