Chapter 2

Macroeconomic Data

Intermediate Macroeconomics
 Content
• Overview
• GDP
– Expenditure
– Income
• Inflation
– CPI
– GDP Deflator
• Unemployment
Intermediate Macroeconomics
 The importance of data
• Sherlock Holmes: It is a capital mistake to
theorize before one has data. Insensibly one
begins to twist facts to suit theories, instead of
theories to fit facts.
• Systematic v.s. casual observations
• Economic data or statistics offer a systematic and
objective measure of the state of economy.
• In this lecture, we focus on three statistics:
– GDP: total income or expenditure
– CPI: price level
– Unemployment: fraction of employment
Intermediate Macroeconomics
 National Income Accounting
• GDP (Gross Domestic Product) is essentially the total value
of all transactions in the economy within a time interval
(say, a quarter).
• Three ways to view GDP:
– [production] the total value of final goods and services
produced in the economy
– [income] the total income generated from transactions of
domestically produced goods and services
– [expenditure] the total expenditure generated from transactions
of domestically produced goods and services
• Total income must equal total expenditure, because every
transaction generates an income to the seller and an equal
amount expenditure to the buyer.

Intermediate Macroeconomics
总产出=总收入=总支出

Intermediate Macroeconomics
 The Circular Flow
Income

Factor market
Labor

Households Firms

Goods and services

product and service market

Expenditure

Intermediate Macroeconomics
 Two sectors economy
S不等于0

家庭将1000元要素报酬中拿出800元消费,200元储蓄\投资
从支出看,国民产出=总需求(AD)=消费+投资=C+I
从收入看,国民收入一部分消费,其余储蓄.
总供给(AS)=国民收入=工资+利息+租金+利润=消费+储蓄=C+S
社会的总产出=总收入时,经济均衡运行:
C+I=Y=C+S--------得到I=S
储蓄投资恒等式 Intermediate Macroeconomics
 Three sectors economy (Ⅰ)

收支
平衡

家庭获得900元要素报酬+100元转移支付共计1000元,交了
100元税,700元消费,200元储蓄;
厂商从家庭消费中得到700元,从资本市场上得到200元;政
府得到100元税收并转移支付或购买100元,国民经济平衡

Intermediate Macroeconomics
Three sectors
economy (Ⅱ)
政府
预算
盈余

• 家庭获得900元要素报酬+100元转移支付共计1000元,交了100元税,710元消费,190元储
蓄;
• 厂商从家庭消费中得到710元,从资本市场上得到200元(家庭储蓄190+政府储蓄10=200
元);政府得到100元税收并转移支付或购买90元,政府预算盈余,国民经济平衡
• 从支出看,国民产出=总需求(AD)=C+I+G
• 从收入看,国民收入一部分消费,其余储蓄.
• 总供给(AS)=国民收入=工资+利息+租金+利润=纳税+消费+储蓄
• 政府净税收(T=总税收(T0)-转移支付Tr)
• 国民收入=C+S+T
• 社会的总产出=总收入时,经济均衡运行:C+I+G=C+S+T得到I=S+(T-G),即投资=私人储蓄+公
Intermediate Macroeconomics
共储蓄
 Four sectors economy

从支出看,国民产出=C+I+G+(X-M)
从收入看, 国民收入=C+S+T+Kr;Kr表示本国居民对外国的转移支付(如救灾抗疫等,资金来
自生产要素的收入)
经济均衡时:C+I+G+(X-M)=C+S+T+Kr,则得到:I=S+(T-G)+(M-X+Kr)[四部门中总储蓄(私人+政
府+国外)与投资间关系的恒等式]
S—私人储蓄;(T-G)为公共储蓄;(M-X+Kr)为外国对本国储蓄;M为进口,X为出口,Kr也可以理
Intermediate Macroeconomics
解为他国从本国得到的收入.当)(M+Kr>X时,外国在本国有正储蓄,反之为负储蓄;
 Computing GDP
• GDP: the market value of all final goods and services
produced within an economy in a given period of
time.
• Mathematically, 𝐺𝐷𝑃𝑡 = σ𝑀 𝑖=1 𝑞𝑖𝑡 𝑝𝑖𝑡 , where 𝑞𝑖𝑡 and
𝑝𝑖𝑡 are quantity and price, respectively, of 𝑖-th item
produced period 𝑡.
• If the economy produces 4 apples and 3 oranges,
with market prices 0.5 and 1 RMB, respectively, then
GDP = (Price of apples  Quantity of apples)
+ (Price of oranges  Quantity of oranges)
= (0.5  4) + (1.0  3) = 5.0 RMB

