Chapter 13: Economic
deals with the way the United States measures its national
output and income, along with the topics of population and
Section 1 explains Gross Domestic Product
(GDP), the nation's most comprehensive measure of total output.
Gross National Product is derived from GDP and is the most
comprehensive measure of total income. Four other measures
of income are net national product, national income, personal
income, and disposable personal income. Economists view the
economy as being organized into four sectors: the consumer
or household sector, the business or investment sector, the
government sector, and the foreign sector. These sectors are
then combined to form the output-expenditure model, which
is written as GDP = C + I + G + F.
Section 2 explains how price indices, which
are based on a market basket of representative products, are
used to track changes in prices over time. Price indices can
be constructed for any product, group of products, or group
of consumers. Different base years are often used for different
indices, but this is not important since the index numbers
for an individual series are only compared with other numbers
in the same series.
Section 3 provides an overview of the population
census that must be conducted every 10 years. The annual rate
of population growth was more than 3 percent until the Civil
War, but has declined steadily since then and is now less
than one percent annually. Factors that contribute to this
trend are a replacement level fertility rate, a longer life
expectancy, and constant net immigration. The racial and ethnic
mix will also change with gains made by Asians, Hispanics,
and African Americans.
Section 4 examines the concept of long-term
economic growth as measured in terms of real GDP per capita.
Economic growth was negative during the 1930s, but rebounded
sharply in the 1940s. Since then, growth has been positive
although it has declined modestly in recent decades. Changes
in the rate of productivity growth are not fully understood,
but it did accelerate after 1996, which will have a favorable
impact on economic growth.