Learn a little bit of finance every day

Chapter 9 Understanding Macroeconomic Indicators in Life (1)
GDP vs. GNP: Measures of National Wealth
In the process of studying finance, it is inevitable to encounter many economic indicators.These indicators often appear in our lives, and people are already familiar with them, but they may not be able to explain them in detail, because they often involve a lot of economics.This chapter will explain one by one the important macroeconomic indicators in financial life.

There is such a hilarious classic story about GDP.

There are two very bright young economic geniuses, they often argue for some advanced economic theories.

One day after dinner, I went for a walk, and for the proof of a certain mathematical model, two outstanding young men fought again. When it was difficult to distinguish, they suddenly found a pile of dog shit on the grass in front of them.A said to B, if you can eat it, I am willing to pay 5000 million. The temptation of 5000 million is really not small, should I eat it or not?B took out a pen and paper, performed precise mathematical calculations, and quickly came up with the optimal solution in economics: eat!So A lost 5000 million. Of course, B's extra meal was not easy.

The two continued to walk, and suddenly found a pile of dog shit. At this time, B began to have a strong nausea, and A also felt a little bit sorry for the 5000 million that was spent just now.So B said, if you eat it, I will give you 5000 million.Therefore, different calculation methods yield the same calculation result—eat!A took back 5000 million with satisfaction, and B seemed to have found a little psychological balance.Suddenly, the geniuses wailed at the same time: We got nothing after making trouble for a long time, but ate two piles of shit for nothing!They couldn't figure it out, so they had to ask their mentor, a famous economics guru, for an explanation.Hearing the stories of the two students, unexpectedly, the master also burst into tears.It was so easy to wait for the mood to stabilize a little, and the master raised a finger tremblingly, and said excitedly: "1 million! 1 million! My dear classmates, on behalf of the motherland and the people, I thank you, You just ate two piles of shit, and you contributed 1 million yuan to the country's GDP!"

GDP is the abbreviation of gross domestic product in English, that is, gross domestic product.GDP is usually defined as the total value of the market value of all final products and labor services produced in the economy of a country or region in one year.In economics, GDP and GNP (gross national product: gross national product) are commonly used to measure the comprehensive level of economic development of a country or region.This is also a common measurement method in various countries and regions. GDP is the most concerned economic statistic in macroeconomics, because it is considered to be the most important indicator to measure the development of the national economy.Generally speaking, there are three forms of GDP, namely value form, income form and product form.From the perspective of value form, it is the difference between the value of all goods and services produced by all resident units within a certain period of time and the value of all non-fixed asset goods and services invested in the same period, that is, the sum of the added value of all resident units; In terms of form, it is the sum of the income directly created by all resident units within a certain period; in terms of product form, it is the final use of goods and services minus the import of goods and services. GDP reflects the total value added of various sectors of the national economy.

Gross national product (GNP for short) refers to the final result of the initial income distribution of all resident institutional units in a country (region) within a certain period (annual or quarterly).The added value (gross domestic product) created by a country’s resident institutional units engaged in production activities is mainly distributed to the country’s resident institutional units in the initial distribution process, but part of it is also distributed to the country in the form of labor remuneration and property income. non-residential institutional units.At the same time, part of the added value created by foreign production units is distributed to the resident institutional units in the country in the form of labor compensation and property income.Thus came the concept of gross national product, which is equal to gross domestic product plus labor remuneration and property income from abroad minus labor remuneration and property income paid to foreign countries.

Everything Created Has Value: Gross Output and Gross Income

In macroeconomics, it is generally accepted that total output equals total income.But in fact, this is not easy to understand in economic activities.Someone put forward such a proposition:
If a manufacturer sells all of its output of 100 million yuan, it needs to pay 45 yuan in wages, which is included in the income of workers, and 5 yuan in interest is paid as the creditor's income, and 40 yuan in raw materials and rents are included in the sales of raw materials income of the owner or lessor.The remaining $10 is profit earned by the business owner, which is included as part of the business owner's income.In this case output equals income.If only 90 yuan is sold, there is still 10 yuan in stock.At this time, the output is 100 million yuan, and the income is only 90 yuan. Is the output still equal to the income?Can this 10 inventory be understood as profit? .

This is actually a false proposition.Because the case uses the content of a microeconomics to explain the macroeconomy, which is of course unreasonable.In macroeconomics, total output is equal to total income.Because this is not referring to money, but to all the products that are created.

The total output refers to the sum of the value of goods and services produced by the resident units of various sectors of the national economy within a certain period of time, reflecting the total results of the production and operation activities of various sectors of the national economy.Total income refers to the accumulated state of income at a certain point in time.