Intermediate Macroeconomics
 Rule for Computing GDP:
Use Market Price
• Use market prices, when available, to
calculate the value of goods and services.
• Imputed price for those goods that are not
sold in the marketplace. For example, home
ownership and government services.
• No imputation is made for goods and services
in the underground economy.

Intermediate Macroeconomics
 Rule for Computing GDP:
Final Goods Only
• Intermediate goods are not doubly counted in
GDP.
GDP = value of final goods produced
= sum of value added at all stages of production
• Used goods not included
– The treatment of inventories depends on if the goods
are spoilable.
• If they spoil, GDP remains unchanged.
• If the goods do not spoil and they are stored for future sale,
their value is included in GDP. When the goods are finally
sold out of inventory (possibly next year), they will be
treated as used goods (and not counted in GDP).

Intermediate Macroeconomics
 Rule for Computing GDP:
Produced within the Country
• Goods and services that are imported for
consumption or investment within the country
are not counted in GDP.
• They are counted in investment or
consumption, though.

Intermediate Macroeconomics
 Nominal and Real GDP
• In the calculation 𝐺𝐷𝑃𝑡 = σ𝑀 𝑖=1 𝑞𝑖𝑡 𝑝𝑖𝑡 , current price is used. We call
it nominal GDP.
• Nominal GDP can change over time, either because there is a
change in the amount (real value) of goods and services or a change
in the prices of those goods and services.
• Real GDP measures the value of final goods and services at constant
prices,
𝑅𝐺𝐷𝑃𝑡 = σ𝑀 𝑖=1 𝑞𝑖𝑡 𝑝𝑖𝑡0 ,
where 𝑡0 stands for the base year and 𝑝𝑖𝑡0 is a constant for each 𝑖.
• The relationship between nominal and real GDP can be
characterized by 𝐺𝐷𝑃𝑡 = 𝑃𝑡 ⋅ 𝑅𝐺𝐷𝑃𝑡 , where 𝑃𝑡 is called GDP
deflator, or implicit price deflator for GDP.
• Taking real measurements is essential for gauging growth or
improvement (e.g., real wage) without distortion of price changes.

Intermediate Macroeconomics
The Real and Nominal GDP of China
Nominal GDP Real GDP (2010 Price)

501000.0

451000.0

401000.0

351000.0

301000.0

251000.0

201000.0

151000.0

101000.0

51000.0

1000.0
1992

1997
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991

1993
1994
1995
1996

1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Intermediate Macroeconomics
The Real and Nominal GDP of China

Intermediate Macroeconomics
The Real and Nominal GDP of China

Intermediate Macroeconomics
Intermediate Macroeconomics
 0
10
20
30

(30)
(20)
(10)
1953

1955

1957

1959

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

Intermediate Macroeconomics
1993
China Real GDP Growth (Annual, %)

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017
Real GDP Growth of China (Annual)
Intermediate Macroeconomics
 0
4
8
12
16

2
6
10
14
18
1992-03
1992-11
1993-07
1994-03
1994-11
1995-07
1996-03
1996-11
1997-07
1998-03
1998-11
1999-07
2000-03
2000-11
2001-07
2002-03
2002-11
2003-07
2004-03
2004-11
2005-07
2006-03
2006-11
2007-07
2008-03

Intermediate Macroeconomics
2008-11
2009-07
China Real GDP Growth (Quarterly, %)

2010-03
2010-11
2011-07
2012-03
2012-11
2013-07
2014-03
Real GDP Growth of China

2014-11
2015-07
(Quarterly, 1992Q1-2019Q2)

