Mankiw Macroecon 5th edition Notes

Mankiw Macroecon 5th edition Notes - Notes from Mankiw's...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Notes from Mankiw's Macroeconomics 5th edition (2001) Some parts of this document were taken directly from the book. All rights reserved. # DEFINITIONS ------------- * GDP = PIB = C + I + G + NX where C = consumption I = investment G = gov expenditures NX = net exports real GDP = GDP at constant prices GNP = GDP + factor payments from abroad - factor payments to abroad :: total income earned by residents of a nation GNI = GNP :: GNI calculates the GNP by summing income, not output value GDP deflator = nominal GDP / real GDP :: an indicator of what's happening to the level of prices NNP = GNP - depreciation Notes: - There is 'investment' only when new goods are added to the economy, like when building a house from scratch. - Used goods are not counted toward the GDP: they are not an addition to the economy. - When inventories get bigger even if the goods are not sold, it is still counted toward the GDP. - For intermediary goods, we only count the added value at each step, or equivalently, the value of the final good. - Some goods which aren't traded need to be imputed a value, such as the rent homeowners would pay themselves. * CPI CPI is an indicator of the level of prices, using the change in price of a basket of goods. Different from the GDP deflator for 3 reasons: - the GDP deflator reflects the level of all prices, not just those bought by consumers - the GDP deflator includes only domestic goods, the change in price of imports is not reflected - the CPI is calculated with a fixed set of goods, substitution from one product to another or new products are not accounted for * Unemployment rate = # of unemployed / labor force * 100 where labor force is all the workers and those looking for a job or on a temporary layoff. Discouraged workers are not counted, neither are retirees and full-time students. Okun's law :: the unemployment is negatively related to the GDP growth Percentage Change in Real GDP = 3% - 2*Change in the Unemployment Rate # GENERAL EQUILIBRIUM MODEL --------------------------- This is clasical/neoclassical theory, aka the general equilibrium model The production depends on the quantity of the factors of production and on
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
productivity (the ability to go from input to output). MV = PT or MV = PY where M = money V = velocity P = typical price T = # of transactions (PT) = the amount of money that changes hands Y = C + I + G Assumptions: - money is neutral, does not affect real variables - velocity of money is constant - long run :: prices are flexible - capital, labor and thus ouput, is fixed - the competitive firm is a price taker, it takes the price of inputs, outputs, and wages as given. It will then choose the quantity of each to maximize profits - savings = Y - C - G = I - the role of money is ignored - no trade with other countries - full employment - capital stock and labor force are fixed - ignored the role of short-tun sticky prices Consequences: - to maximize profits, the competitive firm must hire until the marginal product of labor equals the real wage
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/03/2009 for the course ECON 206 taught by Professor Aravantanos during the Spring '08 term at CUNY Queens.

Page1 / 11

Mankiw Macroecon 5th edition Notes - Notes from Mankiw's...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online