Lecture 1a REVIEW OF MACRO CONCEPTS

National income & product accounts

-Accounting system used to measure aggregate economic activity.

Gdp
vs
Measure of aggregate output in
national income accounts.
Includes products & services
currently produced within specific
interval of time

Gni
Aggregate output measurement in
some economies
Includes income earned by OFWs
Excludes income earned by
foreigners in PH
Net factor income from abroad
-Difference between GNI & GDP which accounts for > 10% of GNI in the PH

Three ways of defining GDp
1. Value of final goods & services produced in the economy during given period
Final good
-Destined for final consumption

Intermediate good
-Used in production of another
good
2. Sum of value added in the economy during a given period
Value added =value of firms production value of intermediate goods it uses in production
3. Sum of incomes in economy during given period
Includes:
Wages labor income
Profit capital income
Rents returns to land
Indirect taxes includes revenues collected by government in form of sales

Three ways of measuring GDp
1. Expenditure approach
GDP = C (Consumption) + I (Investment) + G (Govt Spending) + NX (Net
exports)

2. Sectoral approach
GDP = Agriculture + Industry + Services

3. Income approach
GDP = Wages + Profits + Rents + Indirect Business Taxes
Nominal GDP
Sum of quantities of final goods x current prices
Also called peso GDP
Real GDP
Sum of quantities of final goods x constant prices
Also called GDP in terms of goods, GDP
in constant pesos, GDP adjusted for inflation

Current economic Situation
Economic growth improved in 2012-2013 after it slowed in 2011;
slowdown may occur in 2014.
Industrial and service sectoral growth improved since 2011
Net factor income is becoming more stable; little growth over past 2
years
GDP growth this year will be more moderate; estimated growth rate 6-
7%, lower than last year but better than most Asian economies
Agriculture was generally poor in 2013 with declines in major crops, i.e.,
coconut, sugar, fisheries continued weak trend due to depleted stocks.
Industry strengthened, but mining activity remained weak.
Finance and real estate, with trade and transport, remained resilient
drivers of growth during the year
Economic growth in 2013 was sustained by improvement in investment
spending; growth was also recorded in government consumption
spending
Capital formation (investment) growth in 2010 and 2011 was sustained
due to continued confidence in the economy.
However, exports were very sluggish due to weak external demand
The unemployment rate (UR) has slightly increased; this translates to an
increase of 120,000+ workers that are unemployed; in 2013, UR increased
to 7.3%, highest in 3 years
Underemployment is still high; slight increase of around 225,000
workers, mainly those who have full-time jobs but need more hours of
work
Headline inflation rate remained moderate in 2013
Inflation rate is expected to increase due to significant oil price hikes and
attendant transportation price adjustments