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Transcript of Detecting Macroeconomics
What we have examined so far are part of
Demand = consumers
Supply = producers
Pe and Qe of a
good or service
Costs of a
- stands for?
What could be a
Stable price level
Low levels of unemployment
Equitable distribution of income
Low exchange rate fluctuation and stable BoP
find an article on a macroeconomic topic and make summary of it.
Will present their article
Measuring economic performance
The circular flow of income shows the main economic agents in the economy as well as the flows (good & services, factors of productions and money) among them.
Which are the 3 ways to measure economic performance?
The expenditure method
The expenditure method counts the total spending on final goods and services in a given year.
GDP = C + I + G + X -M where GDP: Gross Domestic Product, C: Consumption, I: Investment, G: Government spending, X: exports, M: imports
goods and services that have been
within a countries
If we know GDP we can calculate:
1. Gross National Product = GDP + income flows to our country from abroad (an example??)- income flows abroad from our country (an example??)= GDP + net property income from abroad
2. Net National Product = GNP - capital consumption
3. Per capita GDP = GDP / population
4. Real GDP = GDP adjusted for change in prices=
Using the formulas provided calculate GDP of country "x" using the expenditure method of you know that:
government spending on goods and services (G)=900, transfer payments=320, gross private domestic investment=410,income from foreign employment=750, taxation=340, C=950, IM=330, EX=150, net property income from abroad= -270, Savings (S)=60. 9prices in billions of $
Then calculate GNP/GNI
a. The GDP de
is an index that measures the changes in the prices across the economy (increase =in
, decrease = de
) in comparison with a base year. In the base year the GDP de
is always 100.
b. The percentage change between two consecutive deflators shows the inflation (or deflation or disinflation) rate between those years.
How do we measure percentage change?
c. The growth rate, shows how the GDP has changed between two consecutive years and is calculated as the percentage change between them.
: Read The usefulness and accuracy of GDP data and Going beyond GDP on youtube
Purchasing power parity
PPP is based in the law of one price, which states that an identical good in one country should cost the same in another and that the exchange rate should reflect that. Maley & Welker
The business cycle
a. What is a business cycle?
b. Which are the phases of a business cycle?
c. If the phases of the business cycle are always the same, what is different from one business cycle to another?
the use of GDP for making comparisons over time, between countries and making conclusions about standards of living.
alternative ways to measure standards of living
At the same time it shows that at any given time period the value of the output produced in an economy is equal to the total income generated in producing that output, which is equal to the expenditure made to purchase that output.
Answer the question (Learning outcome)
Explain how the size of the circular flow will change depending on the relative size of injections and leakages.
Calculate the real GDP for the following years
Nominal GDP $431 bil; index: 115
Nominal GDP $1.5 tril; GDP deflator: 106.5
Nominal GDP $900 bil; index: 97
(evaluating national income statistics)
Why do we study the business cycle?
By understanding the cycle we can
Reduce the intensity of expansions and contractions; this is aiming at making output gaps (producing within the PPF) as small as possible. This is done by flattening the business cycle. As a result in a lower pressure on prices (in expansions)and on unemployment (in contraction)
Increasing the steepness of the potential output line, hence achieving greater economic growth in the long run (p.234)