Total output consists of two parts, profit and cost.It is easy to understand that profit is income; while cost is another part of income (such as: wages, raw materials, etc.).So total output = total income.Total expenditure is related to total output: total output - total expenditure = total profit.

Total output is an important indicator of the national statistical department's accounting every year. What is its significance?
Total output can be said to be the most basic macroeconomic variable, and other macroeconomic variables such as consumption, savings, investment, taxation, fiscal expenditure, import and export, etc. are all derived from it.Only by mastering the country's total output can we measure consumption, investment, savings, expenditure and other indicators.

In addition, in the study of macroeconomics, total output is also an important issue.Such as employment level, price level, economic growth, economic cycle, etc. can only be finally explained through changes in the level of total output.The identity of "total output = total income" is undoubtedly the basic basis for establishing macroeconomic models.

At the same time, we also need to see the difference between the total output value and the total output.These are two similar concepts that people often confuse.

Gross output value refers to the sum of the value of goods and services produced by the resident units of the material production department within a certain period of time, reflecting the total results of the production and operation activities of the material production department.The total output reflects the total results of the production and business activities of various sectors of the national economy.

The total output value of some industries is consistent with the concept of total output. For example, the total output value of agriculture is equal to the total output value of agriculture; the total output value of the construction industry is the total output value of the construction industry; The total output of the retail trade industry and the catering industry is basically equivalent to the total output value of the wholesale and retail trade industry and the catering industry.

However, there are some differences between the total industrial output and the total industrial output value stipulated by the current statistical system.Mainly because of the difference in accounting:

1. The accounting basis is different. The total output is based on the industrial activity unit as the basic accounting unit, and the total output value is based on the independent accounting unit as the basic accounting unit;
2. The accounting methods are different. The total output is based on sales revenue, and the total production results of the current period are obtained by adjusting the inventory. The total output value is directly calculated for the production process;
3. The scope of accounting is different. The total output includes main business income and auxiliary business income, while the total output value only includes main business income.Gross industrial output includes value-added tax on the same caliber, and gross industrial output does not include value-added tax.At the same time, strictly speaking, the value of "sales of waste products" is also included in the total industrial output, but not included in the total industrial output.

Commonplace Metric: Economic Growth Rate

"Economic growth rate" is a term commonly used in the media.

In 2008, with the slowdown of the external economy and relatively serious inflation in the country, the economic growth rate had attracted much attention.Statistics show that the GDP growth rate in the first half of 2008 was about 10.4%, of which it was 10.2% in the second quarter.This means that the economic growth in the first half of the year still maintained a relatively fast pace.According to the data released by the National Bureau of Statistics, in the first quarter of this year, the domestic economic growth rate was 10.6%.In contrast, the second quarter will drop, but still above 10%.

Judging from the data of nearly 30 years of reform and opening up, the average domestic economic growth rate is about 9.7%.Therefore, it is a relatively reasonable growth level to maintain above 9%.Therefore, from this perspective, the economic growth rate in the first half of 2008 is still relatively normal.However, this situation declined to a certain extent in the second half of 2008.Experts estimate that the economic growth for the whole year will be maintained at around 10%, compared with 2009% in 9.

People have never stopped paying attention to the economic growth rate.According to the state of economic growth, the government will implement different economic policies to maintain steady and rapid economic growth.This is the significance of understanding the level of economic growth rate.

So, how is the economic growth rate generated and calculated?
Economic growth rate, also known as economic growth rate, is a dynamic indicator that reflects the degree of change in the level of economic development in a certain period of time, and is also a basic indicator that reflects the vitality of a country's economy.To be precise, it is the comparison of the end-period GNP with the base-period GNP.Calculate the end-period GNP at the end-period current price, and the growth rate obtained is the nominal economic growth rate.The growth rate obtained by calculating the end-period GNP at the constant price (namely the price of the base period) is the real economic growth rate.However, when measuring the speed of economic growth, the actual economic growth rate is generally used.

The size of the economic growth rate means the speed of economic growth and the length of time needed to improve people's living standards, so it has attracted the attention of all walks of life.

The well-known CPI
As we all know, China experienced serious inflation in early 2008.

In the vegetable market next to the North Courtyard in Chaoyang District, Beijing, the Chinese cabbage and spinach stalls were crowded with people.The hawker was sweating profusely, but the smile on his face never stopped for a moment.A vegetable vendor can earn about 200 yuan a day.The 15 meat stalls on the north side of the vegetable market were deserted. "Meat sales were very prosperous in the past, and they could sell 2000 yuan a day, but since the end of last year, the business has plummeted." A stall owner surnamed Hu said, pointing to the six empty stalls opposite. "Now the common people are starting to calculate when they buy meat. Several meat sellers can't keep going."