2016-03
2016-11
2017-07
2018-03
2018-11
Nominal GDP Growth of China
(Quarterly, 2018Q1-2023Q2)

Intermediate Macroeconomics
 Choice of Base Year
• One principle of calculating RGDP is that the base year
should not be too far, so that prices will not be too out of
date. For example, cell phone was a rare product 20 years
ago.
• Since 1995, the US has been using chain-weighted
measures of real GDP in the calculation of real GDP growth.
• The chain weight works as follows: Average prices in 2009
and 2010 are used to measure real growth from 2009 to
2010. Average prices in 2010 and 2011 are used to measure
real growth from 2010 to 2011, and so on.
• In China, we change base-year every five years.

Intermediate Macroeconomics
 Components of Expenditure

Y = C + I + G + NX

Total expenditure Investment

(GDP) spending by
businesses and
households Net exports
or net foreign
Consumption Government demand
spending by purchases of goods
households and services

This is the called the national income accounts identity.

Intermediate Macroeconomics
 A More Detailed Decomposition
• Let 𝐶 𝑑 be the consumption of domestic goods
and services, and let 𝐶 𝑓 be the consumption
of imported goods and services.
• Similarly, we have 𝐼𝑑 and 𝐼 𝑓 , and 𝐺 𝑑 and 𝐺 𝑓 .
• Then we have 𝑌 = 𝐶 𝑑 + 𝐶 𝑓 + 𝐼𝑑 + 𝐼 𝑓 +
𝐺 𝑑 + 𝐺 𝑓 + 𝑋 − 𝐶 𝑓 + 𝐼 𝑓 + 𝐺 𝑓 , where 𝑋 is
export.

Intermediate Macroeconomics
 Decomposition of Chinese GDP
(Expenditure)

2002 2006 2007 2008 2010 2019 2020 2021 2022

C/Y 45.06 37.72 36.31 35.42 34.63 39.08 37.75 38.48 53.25
G/Y 16.12 14.81 14.60 14.54 14.72 16.70 16.93 15.97 16.08
I/Y 36.27 39.88 40.42 42.43 46.97 43.07 42.86 42.96 42.15
NX/Y 2.55 7.58 8.66 7.62 3.69 1.15 2.46 2.59 3.28
Intermediate Macroeconomics
 Decomposition of Chinese GDP
(Expenditure,100million RMB Yuan)

2002 2005 2008 2012 2016 2020 2021 2021

2022 2022%
,%
GDP 121326.7 187657.5 318067.6 539039.9 745980.5 1025628 1140340
1205017 100
100
C 74227.5 101872.5 158899.2 275443.9 410806.4 560811.1 620921 641633 53.25
54.5
447910.2 37.17
Household consumption 54667 74153.7 112654.7 190584.8 288668.2 387185.8 438849.4
38.5 0.00
Consumption of urban residents 37650.3 53241.7 84413.9 148273.2 226960.2 304086.3
0.0
Consumption of rural residents 17016.7 20912 28240.7 42311.6 61708 83099.5 0.00
0.0
Government consumption( G ) 19560.5 27718.8 46244.5 84859.1 122138.3 173625.4 182071.6 193722.8 16.08
16.0
I 44005 75576 134941.6 248960 318198.5 439550.3 489897.2 523890.4 43.48
43.0
Total fixed capital formation 42672.1 73852 124700.7 238320.7 310144.8 430624.9 478901.2 507957.5 42.15
42.0
Inventory change 1332.9 1724 10240.9 10639.3 8053.7 8925.4 10996
15932.8 1.32
Net exports of goods and 1.0
3094.2 10209.1 24226.8 14636 16975.6 25266.9 29521.9 39493.7 3.28
services(NX) 2.6

Final consumption rate (%) 61.2 54.3 50 51.1 55.1 54.7 54.5 53.25
--

Capital Formation Rate(%) 36.3 40.3 42.4

Intermediate 46.2
Macroeconomics 42.7 42.9 43 -- 43.48
 Consumption (C)
• Consumption (C) measures the value of all goods
and services bought by households.
• It includes
– durable goods
last a long time
e.g., cars, home appliances
– non-durable goods
last a short time
e.g., food, clothing
– services
work done for consumers
e.g., dry cleaning, air travel.

