The following are some aspects collected by individuals:
Explanation of economic terms
1. What are CPI, inflation, PPI and GNP deflator?
Consumer Price Index (CPI), abbreviated as CPI in English, is a price change indicator that reflects the price of products and services related to residents' lives. It is usually used as an important indicator to observe the level of inflation. If the consumer price index rises too much, it indicates that inflation has become a factor of economic instability, and the central bank will be at risk of tightening monetary and fiscal policies, resulting in an uncertain economic outlook. Therefore, excessive increases in the index are often not welcomed by the market.
For example, in the past 12 months, the consumer price index increased by 2.3%, which means that the cost of living has increased by an average of 2.3% compared with 12 months ago. When the cost of living increases, the value of your money decreases. In other words, a 100 yuan note received a year ago can only buy 97.70 yuan worth of goods and services today. Generally speaking, when the CPI increases by more than 3%, we call it inflation, and when the CPI increases by more than 5%, we call it serious inflation.
There are three main price indexes: Consumer Price Index CPI (Consumer’s Price Index), Producer Price Index PPI (Producer’s Price Index), and GNP Deflator.
The calculation methods of the three price indexes are basically the same, that is, the weighted average of the price changes of various commodities. However, the basket of goods selected for each price index calculation is different. When calculating the consumer price index, the commodity basket contains the consumption basket of a typical citizen. Therefore, the Consumer Price Index is also known as the Cost of Living Index. When calculating the producer price index, the selected commodity basket contains production resources. The GNP deflator is a more comprehensive index, and the commodity basket selected in its calculation includes both consumer goods and production resources.
It can be said that CPI is a synchronized economic indicator, and PPI is a leading economic indicator. Generally speaking, the producer price index leads the economy by 3 months to half a year, and the consumer price lags behind the economy by 3 months to half a year. CPI can show the current economic situation, while PPI can show the future economic situation. PPI calculates the price at which manufacturers sell, while CPI calculates the price at which consumers purchase.
2. What is the Engel coefficient? A brief understanding
In 1857, the German statistician Engel studied the relationship between the income and food consumption expenditure of certain households in Western Europe at that time, and proposed this point of view: the lower the income of a family, the lower the total expenditure. The greater the proportion of money spent on food. This idea is called "Engel's law", or Engel's coefficient. Expressed as a formula:
Engel's coefficient (%) = (amount of food expenditure ÷ total consumer expenditure) × 100%
Engel's law mainly states that food expenditure accounts for 10% of total consumer expenditure over time. A certain trend that changes with changes in income. It reveals the quantitative relationship and correlation between residents' income and food expenditure, and uses the proportion of food expenditure to total consumption expenditure to illustrate the impact of production development and income increase on living consumption. As we all know, eating is the first need for human survival. When the income level is low, it must occupy an important position in consumer expenditures. As income increases and food needs are basically met, the focus of consumption will begin to shift to clothing, use, etc. Therefore, the poorer a country or family lives, the greater the Engel coefficient; conversely, the richer the life, the smaller the Engel coefficient.
Once Engel's Law and Engel's coefficient were proposed, they were widely accepted and confirmed by the Western economics community, and they were considered to have universal applicability. Engel's law and Engel's coefficient are concepts from Western economics and statistics that were introduced to my country earlier.
The Engel coefficient is often used internationally to measure the living standards of people in a country and region. According to the standards proposed by the Food and Agriculture Organization of the United Nations, an Engel coefficient above 59% is considered poor, 50-59% is subsistence, 40-50% is moderately well-off, less than 40% is rich, and less than 30% is the richest. In the West, personal consumption includes all expenditures on housing, medical care, sanitation, transportation, etc. In our country, especially in cities, public medical care, low rents, and various subsidies for food, fuel, water, etc. are implemented. These policy factors have a certain impact on the consumption structure. Therefore, incomparable factors must be eliminated in comparative analysis, especially when conducting international comparisons and urban-rural comparisons. When our country uses this standard to make international and urban-rural comparisons, we must take into account those incomparable factors, such as different price comparisons of consumer goods and differences in residents’ living habits. We must pay attention to the calculation and analysis of policy impacts and the differences caused by different social and economic systems. special factors. For these incomparable issues, they should be eliminated accordingly during analysis and comparison. In addition, when observing changes in historical conditions, it should be noted that the Engel coefficient reflects a long-term trend rather than an absolute tendency to decline year by year. It is to find the long-term trend by smoothing out short-term fluctuations.
3. What is GDP? What is GNP? What's the difference between the two?
GDP is the abbreviation of "Gross Domestic Product" in English, which is also the gross domestic product. It is a measure of the total amount of final products produced by all resident units of a country (region) economy during the accounting period. It is often regarded as an important indicator of the economic status of a country (region). The new added value in the production process includes the value newly created by workers and the wear and tear value of fixed assets, but does not include the value of intermediate inputs in the production process; in terms of physical composition, it is the final product produced in the current period, including the value used for consumption. , accumulated and net exported products, but does not include various intermediate products consumed by other sectors. There are three methods for measuring GDP: Production method: GDP = ∑ Total output of each industrial sector - ∑ Intermediate consumption of each industrial sector: Income method: GDP = ∑ Labor remuneration of each industrial sector + ∑ Depreciation of fixed assets of each industrial sector + ∑ Net production tax of each industrial sector + ∑ Operating profit of each industrial sector; expenditure method: GDP = total consumption + total investment + net exports.
