BLch1to5 - What is macroeconomics Studies interaction...

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Macro/ch21What is macroeconomics?
Macro/ch22Difference with microeconomicsMicro studies supply and demandrelations in a specific market, production at the level of the firm, consumptionat the level of the consumer etc…Micro make use of relativeprices and not price levelsMicro is based on premises which are generally accepted while macro evolves overtime and its premises depend on schools of thought (e.g. Keynesian versus classical assumptions)
Macro/ch23The 3 main measures of macro performanceAggregate outputmeasures total production in the economy– Total Gross Domestic Product - GDP– GDP per capita (GDP/number of inhabitants)– Rate of growth of GDP or (GDP1-GDP0)/GDP0Unemployment rate measures proportion of people without jobsInflation ratemeasures the overall increase in prices
Macro/ch24
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Macro/ch25Calculating GDPExample:Mine extracts iron ore.Steel mill buys - $10 worth - of iron ore that it used to produce steel. It then sell the steel for $25 to a cutlery factory.Cutlery manufacturer transforms the steel - $25 worth - into a cutlery set sold directly to the consumer (at a factory store) for $35.
Macro/ch26
Including the value of the iron ore or of the steel produced would be double counting.Why?
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$10
Macro/ch28Income approachAnother interpretation of the value added:The value added is equal to all the production costs incurred by the firm - other than the purchase of material. so what is left?
Macro/ch29
Macro/ch210Income approachMineSteel millCutleryfactoryTotalRent$1$3$1$5Interest$2$8$2$12Wages$5$3$4$12Profit$2$1$3$6VA$10$15$10$35

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