Chapter Five: Macroeconomic Measurement: The Current Approach.

Chapter Five:

Macroeconomic Measurement:The Current Approach

An Overview of National Accounting

Type of Capital

Value in Trillions of Dollars at the End of the

YearEquipment and software (businesses and government) 7.0Structures (businesses and government) 21.5Residences 17.6Inventories 2.2Consumer durable goods 4.7Total Value of Manufactured Capital 53.0

Table 5.1: The Estimated Size of U.S. Manufactured Capital Stock, 2011

Sources: BEA, Fixed Asset Accounts Table 1.1 and NIPA Table 5.9, and authors’ calculations

Measuring Gross Domestic Product

Sector and SubsectorProduction by

Sector (trillions of dollars)

Production by Subsector (trillions

of dollars)

Households and institutions production 1.93  

Private households   1.07

Nonprofit institutions   0.86

Business production 11.87  

Government production 1.87  

Federal government   0.62

State and local governments  

1.26

Total: Gross domestic product 15.68  

Table 5.2: Gross Domestic Product, Product Approach, 2012

Source: BEA, NIPA Table 1.3.5, published 1/30/2013.Note: Totals may not add up exactly due to rounding.

Table 5.3: Gross Domestic Product, Spending Approach, 2012

Sector and Type of SpendingSpending by Sector (trillions of dollars)

Spending by Type (trillions of dollars)

Household and institutions spending

11.12  (personal consumption expenditures)

Durable goods   1.22

Nondurable goods   2.56

Services   7.34

Business spending

2.06  (gross private domestic investment)

Fixed investment   2.00

Change in private inventories   0.06

Net foreign sector spending

-0.57  (net exports of goods and services)

Exports   2.18

Less: Imports   2.75

Government spending

3.07  (government consumption expenditures and gross investment)

Federal   1.21

State and local   1.85

Total: Gross domestic product 15.68  

Source: BEA, NIPA Table 1.1.5, published 1/30/2013Note: Totals may not add up exactly due to rounding.

Table 5.4: Gross Domestic Product, Income Approach, 2011

Types of Income and AdjustmentsIncome and Adjustments

(trillions of dollars)

National income 13.36

Less: Net income receipts from the rest of the world 0.25

Plus: Depreciation (consumption of fixed capital) 1.94

Plus: Statistical discrepancy 0.03

Total: Gross domestic product 15.08

Source: BEA, NIPA, Table 1.7.5, published 1/30/2013, and authors’ calculations

Growth, Price Changes, and Real GDP

(1) (2) (3) (4)

DescriptionPrice per Pound

Quantity (Pounds)

Contribution to Nominal GDP [column (2) × column (3)]

Year 1      

Apples $1.00 100 $100

Oranges $2.00 50 $100

      $200

Year 2      

Apples $1.50 100 $150

Oranges $2.00 75 $150

      $300

Table 5.5: Calculation of Nominal GDP in an “Apples-and-Oranges” Economy

Table 5.6: Calculation of Constant-Dollar Real GDP

(1) (2) (3) (4)

DescriptionPrice per Pound

in Base YearQuantity (Pounds)

Contribution to Real GDP [column (2) × column (3)]

Year 1 (Base)      

Apples $1.00 100 $100

Oranges $2.00 50 $100

      $200

Year 2      

Apples $1.00 100 $100

Oranges $2.00 75 $150

      $250

Nominal GDP

Figure 5.1 Real versus Nominal GDP, Chained 2005 Dollars, 1980–2012

Source: BEA NIPA Tables 1.1.5 and 1.1.6, published 1/30/2013

Table 5.7: Calculation of a Constant-Weight Price Index

(1) (2) (3) (4)

DescriptionPrice per

PoundQuantity in Base Year

Sum of (Prices × Base Quantities) [column (2) × column (3)]

Year 1      

Apples $1.00 100 $100

Oranges $2.00 50 $100

      $200

Year 2      

Apples $1.50 100 $150

Oranges $2.00 50 $100

      $250

Appendix: Chained Dollar Real GDP

Type of Measure Year 1 Year 2

Nominal GDP $200 $300

Fisher quantity index(current to previous year) 

——— 1.225

Chain-type quantity index 100100 ×1.225

= 122.5

Real GDP (chained Year 1 dollars)  (122.5 $200)/100

= $200 = $245

Table 5.8: Deriving GDP in Chained (Year 1) Dollars