Samenvatting Economy
Chapter 4
4.1.1 Differences in prosperity
The capacity to satisfy needs by means of goods and services is termed prosperity.
Goods and services cannot satisfy needs without first being processed, value is added to
them. This process we call production.
The total production of a country is termed the Gross Domestic Product
The GDP per head of population is often used to determine how prosperous a country is.
Most countries aim for growth in production, also know as economic growth.
Needs of individual are infinite.
Prosperity differences within a country.
4.1.2 Welfare
Important reason for the difference in income is the difference in labour productivity.
People who make a high contribution to productivity want to receive a high amount as well.
Prosperity has been defined as the availability of goods and services.
Welfare is more an indication of the sense of contentment and satisfaction that people in a
society have.
HDI is an instrument to measure welfare of a country.
It goes from 0 (bad) to 1 (good).
Includes following elements:
A long and healthy life, life expectancy at birth
Education
Reasonable living standard
4.2.1
The GDP is the sum of all the productive activities that take place within the borders of a
country.
Production can be measured in variety of ways:
we can determine the GDP of the EU by adding the added value of businesses and
governments within the borders of all the combined countries. production approach
Measure production by adding together all the remuneration (betalingen) that the
production factors receive. income approach
Measure production by adding all expenditures. expenditure approach
,Production and income approach
Return on sales by a business is not the same as the production or the added value.
VAT tax
Gross Domestic Product market price = value of raw materials and semi-manufactured
goods + tax.
GDPmp – all subsides products by government = GDPbp (basisc prices)
GDPbp – Deprecation from machines = NDPbp (Net domestic product)
NDPbp = used for pay wages, interests and profits
Wage costs All salaries and security contributions
Security contributions you get money from the government when 65+
Profits = return from sales – costs of production
Sum of all remunerations of the production is equal to the production.
Gross National Income vs Gross Domestic Product
Gross Domestic Product = production factors that apply within the borders of a country
Gross National Income = income that is derived from production factors that are owned by
the population
Example: Investor who made all investments in other countries is not contributing to GDP
but to the GNI.
Government production: no-one can do without them.
Government also adds value to products.
Addes value of government production cannot be measures in the same way as for
businesses because government doesn’t sell products on the market. Added value of
government is the same as the sum of the wages and salaries paid to government
employees.
4.3.1
Durable capital goods long lasting goods. Factories, buildings, offices, shops, machines,
transport…..
Floating capital goods are incorporated to the final product. Materials for the product
Companies also use consumables which are used in the production process, such as energy.
Capital coefficient = indicator for the amount of capital goods needed to produce one unit of
the product. Capital coefficient of 3 indicates that three billion euros in capital are needed to
produce 1 billion’s worth of the final product.
,4.3.2
Working-age population = people between 15 and 65 years.
People between 15-65 who are candidate for the labour market are the work force.
The work force as a percentage of the working age population is the participation rate.
Employment rate is the ratio of employed to working-age people. It indicates which part of
the population contributes actively to the production process.
GDP = Lp x Ld
Ggp = Glp + Gld
Ggdp = % of increase in production
Glp = % of increase in labour productivity
Gld = % of increase in employement
Long term and short term unemployement look in book
BLZ 121 GOED LEZEN
Wage cost per unit is equal to wage cost per employee divided by labour productivity.
Glu = Gwe - Glp
Glu = % of change in the wage cost per unit
Gwe = % of change in the wage cost per employee
Glp = % of change in labour productivity
The wage cost per unit increases as a result of an increase in wage per employee and drops
as a result of an increase in labour productivity.
If wages increase spendings will increase/sales will increase
BLZ 123 GOED LEZEN
4.3.3
BLZ 124 & 125 GOED LEZEN
Long term economic development that maintains the quality of the environment is called
sustainable development.
This requires a sustainable GDP, however involve negative economic growth with a reduced
demand for raw materials, energy and spade.
4.4.1
BLZ 126 t/m 135 GOED LEZEN
Immaterial investments are expenses that contribute to a company’s ability to produce
goods and services now or in the future.
,Chapter 5
5.1 Consumption
Consumers purchase a set of number of goods and services to satisfy their needs, this is
termed consumption pattern.
Consumers use variety of different products, this is called consumer preferences.
Foodstuff low income elasticity
Services high income elasticity
Look in the book at figure 5.3
Real income = with a 4% rise in income and an inflation of 3%, purchasing power will
therefore increase by 1%. Increase in purchasing power is also known as real increase in
income.