Intermediate Macroeconomics
 Household consumption

https://www.macroview.club/data?code=us_g
Intermediate Macroeconomics
dp_share_pce
 Investment (I)
• Definition: spending on goods bought for future
use.
• It includes:
– business fixed investment
spending on plant and equipment that firms will use
to produce other goods & services:
– residential fixed investment
spending on housing units by consumers and
landlords
– inventory investment
the change in the value of all firms’ inventories
Intermediate Macroeconomics
 Investment and Capital
• Capital is one of the factors of production.
At any given moment, the economy has a certain overall
stock of capital.
• Investment is spending on new capital.
• Example:
Suppose that on 1/1/2002:
An economy has an amount of capital: 500
during 2002:
investment = 100, depreciation = -20
1/1/2003:
The economy will have capital: 500+100-20=580
• In a word, investment is “flow”, capital is “stock”.

Intermediate Macroeconomics
 Housing Issue
• A house is a piece of capital which is used to produce a consumer
service, which we may call “housing services”.
• A consumer’s spending on a new house counts under investment,
not consumption.
• A tenant’s spending on rent counts under services -- rent is
considered spending on “housing services.”
• In national income accounting, (the services category of)
consumption includes the imputed rental value of owner-occupied
housing.
• So what happens if a renter buys the house she had been renting?
Conceptually, consumption should remain unchanged: she is no longer
paying rent, but she is still consuming the same housing services as before.

Intermediate Macroeconomics
 Inventory issue
• Unsold output goes into inventory, and is counted
as “inventory investment”, whether the inventory
buildup was intentional or not.
• If total inventories are $10 billion at the
beginning of the year, and $12 billion at the end,
then inventory investment equals $2 billion for
the year.
• Note that inventory investment can be negative
(which means inventories fell over the year).
Intermediate Macroeconomics
 Government Spending (G)
• Government Spending includes all
government spending on goods and services.
• To avoid double-counting, G excludes transfer
payments (e.g. unemployment insurance
payments), because they do not represent
spending on goods and services.
• Transfer payments are included in
“government outlays,” but not in government
spending.

Intermediate Macroeconomics
Intermediate Macroeconomics
 Chinese GDP at 2022
• In 2022, the total GDP of China is121.02 trillion
Yuan. The population is 1.4 billion. So GDP per
capita is about 85698 Yuan.
• Using market exchange rate, the GDP per cap. is
around $12741.
• In comparison, the estimated
• US GDP per capita is $76400 in 2022.
https://www.baidu.com/s?ie=utf-
8&f=8&rsv_bp=1&rsv_idx=1&tn=baidu&wd=%E7%BE%8E%E5%9B%BD%E4%BA%BA%E5%9D%87GDP&fenlei=25
6&rsv_pq=0x865631900001e549&rsv_t=0826rjTHifD%2B6LXW64d7NWRuJCo0zt2katHEAI7gafUEsnaNIJ
UEILWKMoY&rqlang=en&rsv_enter=0&rsv_dl=tb&rsv_sug3=17&rsv_sug1=16&rsv_sug7=100&rsv_bty
pe=i&prefixsug=%25E7%25BE%258E%25E5%259B%25BD%25E4%25BA%25BA%25E5%259D%2587GDP&rsp=0&i
nputT=7833&rsv_sug4=7833

Intermediate Macroeconomics
 Investment in China
• In 2021, total investment in China is 4.999
billion yuan，about 43.84% of GDP
• In 1980, the I/Y ratio was 35%.
• In US in 2022Q2, C/Y=68.4%;I/Y=18.7%;NX/Y=-
4.4%;G/Y=17.3 .

