CHAPTER 1
INTRODUCTION
1.1 Assessing the performance of the economy
> Economic growth
> Price stability
> Full employment
> Balance of payments stability
> Equitable distribution of income
1.2 Sources of economic data
> Stats SA
> SARB
>Stats in Brief
> Budget Review
> SARB Annual Report
1.3 Some basic concepts and techniques
> Value (PQ) = price (P) x quantity (Q)
> Quantity = value (PQ) ÷ price (P)
1.3.1 Percentages
new value−old value
> x 100
old value
> If a certain variable increases – the answer will be a positive percentage answer, but if the variable
decreases (E.g. from R25-R20), the answer will be expressed as a negative percentage answer
1.3.2 Percentages, percentage points and basis points
> Example; an increase in inflation rate from 10 – 11 is a 10% increase
11
(10 – 1) x 100 = 10%
,> Example; an increase in the inflation rate from 5% - 7% is an increase of two percentage points, not
2%
7
(5 – 1) x 100 = 40% - percentage increase
> Example; the interest rate increases from 6.25% to 8% - the difference is 175 basis points
1.3.3 Stocks, flows and ratios
> Stocks – has no time dimension and is measured at a particular point in time – e.g. balance in a
savings account, wealth
> Flows – is measured over a period of time – e.g. production, spending , income, investment
1.3.4 Averages
> The simple/arithmetic averages of a set of data simply the sum of the values divided by the number
of values
> Weighted averages are calculated when the different observations are not equally important, with
the result that their values should not simply be added and their sum divided by the number of
observations
> The median is another measure of central tendancy
CHAPTER 2
TOTAL PRODUCTION, INCOME AND EXPENDITURE: THE NATIONAL ACCOUNTS
2.1 THE NATIONAL ACCOUNTS
> Constitute as the most important source of information about the condition and performance of the
economy
> Compiled by Stats SA and SARB
> Prepared in accordance with the System of National Accounts (SNA), a framework devised by the
UN, WB, IMF, Economic Cooperation and Development (OECD) and the Eurostat
> The SNA consist of a coherent and integrated set of accounts, balance sheets and tables based on
a set of internationally agreed concepts, definitions, classifications and accounting rules
> Term national accounts refer to the national income and production accounts (NIPA) only
BOX 2-1: IDENTITIES AND EQUATIONS
There are two types of equalities: an identical equality
(identity) and a conditional equality (equation). The
difference between the two is that any value(s) of the
unknown variable(s) will satisfy an identity =, while an
equation is satisfied by a unique set of values.
a x a = a2 - identity
a2 = 4 – equation
, 2.2 TOTAL PRODUCTION, INCOME AND EXPENDITURE
> The most important identity in the national accounts is the equality of total production, income and
expenditure – production gives rise to income which is spent on production
Production=income=spending on product
> Total production, total income and total spending only holds if all three variables pertains to the
same period, geographic area and if all are valued at the same set of prices
2.3 GROSS DOMESTIC PRODUCT (GDP)
> Definition – the total value of all final goods and services produced within the geographic
boundaries of a country in a particular period
> GDP is one of the most important indicators of the performance of the economy
Elements of GDP:
1. Value – once production of each good/service is expressed in money terms, the total value of
production can be determined by adding the values together
2. Final – to avoid double counting only final goods and services are taken into account
3. Geographic boundaries – includes only domestic production
4. Particular period – GDP only concerns new goods and services during a specific period
5. Gross – indicates that no provision has been made for consumption of fixed capital (depreciation),
this implies that capital equipment is used up in production process
BOX 2-2: GROSS GEOGRAPIC PRODUCT
Used to estimate the total value of production in other
geographic areas such as different provinces
2.4 THREE APPROACHES TO CALCULATE GDP
1. Production method – adding the value added during each round
2. Income method – focuses on the income earned in the form of rent, interest, wages and profits in
the production process
INTRODUCTION
1.1 Assessing the performance of the economy
> Economic growth
> Price stability
> Full employment
> Balance of payments stability
> Equitable distribution of income
1.2 Sources of economic data
> Stats SA
> SARB
>Stats in Brief
> Budget Review
> SARB Annual Report
1.3 Some basic concepts and techniques
> Value (PQ) = price (P) x quantity (Q)
> Quantity = value (PQ) ÷ price (P)
1.3.1 Percentages
new value−old value
> x 100
old value
> If a certain variable increases – the answer will be a positive percentage answer, but if the variable
decreases (E.g. from R25-R20), the answer will be expressed as a negative percentage answer
1.3.2 Percentages, percentage points and basis points
> Example; an increase in inflation rate from 10 – 11 is a 10% increase
11
(10 – 1) x 100 = 10%
,> Example; an increase in the inflation rate from 5% - 7% is an increase of two percentage points, not
2%
7
(5 – 1) x 100 = 40% - percentage increase
> Example; the interest rate increases from 6.25% to 8% - the difference is 175 basis points
1.3.3 Stocks, flows and ratios
> Stocks – has no time dimension and is measured at a particular point in time – e.g. balance in a
savings account, wealth
> Flows – is measured over a period of time – e.g. production, spending , income, investment
1.3.4 Averages
> The simple/arithmetic averages of a set of data simply the sum of the values divided by the number
of values
> Weighted averages are calculated when the different observations are not equally important, with
the result that their values should not simply be added and their sum divided by the number of
observations
> The median is another measure of central tendancy
CHAPTER 2
TOTAL PRODUCTION, INCOME AND EXPENDITURE: THE NATIONAL ACCOUNTS
2.1 THE NATIONAL ACCOUNTS
> Constitute as the most important source of information about the condition and performance of the
economy
> Compiled by Stats SA and SARB
> Prepared in accordance with the System of National Accounts (SNA), a framework devised by the
UN, WB, IMF, Economic Cooperation and Development (OECD) and the Eurostat
> The SNA consist of a coherent and integrated set of accounts, balance sheets and tables based on
a set of internationally agreed concepts, definitions, classifications and accounting rules
> Term national accounts refer to the national income and production accounts (NIPA) only
BOX 2-1: IDENTITIES AND EQUATIONS
There are two types of equalities: an identical equality
(identity) and a conditional equality (equation). The
difference between the two is that any value(s) of the
unknown variable(s) will satisfy an identity =, while an
equation is satisfied by a unique set of values.
a x a = a2 - identity
a2 = 4 – equation
, 2.2 TOTAL PRODUCTION, INCOME AND EXPENDITURE
> The most important identity in the national accounts is the equality of total production, income and
expenditure – production gives rise to income which is spent on production
Production=income=spending on product
> Total production, total income and total spending only holds if all three variables pertains to the
same period, geographic area and if all are valued at the same set of prices
2.3 GROSS DOMESTIC PRODUCT (GDP)
> Definition – the total value of all final goods and services produced within the geographic
boundaries of a country in a particular period
> GDP is one of the most important indicators of the performance of the economy
Elements of GDP:
1. Value – once production of each good/service is expressed in money terms, the total value of
production can be determined by adding the values together
2. Final – to avoid double counting only final goods and services are taken into account
3. Geographic boundaries – includes only domestic production
4. Particular period – GDP only concerns new goods and services during a specific period
5. Gross – indicates that no provision has been made for consumption of fixed capital (depreciation),
this implies that capital equipment is used up in production process
BOX 2-2: GROSS GEOGRAPIC PRODUCT
Used to estimate the total value of production in other
geographic areas such as different provinces
2.4 THREE APPROACHES TO CALCULATE GDP
1. Production method – adding the value added during each round
2. Income method – focuses on the income earned in the form of rent, interest, wages and profits in
the production process