Nominal = income that is not corrected for price increases is called nominal income.
Marginal consumption ratio = gives an indication of how much of every extra euro earned is
consumed.
Marginal consumption ratio is significantly lower for high incomes than for low incomes. As
such, the distinction between wage income, social security income and other income is a
significant one.
Consumer confidence = if consumers have little confidence in the general economic future
or their own economic future, their willingness to buy will be low, they will not spend their
increase in income but save it. Only when confidence returns consumers will spend their
savings.
Consumption growth is also dependent on two other factors, both of which have a small
affect on consumption: real interest and capital increase.
If the real interest increases, consumption will decrease, because loans get more expensive.
Consumer credit will decrease and so consumer expenditure will decrease.
Consumers posses capital value (rise is share prices) will lead to an increase in consumption.
, 5.2 Investments
Planned stock investments = investments to make when you expect sales to increase.
Forced stock investments = when you produced more than the demand, so you are not able
to sell part of their production.
Replacement investments = are investments that companies need to make to replace their
old machinery after is has been used for a couple of years. Replacement investments are
needed to keep production going.
Expansion investments = investments who are aimed at increasing production capacity.
Gross investments = net investments + replacement investments
Net investments = expansion investments in fixed assets and stock changes.
Investments in depth = less labour required per machine increase labour productivity
Investments in width = new machines produce the same quantity of products per employee.
Companies make investments with a view on sales expectations Look at figure 5.5
Degree of capital utilization indicates percentage of time that machines and other capital
goods are actually used If degree of utilization is high, companies only increase production
by expansion of the stock of capital goods.
Investments and interest affect each other negatively, if interest rates rises, investments will
decrease. Companies invest in order to produce, the sales of products provides profits which
companies regard as the return of investments.
The higher the profits, the easier for the companies to finance investments.
Labour income ratio and capital income ratio give an indication of the proportion of labour
and capital in the added value. The remaining share of the added value is for depreciation,
interest, and profits. The closer the LIR approaches 100%, the less is left for the owners
capital.
LIR = W
------
GDP
W=Wages
GDP=Gross Domestic Product
Percentage formula look in the book 149
Chapter 4
4.1.1 Differences in prosperity
The capacity to satisfy needs by means of goods and services is termed prosperity.
Goods and services cannot satisfy needs without first being processed, value is added to
them. This process we call production.
The total production of a country is termed the Gross Domestic Product
The GDP per head of population is often used to determine how prosperous a country is.
Most countries aim for growth in production, also know as economic growth.
Needs of individual are infinite.
Prosperity differences within a country.
4.1.2 Welfare
Important reason for the difference in income is the difference in labour productivity.
People who make a high contribution to productivity want to receive a high amount as well.
Prosperity has been defined as the availability of goods and services.
Welfare is more an indication of the sense of contentment and satisfaction that people in a
society have.
HDI is an instrument to measure welfare of a country.
It goes from 0 (bad) to 1 (good).
Includes following elements:
A long and healthy life, life expectancy at birth
Education
Reasonable living standard
4.2.1
The GDP is the sum of all the productive activities that take place within the borders of a
country.
Production can be measured in variety of ways:
we can determine the GDP of the EU by adding the added value of businesses and
governments within the borders of all the combined countries. production approach
Measure production by adding together all the remuneration (betalingen) that the
production factors receive. income approach
Measure production by adding all expenditures. expenditure approach
,Production and income approach
Return on sales by a business is not the same as the production or the added value.
VAT tax
Gross Domestic Product market price = value of raw materials and semi-manufactured
goods + tax.
GDPmp – all subsides products by government = GDPbp (basisc prices)
GDPbp – Deprecation from machines = NDPbp (Net domestic product)
NDPbp = used for pay wages, interests and profits
Wage costs All salaries and security contributions
Security contributions you get money from the government when 65+
Profits = return from sales – costs of production
Sum of all remunerations of the production is equal to the production.
Gross National Income vs Gross Domestic Product
Gross Domestic Product = production factors that apply within the borders of a country
Gross National Income = income that is derived from production factors that are owned by
the population
Example: Investor who made all investments in other countries is not contributing to GDP
but to the GNI.
Government production: no-one can do without them.
Government also adds value to products.
Addes value of government production cannot be measures in the same way as for
businesses because government doesn’t sell products on the market. Added value of
government is the same as the sum of the wages and salaries paid to government
employees.