Intermediate Macroeconomics
 (I/Y )% in the USA
• 2023Q2:17.2

Intermediate Macroeconomics
(NX/Y)% IN THE USA 2023Q2:-3.0

Intermediate Macroeconomics
 -10
0
10
20
30
40
50
60
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992

C/Y (%)
1993
1994
1995

I/Y (%)
1996
1997
1998
1999

G/Y (%)
2000

Intermediate Macroeconomics
2001
2002
2003
Decomposition of GDP (Expenditure, %)

NX/Y (%)
2004
2005
2006
2007
2008
2009
Decomposition of GDP

2010
2011
2012
2013
2014
2015
2016
Decomposition of GDP
(Expenditure,%)

Intermediate Macroeconomics
 Other measures of income
• GNI (Gross National Income) or GNP (Gross National
Product)
GNI = GDP + net factor payments from abroad
• NNP (Net National Product)
NNP = GNP – Depreciation
– In the national income accounts, depreciation is called the
consumption of fixed capital. In US, it equals about 10% of GNP.
Because depreciation of capital is a cost of producing the output
of the economy, subtracting depreciation shows the net result
of economic activity.
• NI (National Income)
– NI differs from NNP by a small correction called statistical
discrepancy.

Intermediate Macroeconomics
Difference between GNP and GDP (as
percentage of GDP, 1997)
Country (GNP/GDP-1)*100%
U.S.A. 0.1%
Bangladesh 3.3%
Brazil -2.0%
Canada -3.2%
Chile -8.8%
Ireland -16.2%
Kuwait 20.8%
Mexico -3.2%
Saudi Arabia 3.3%
Singapore 4.2%

Intermediate Macroeconomics
 0.0
1.0
2.0

-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
(GNP/GDP-1) 100%

Intermediate Macroeconomics
1999
2000
2001
2002
Case of China

2003
2004
2005
2006
2007
2008
2009
2010
2011
 2
• In 2022,China’s
GDP:12.102
billion yuan

https://zhuanlan.zhihu.com/p/423178156
Intermediate Macroeconomics
 Personal Income
• Personal Income = National Income
− Indirect Business Tax
− Corporate Profits
− Social Insurance Contributions
− Net Interest
+ Dividends
+ Government Transfers to Individuals
+ Personal Interest Income.
• Disposable Personal Income =
Personal Income – Personal Taxes

Intermediate Macroeconomics
 Content
• Overview
• GDP
– Expenditure
– Income
• Inflation
– CPI
– GDP Deflator
• Unemployment
Intermediate Macroeconomics
 CPI
• CPI (Consumer Price Index) is an index that measures the overall
level of prices for consumers.
• A government agency (统计局 in China, Bureau of Labor Statistics
in US) determines a basket of goods and services consumed by a
typical customer. Using this basket, the agency then computes an
index,
σ𝑖 𝑞𝑖,𝑡0 𝑝𝑖𝑡
CPIt = c0 ,
σ𝑖 𝑞𝑖,𝑡0 𝑝𝑖,𝑡0
where 𝑝𝑖𝑡 is the price of the 𝑖-th item at time 𝑡, 𝑝𝑖,𝑡0 is the price of the
𝑖-th item at some base time 𝑡0 , 𝑞𝑖,𝑡0 is the quantity of the 𝑖-th item in
the consumption basket at 𝑡0 , and 𝑐0 is a constant.
• For example, we may choose 𝑐0 = 100, implying that the level of
CPI at time 𝑡0 is 100.

Intermediate Macroeconomics
 CPI
• Let 𝑤𝑖 denote the fraction of expenditure on
the 𝑖-th item in the consumption basket at
time 𝑡0 ,
𝑤𝑖 = 𝑞𝑖,𝑡0 𝑝𝑖,𝑡0 / σ𝑀
𝑖=1 𝑞𝑖,𝑡0 𝑝𝑖,𝑡0
Then the equation (4) can be written as
𝑁
𝑝𝑖𝑡
CPIt = 𝑐0 ෍ 𝑤𝑖 .
𝑝𝑖,𝑡0
𝑖=1

Intermediate Macroeconomics
 Apple and orange economy
• For example, in our twin-tree economy, the
apple tree produces 20 apples and the orange
tree produces 10 oranges. All these fruits are
consumed every year. Their prices are
Year Apple Orange
2016 0.5 1
2015 0.4 0.8

