EC 140_Lecture_1

EC 140_Lecture_1 - EC140 Macroeconomics...

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    EC 140 Macroeconomics What Macroeconomics is all  about Ch. 19
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Macroeconomics   studies broad   aggregates in economy such as: Total output Economic Growth Unemployment and how government policy effects  these aggregates.
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Growth versus Fluctuations Growth    - economics growth is focused on  long-run  changes in  variables especially national income  Fluctuations    -  emphasis on  short-run  changes in output,   Main focus is to define and study the behaviour of economic  variables  =    values that change over time Variables are usually either: Cross-section --  different observations of one variable  taken at the same time Time-series --  observations of one variable at different  times
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Key Macroeconomic Variables National Income  --  GDP Exchange Rates  --  value of Canadian  dollar Inflation  -- how average prices change Unemployment  -- resources that are  wasted Interest rates  -- cost of borrowing
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Index Numbers Index numbers are used to measure relative or average  changes of variables over time Commonly used for variables such as the price level or  industrial output We choose a base year for comparison and other years are  given relative to base year value of index in year t =  absolute value in year t divided by  absolute value in base year  If we want per cents,  multiply index by 100%
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Example e.g nominal national income in Canada  was $833 b. in 1997 and $878 b. in  1998.  Taking 1997 as the base year,   what is the index number for 1998? A.    104.5 B     105.4 C     105.1  D     105.3
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Key idea is that production of goods and services also  generates income  By definition,  national product or output is equal to national income since  value of production must belong to someone who has a claim  on that value in wages or profits or rent National Income  =  total value of production and/or value of  income claims generated by the production services to get total output National income is often measured by Gross Domestic Product  (GDP)  (details in next chapter)
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Nominal vs Real GDP Since we add together the value of all products and services,  they are  influenced by price So we need to distinguish between nominal (or money) GDP  and real  GDP Nominal Nat Income add together value of all production when valued at current price physical quantities multiplied by current prices current-dollar national income
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EC 140_Lecture_1 - EC140 Macroeconomics...

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