4.3.1
Durable capital goods long lasting goods. Factories, buildings, offices, shops, machines,
transport…..
Floating capital goods are incorporated to the final product. Materials for the product
Companies also use consumables which are used in the production process, such as energy.
Capital coefficient = indicator for the amount of capital goods needed to produce one unit of
the product. Capital coefficient of 3 indicates that three billion euros in capital are needed to
produce 1 billion’s worth of the final product.
,4.3.2
Working-age population = people between 15 and 65 years.
People between 15-65 who are candidate for the labour market are the work force.
The work force as a percentage of the working age population is the participation rate.
Employment rate is the ratio of employed to working-age people. It indicates which part of
the population contributes actively to the production process.
GDP = Lp x Ld
Ggp = Glp + Gld
Ggdp = % of increase in production
Glp = % of increase in labour productivity
Gld = % of increase in employement
Long term and short term unemployement look in book
BLZ 121 GOED LEZEN
Wage cost per unit is equal to wage cost per employee divided by labour productivity.
Glu = Gwe - Glp
Glu = % of change in the wage cost per unit
Gwe = % of change in the wage cost per employee
Glp = % of change in labour productivity
The wage cost per unit increases as a result of an increase in wage per employee and drops
as a result of an increase in labour productivity.
If wages increase spendings will increase/sales will increase
BLZ 123 GOED LEZEN
4.3.3
BLZ 124 & 125 GOED LEZEN
Long term economic development that maintains the quality of the environment is called
sustainable development.
This requires a sustainable GDP, however involve negative economic growth with a reduced
demand for raw materials, energy and spade.
4.4.1
BLZ 126 t/m 135 GOED LEZEN
Immaterial investments are expenses that contribute to a company’s ability to produce
goods and services now or in the future.
,Chapter 5
5.1 Consumption
Consumers purchase a set of number of goods and services to satisfy their needs, this is
termed consumption pattern.
Consumers use variety of different products, this is called consumer preferences.
Foodstuff low income elasticity
Services high income elasticity
Look in the book at figure 5.3
Real income = with a 4% rise in income and an inflation of 3%, purchasing power will
therefore increase by 1%. Increase in purchasing power is also known as real increase in
income.
Nominal = income that is not corrected for price increases is called nominal income.
Marginal consumption ratio = gives an indication of how much of every extra euro earned is
consumed.
Marginal consumption ratio is significantly lower for high incomes than for low incomes. As
such, the distinction between wage income, social security income and other income is a
significant one.
Consumer confidence = if consumers have little confidence in the general economic future
or their own economic future, their willingness to buy will be low, they will not spend their
increase in income but save it. Only when confidence returns consumers will spend their
savings.
Consumption growth is also dependent on two other factors, both of which have a small
affect on consumption: real interest and capital increase.
If the real interest increases, consumption will decrease, because loans get more expensive.
Consumer credit will decrease and so consumer expenditure will decrease.
Consumers posses capital value (rise is share prices) will lead to an increase in consumption.
, 5.2 Investments
Planned stock investments = investments to make when you expect sales to increase.
Forced stock investments = when you produced more than the demand, so you are not able
to sell part of their production.
Replacement investments = are investments that companies need to make to replace their
old machinery after is has been used for a couple of years. Replacement investments are
needed to keep production going.
Expansion investments = investments who are aimed at increasing production capacity.
Gross investments = net investments + replacement investments
Net investments = expansion investments in fixed assets and stock changes.
Investments in depth = less labour required per machine increase labour productivity
Investments in width = new machines produce the same quantity of products per employee.
Companies make investments with a view on sales expectations Look at figure 5.5
Degree of capital utilization indicates percentage of time that machines and other capital
goods are actually used If degree of utilization is high, companies only increase production
by expansion of the stock of capital goods.
Investments and interest affect each other negatively, if interest rates rises, investments will
decrease. Companies invest in order to produce, the sales of products provides profits which
companies regard as the return of investments.
The higher the profits, the easier for the companies to finance investments.
Labour income ratio and capital income ratio give an indication of the proportion of labour
and capital in the added value. The remaining share of the added value is for depreciation,
interest, and profits. The closer the LIR approaches 100%, the less is left for the owners
capital.
LIR = W
------
GDP
W=Wages
GDP=Gross Domestic Product
Percentage formula look in the book 149