• Then the CPI for 2016 is given by

0.5 ∗ 20 + 1 ∗ 10 20
𝐶𝑃𝐼2016 = = .
0.4 ∗ 20 + 0.8 ∗ 10 16
Intermediate Macroeconomics
 Inflation and Core Inflation
• Change in CPI is inflation.
• Core CPI is the price index of a consumer
basket that excludes food and energy
products.
• Core inflation measures the increase in the
core CPI.
• CPI exhibits strong seasonality, hence seasonal
adjustment is necessary before any analysis of
inflation based on CPI.
Intermediate Macroeconomics
 How Chinese Statistics Bureau
Calculates inflation
• Conduct a survey to determine the composition
of a typical consumer’s “basket” of goods. (→ 𝑤𝑖 )
• Every month, collect data on prices of all items in
the basket. (→ 𝑝𝑖𝑡 )
• Publish Year-to-Year CPI change in any month:
𝑝𝑖𝑡
෍ 𝑤𝑖 × 100%
𝑝𝑖,𝑡−12
𝑖
This statistics avoids, largely, seasonality. But it
loses both chain (环比) and level (水平)
information.
Intermediate Macroeconomics
https://data.eastmoney.com/cjsj/cpi.html

Intermediate Macroeconomics
https://data.eastmoney.com/cjsj/cpi.html
Intermediate Macroeconomics
Composition of the CPI’s “basket” (US)
Food and bev.
5.8% 5.9%
Housing 17.6%
2.8%
Apparel 2.5%
4.5% 4.8%
Transportation

Medical care

Recreation
16.2%
Education

Communication
40.0%
Other goods and
services

Intermediate Macroeconomics
 CPI in the USA
• 2023-08:3.7

https://www.macroview.club/data?code=us_p
ce_price

Intermediate Macroeconomics
https://baijiahao.baidu.com/s?id=1772568174
720876991&wfr=spider&for=pc Intermediate Macroeconomics
https://baijiahao.baidu.com/s?id=1744654305
994585568&wfr=spider&for=pc Intermediate Macroeconomics
 中国CPI权重（2016）

居住19.4%

一、食 品
二、烟酒及用品
食品烟酒31.1 三、衣 着
教育9.4 四、家庭设备用品及服务
五、医疗保健及个人用品
六、交通和通信
交通通讯14.0% 七、娱乐教育文化用品及服务
八、居 住
衣着9.0%
生活用品
医疗保健 及服务5.5
7.5
其他
4.1
Intermediate Macroeconomics
 GDP Deflator
• We define GDP deflator by
𝑌𝑡 σ𝑀
𝑖=1 𝑞𝑖𝑡 𝑝𝑖𝑡
𝑃𝑡 = = σ𝑀
𝑦𝑡 𝑖=1 𝑞𝑖𝑡 𝑝𝑖,𝑡0
where 𝑦𝑡 is the value of output at price level of the year
𝑡0 (base year), 𝑞𝑖𝑡 is the output of 𝑖𝑡ℎ item in year 𝑡.
• Obviously, the GDP deflator also measures general
price level.
• Let 𝑤it = 𝑞𝑖𝑡 𝑝𝑖,𝑡0 / σ𝑀
𝑖=1 𝑞𝑖𝑡 𝑝𝑖,𝑡0 , then we obtain
𝑀
𝑝𝑖𝑡
𝑃𝑡 = ෍ 𝑤𝑖𝑡 ⋅
𝑝𝑖,𝑡0
𝑖=1

Intermediate Macroeconomics
 GDP Deflator v.s. CPI
• The GDP deflator measures the prices of all goods and
services produced, whereas the CPI measures prices of only
the goods and services bought by consumers. Thus, an
increase in the price of goods bought only by firms or the
government will show up in the GDP deflator, but not in the
CPI.
• Also, another difference is that the GDP deflator includes
only those goods and services produced domestically.
Imported goods are not a part of GDP and therefore don’t
show up in the GDP deflator.
• The final difference is the way the two weight the prices in
the economy. The CPI assigns fixed weights to the prices of
different goods (Laspeyres index), whereas the GDP
deflator assigns changing weights (Paasche index).
Intermediate Macroeconomics
 CPI vs GDP Deflator (China)
800