GNP is the market value of all final goods and services produced by domestically owned factors of production within a given time period.
Gross domestic product (GDP) and gross national product (GNP) are two indicators that are both related and different. They are all aggregate indicators that calculate social production results and reflect macroeconomics. However, there are differences between the two because of their different calculation calibers. Gross domestic product refers to an indicator that reflects the results of the production activities of all resident units within a country or region. The so-called permanent residence unit refers to an economic unit with a center of economic interests within the economic territory of a country. The so-called production activities include all industries and departments including the three industries. In terms of value form, it is equal to the sum of added value produced by all departments of the national economy. Gross national product refers to the total value of original income (referring to labor remuneration, net production tax, depreciation of fixed assets, operating surplus, etc.) actually received by all resident units within a country or region within a certain period. The income earned by residents of a country through investing or working abroad (called factor income from abroad) should be included in the country's gross national product. Income earned by non-nationals from investment or work within the country's territory (called factor income paid to foreign countries) should not be included in the country's gross national product. Therefore, the gross national product can be calculated by adding the net factor income received by the country's resident units from abroad (factor income received from abroad - factor income paid to foreign countries). To put it more intuitively, GDP is equal to GDP plus the net amount of labor compensation and investment income (including dividends, dividends and interest, etc.) obtained from abroad. That is: Gross National Product = Gross Domestic Product + Foreign Net Factor Income. Gross National Product is the concept of "income". The main difference between gross domestic product and gross national product is that the former emphasizes the added value created, which is the concept of "production", while the latter emphasizes the original income obtained. Generally speaking, the difference between the gross national product and the gross domestic product of each country is not large. However, if a country has a large amount of investment and a large number of workers abroad, the country's gross national product will often be greater than its gross domestic product.
The Gross National Product is one of the great inventions of the twentieth century, probably almost as significant as the automobile and not quite so significant as TV. The effect of physical inventions is obvious, but social inventions like the GNP change the world almost as much.
——By Professor Kenneth Boulding
4. What is NNP? What are NI, PI and DPI?
NNP (Net National Product) is the total market value of final goods and services produced in the economy in a given period of time, excluding the depreciation of capital.
Simply put, NNP=GNP-depreciation.
NI (National Income) is the income earned by the factors of production.
To put it simply, national income NI=NNP-indirect taxes and corporate transfer expenditures + government subsidies to enterprises.
PI (Personal Income) is the income received by households.
Simply put, personal income PI = NI - income earned but not received + income received but not earned (government transfer expenditures to private individuals).
DPI (Disposable Personal Income) is income remaining after paying personal income taxes.
Simply put, DPI=PI-Income Tax=Personal Consumption C+Personal Savings S.
5. What other common economic terms are there?
CRB is a futures price index, reflecting the level of futures prices.
ECI is the employment cost index. It is a measure of the number of jobs in salaried employment in more than 500 industries in all U.S. states and 255 territories. Employment estimates are based on market adjustments for large business. And the number of full-time or part-time salaried employees in domestic enterprises and governments is calculated. It reflects the difficulty of employment and the quality of its conditions.
Industrial productivity: It is a continuously weighted measurement of the changes in production volume of factories, mining, and public utilities in a country. It is equivalent to measuring their industrial production capacity and what is available in industry, mining, and public utilities. Resources can be utilized (usually referred to as utilization efficiency). The manufacturing sector can affect a quarter of the economy, and usage efficiency provides an assessment of how much production capacity is being utilized.
Purchasing Managers Index: The National Association of Purchasing Managers (NAPM), now known as the Association for Supply Management, releases a monthly composite index that includes domestic manufacturing conditions and new orders for home construction. Production, supplier delivery times, orders, inventories, prices, employment, export orders, and import orders, it is the following index that divides manufacturing by non-manufacturing.
Durable Goods: Durable Goods Orders measures the number of orders received by domestic manufacturers for goods to be delivered immediately or in the future. A durable good is defined as a good that will continue to be used for a period of time (more than 3 years) and the service to it will continue during that period.
Retail sales: It is a timely indicator about consumers' main consumption patterns and will be adjusted due to normal seasonal changes, holidays, and trading days. Retail sales include sales of durable and non-durable goods, services and unavoidable fees and taxes added to goods, but do not include sales taxes borne by consumers.
New Homes Report: The New Homes Report measures the number of new homes built per month related to occupancy. The beginning of a building is the beginning of excavation of the foundation. At the same time, it is mainly composed of residential housing construction, which is the first factor to respond to interest rate changes. The response to an initiation/acceptance rate change, if the rates were represented graphically, would be a trough and peak close to the trough.