Chao Chao, an international student studying economics in the United States, spent more than half of his time in the month after returning to China doing social surveys on prices during the Chinese New Year.When I meet with my classmates, I know the consumption level of different restaurants; if I want to buy a laptop in China, I know the market prices of electronic products in specialty stores and computer malls; when I accompany my mother to the store, I compare the market prices of clothes, shoes and cosmetics ... While I was exhausted, a paper entitled "Special Investigation in the Era of Price Rise" has been compiled.

During his market research, Chao Chao discovered that the ordinary people he has contacted—citizens who buy vegetables in the vegetable market and hawkers who set up stalls on the street—are all familiar with proprietary economic terms such as CPI.

In Chinese society, the term "people's livelihood experience" is also gradually improving its "position".Because the real topic of people's livelihood is indeed closely related to oil, salt, firewood, rice, and family affairs, it is not surprising that prices have become an issue of great concern to the country. CPI is one of the most basic terms in people's livelihood economy.

CPI is the abbreviation of Consumer Price Index (Consumer Price Index).my country's CPI index is calculated according to eight categories: food, tobacco, alcohol and supplies, clothing, household equipment and services, medical care and personal supplies, transportation and communications, entertainment, education, cultural supplies and services, and housing.The sum of the weights of these eight categories is 100.Among them, food accounts for the largest proportion, including: grain, meat and poultry and its products, eggs, aquatic products, fresh vegetables, and fresh fruits.

The National Bureau of Statistics selects a representative product in each category of consumer goods, for example, do most people eat rice or noodles?Whether to wear leather shoes or cloth shoes.The prices of these representative products are converted into a price index on a monthly, quarterly, and annual basis, and regularly announced to the public. This is what we call the official CPI index.

CPI is an important indicator to reflect the consumption level of urban and rural residents and the price changes of consumer goods, and is also used as an important indicator to observe the level of inflation.If the CPI has risen by 12% over the past 2.3 months, it means that the cost of living is now on average 12% higher than it was 2.3 months ago.This is certainly not welcome.And when the cost of living increases, the purchasing power of your money also decreases.If the CPI rises by 12% in 2.3 months, last year's $100 note will buy only $97.75 worth of goods or services this year.Therefore, if the CPI rises too much, it means that the currency depreciates too much, and inflation becomes a factor of economic instability.Therefore, the CPI index is also a powerful indicator of the degree of inflation.Generally speaking, when the CPI increases by more than 3%, inflation has already been triggered; and when the CPI increases by more than 5%, it is already serious inflation.Generally, in this case, in order to curb inflation, the central bank will tighten monetary policy and fiscal policy.

CPI is a lagging data, but it is often an important reference indicator for market economic activities and government monetary policy. CPI stability, full employment and GDP growth are often the most important socio-economic goals.

Aggregate Demand and Aggregate Supply: Balance Guarantees Stability
Generally speaking, the operation of the entire social economy includes two major parts: aggregate supply and aggregate demand.

Often, the evaluation of whether an economy is overheating depends on whether its aggregate demand is too strong. In 2007, when China's price level started to rise, Song Guoqing, a famous macro-economist, did a study.Point out the subtle relationship between aggregate demand and economic growth.

According to the data released in October 2007, after excluding the special factor of the sharp rise in meat prices, the adjusted quarter-on-quarter growth rate of total demand dropped to a relatively appropriate level in the third quarter.

The industrial production level in July-August 2007 was quite low. After excluding the meat price, the month-on-month growth rate of the main price indexes all slowed down, and this situation may have been maintained in September.In terms of quarter-on-quarter growth, the total demand in the second quarter was running high, but it has cooled down significantly in the third quarter.Song Guoqing wrote: Whether the fever is completely reduced depends on further changes.Judging from the known data, it is now moving in the direction of fever reduction.

In addition to the passive growth of consumption expenditure caused by the sharp rise in meat prices, the main reason for the sharp fluctuations in the growth rate of aggregate demand is the fluctuation of the trade surplus in goods.

This explains two reasons: first, strong aggregate demand is the main reason for rising prices and inflation; second, aggregate demand is affected by import and export factors.

Aggregate demand refers to the total amount of products and services that the society is willing to purchase at a certain price level. It depends on the overall price level and is affected by factors such as domestic investment, net exports, government expenditure, consumption level, and money supply.

(End of this chapter)