University:
University of Kent
Course:
ECON3040 | Principles of Economics
Academic year:

2021
Views:

365

Pages:

9
Author:

N. Hebat

ECONOMICS ENERGY MACRO: ENERGY IN PDB PRESENTATION Introduction • The discussion of energy economics is closely related to the relationship between energy and non-energy as a factor of production that drives a country's economic growth: how energy contributes to generating national income (output). • National income calculation = Product Gross Domestic Product (GDP) • GDP: the basis for calculating a country's economic growth and shows the level of public welfare. • It is important to recognize the role of energy in fiscal and monetary sector Energy in GDP Simple circular flow cycle (1) • Macroeconomics: the overall economic activity of individuals, companies, countries. • Macroeconomics is also linked to microeconomics: the relationship between spending, income and production can be seen in a closed circular flow system: Figure 1. • If the closed-cycle income flow system is not balanced, it can get the flow of goods and services from the international (open flow cycle). • The role of government is necessary to balance the flow of goods and services. Energy in GDP Simple circular flow cycle (2) • In the macro-flow cycle system, the national economic activity is shown as the total product of goods and services at a certain time (cross sectional): the measurement of the total final product (finished) goods and services and the total final product purchased is national expenditure. • National income = National expenditure • National income indicators: GDP (national output). • GDP per capita = National GDP : total population • GDP also shows the basic problems in the economic system: the efficiency of factors of production and the level of public welfare Energy in GDP Simple circular flow cycle (3) • GDP can be measured by: 1. Expenditure approach Y = C + G + I + (X-M) 2. Income approach Y = w + i + r + ᴨ 3. Production approach (production of industrial origin) Y = NTB + ∑n(NPB - NIA) • The national production approach is represented by all sectors of a country's economy. Energy in GDP Simple circular flow cycle (4) • GDP calculations in some countries only use expenditure and/or production approach. • GDP is differentiated from GNP (National Income/Products Net/Gross) • GNI is commonly used in developed countries and GDP in developing countries • GDP or gross domestic gross (GDP) measures not citizens within a country are no exception. • GNP or gross national product (GNP) measures citizens' country wherever it is located. Energy in GDP Simple circular flow cycle (5) • Using the expenditure approach, the contribution of energy to GDP is substantial. From where? • Public consumption (C) is related to the final energy demand used to fulfill C. • A country's public consumption can reach >60 percent. • The final energy can be electricity, fuel or other energy in the form of secondary energy. • State expenditure (G) is related to the state budget (APBN) sources, revenues, and expenditures. • Energy contribution through tax deposits imposed include: value-added tax, energy tax, and environmental tax. • Energy producing countries: state revenues are contributed from production sharing and producer taxes. • On the expenditure side: energy price subsidies give rise to energy subsidy allocations Energy in GDP Simple circular flow cycle (5) • Investment (I): gross domestic fixed capital formation which is private sector spending. • Capital goods from the energy sector are substantial: to increase economic activity, open up Employment, multiplier effect on other sectors. • For energy producing countries, exploration and production can attract investment for the country. and export components may contain energy. • Exports minus imports (X-M) of final product goods and services contain at least energy imports to meet domestic needs. • With the income approach: the largest share is contributed by the wage/salary income component of the production factor of labor, however, it is difficult to separate energy and nonenergy sector wages/salaries. Thank You!