Lecture 1 - 9/28/2009 INTRODUCTION EC205 FALL2009 ALPER 1...

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9/28/2009 1 INTRODUCTION EC205 FALL 2009 ALPER 1 INTRODUCTION y What is macroeconomics? y Circular Flow y Measurement y Measures of a Nation’s Income y GDP y Expenditure Approach–The Components of GDP y Income Approach (Factor Payments Approach) y Value Added Approach y GNP, NNP, National Income, Personal Income, Disposable Personal Income y Real vs. Nominal GDP y Problems with Real GDP Calculations y Measures of Aggregate Prices y GDP Deflator y CPI y Measuring the Unemployment Rate y Okun’s Law y Trends and Seasonality EC205 FALL 2009 ALPER 2 What is Macroeconomics? y Macroeconomics y The study of the economy as a whole y The study of output, unemployment & inflation y Appreciate the importance of macro y Read the newspapers y Listen to the news … macroeconomics is everywhere! y The state of the economy affects us all y Everyday life, incomes, future prospects, etc. y Politics EC205 FALL 2009 ALPER 3
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9/28/2009 2 Methodology & Measurement y Methodology of Macroeconomics y No experimentation! y Collect data & formulate relationships y Construct theories/models trying to explain these relationships y Forecast or simulate the future y .. Not to good in doing so! y Formulate policies accordingly y Measurement y The Big Question: How do we measure income, output, inflation, unemployment? EC205 FALL 2009 ALPER 4 Measuring a Nation’s Income y The difference between income & wealth: y Stock vs. flow y Stock: Quantity measured at a given point in time y Flow: Quantity measured per unit of time Flow Stock Income Wealth # of people losing their jobs Unemployed Investment Capital Deficit Debt EC205 FALL 2009 ALPER 5 How to measure income? The Circular Flow y Basic idea: Spending is income EC205 FALL 2009 ALPER 6
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9/28/2009 3 Gross Domestic Product (GDP) y GDP: y Market value of all final goods and services produced within a country in a given period of time e.g. 2001 2008 GDP TR ~$195 bn (pop. 65m) ~$733 bn (pop. 71m) GDP US ~$10,333 bn (pop. 286m) ~$14,097 bn (pop. 306m) GDP per person: 2001 2008 TR 2,995 10,314 US 36,129 46,068 EC205 FALL 2009 ALPER 7 3 Approaches to Calculating GDP 1. Final Goods (Expenditure) Approach 2. Income (Factor Payments) Approach 3. Value Added Approach EC205 FALL 2009 ALPER 8 1. Expenditure Approach y C: Private consumption Expenditures M X G I C Q P GDP Y N i i i + + + = = = = 1 y I: Private Investment (Gross Fixed Capital Formation) y G: Government Expenditures y GC y GI X: Exports of Goods and Services M: Imports of Goods and Services EC205 FALL 2009 ALPER 9
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9/28/2009 4 The Components of GDP y C: goods and services bought by the households y Durable goods y Non durable goods Si y Services y I: Private Gross fixed capital formation y Business plant & equipment y Residential construction y Change in business inventories EC205 FALL 2009 ALPER 10 The Components of GDP y Questions: y When you buy 100 shares of POA Ş , is this an “investment”?
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This note was uploaded on 12/27/2009 for the course ECONOMICS ec 205.1 taught by Professor Emrealper during the Spring '09 term at Boğaziçi University.

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Lecture 1 - 9/28/2009 INTRODUCTION EC205 FALL2009 ALPER 1...

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