notes_macro_ch1 - MACROECONOMICS Georgios Karras*...

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Macro Notes © G.Karras 2010 MACROECONOMICS Georgios Karras* University of Illinois at Chicago * Professor of Economics; Mailing Address: Department of Economics, University of Illinois at Chicago, 601 S. Morgan St., Chicago, IL 60607-7121; e-mail: gkarras@uic.edu . Lecture Draft Do not cite without permission
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Macro Notes © G.Karras 2010, p.2 ││ 1 ││ MACROECONOMIC ISSUES 1.1. Inflation The Price Level ( P ): the average level of prices of goods and services Inflation Rate ( π ): the growth rate of the Price Level 1 1 = t t t t P P P π
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Macro Notes © G.Karras 2010, p.3 Example #1 (year ago) : 8 . 109 3 : 2009 = P 1 . 109 3 : 2008 = P Æ % 64 . 0 0064 . 0 1 . 109 1 . 109 8 . 109 3 : 2008 3 : 2008 3 : 2009 3 : 2009 = = = P P P π Example #2 (quarter ago, annual rate) : 8 . 109 3 : 2009 = P 7 . 109 2 : 2009 = P Æ % 36 . 0 0036 . 0 4 7 . 109 7 . 109 8 . 109 3 : 2009 = × =
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Macro Notes © G.Karras 2010, p.4 Increasing Prices Inflation: 0 1 > > ↑⇔ t t t t P P P π Decreasing Prices Deflation : 0 1 < < ↓⇔ t t t t P P P Steady Prices Price Stability: 0 1 t t t P P Note: Deflation (Falling Prices) Disinflation (Falling Inflation) t t P
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Macro Notes © G.Karras 2010, p.5
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Macro Notes © G.Karras 2010, p.6 1.2. GDP: G ross D omestic P roduct ( Y ) Real GDP : the volume of goods and services produced by the economy within a year Î [Quantities] Nominal GDP : the monetary value of goods and services produced by the economy within a year Î [Quantities x Prices] P GDP GDP × = Real Nominal P GDP GDP Nominal Real =
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Macro Notes © G.Karras 2010, p.7
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This note was uploaded on 04/08/2010 for the course ECON econ218 taught by Professor Tom during the Spring '10 term at University of Illinois, Urbana Champaign.

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notes_macro_ch1 - MACROECONOMICS Georgios Karras*...

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