700

600

500

400 CPI
GDP Deflator

300

200

100

0
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Intermediate Macroeconomics
 Inflation in CPI and GDP Deflator
30.00

25.00

20.00

15.00
Inflation in GDP Deflator
Inflation in CPI
10.00

5.00

0.00

-5.00

Intermediate Macroeconomics
 Why CPI tends to overstates inflation
• Substitution bias
– The CPI uses fixed weights, so it cannot reflect
consumers’ ability to substitute toward goods whose
relative prices have fallen.
• Introduction of new goods
– The introduction of new goods makes consumers
better off and, in effect, increases the real value of
money. But it does not reduce the CPI, because the
CPI uses fixed weights.
• Unmeasured changes in quality
– Quality improvements increase the value of the dollar,
but are often not fully measured.
Intermediate Macroeconomics
 PCE of U.S.

https://www.macroview.club/data?code=us_p
ce_price Intermediate Macroeconomics
https://www.macroview.club/data?code=us_c
pi
Intermediate Macroeconomics
 2022-03:PPI=11.7

2023-08:PPI=11.7

https://www.macroview.club/data?code=us_p
pi Intermediate Macroeconomics
 2022-Q4:-3.8;2023Q1:-3

Intermediate Macroeconomics
 Content
• Overview
• GDP
– Expenditure
– Income
• Inflation
– CPI
– GDP Deflator
• (Un)employment
Intermediate Macroeconomics
 Measuring Unemployment
• Unemployment Rate = Number of Unemployed
Labor Force
• Labor Force Participation = Labor Force
Adult Population
• The labor force is defined as the sum of the employed and
unemployed, and the unemployment rate is defined as the
percentage of the labor force that is unemployed.
• The labor-force participation rate is the percentage of the
adult population who are in the labor force.
• In Sep 2019, the US labor statistics broke down as follows:
Labor Force = 158.3 (Employed) + 5.8 (Unemployed) = 164.1 million
Unemployment Rate = (5.8/164.1) x 100 = 3.5%
LFP:Labor-Force Participation Rate = (164.1/259.6) x 100 = 63.1%
Intermediate Macroeconomics
Case Study I: Trends in US LFP

Intermediate Macroeconomics
 Case Study II: LFP and Unemployment
Rate in China
LFP (%) Unemployment Rate (%)

88.00 3.50

86.00 3.00

84.00 2.50

82.00 2.00

80.00 1.50

78.00 1.00

76.00 0.50

74.00 0.00
1981

1990

2006
1978
1979
1980

1982
1983
1984
1985
1986
1987
1988
1989

1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005

2007
2008
2009
2010
2011
2012
2013
2014
Intermediate Macroeconomics
 Case Study III: The Structural Change
in Labor Force
100%

90%

80%

70%

60%

第三产业就业人员
50%
第二产业就业人员
第一产业就业人员
40%

30%

20%

10%

0%
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Intermediate Macroeconomics
 Okun’s Law
• Employed workers help produce GDP, while
unemployed workers do not.
•
one would expect
a negative relationship between
unemployment and real GDP.
• This relationship is clear in the data…
 Okun’s Law Okun’s Law states that a
one-percent decrease in
unemployment is associated
with two percentage points of
Percentage change additional growth in real GDP
in real GDP
10

8
1951
6 1984
2000
4 1999

2 1993
1975
0

-2 1982

-3 -2 -1 0 1 2 3 4
Change in
unemployment rate
 Summary
• Gross Domestic Product (GDP) measures both total income and total expenditure
on the economy’s output of goods & services.
• Nominal GDP values output at current prices; real GDP values output at constant
prices. Changes in output affect both measures, but changes in prices only affect
nominal GDP.
• GDP is the sum of consumption, investment, government purchases, and net
exports.
• The overall level of prices can be measured by either
– the Consumer Price Index (CPI),
the price of a fixed basket of goods purchased by the typical consumer
– the GDP deflator,
the ratio of nominal to real GDP
• The unemployment rate is the fraction of the labor force that is not employed.
• Okun’s Law states that a one-percent decrease in unemployment is
associated with two percentage points of additional growth in real
GDP

Intermediate Macroeconomics