Third Unit - Unit 3: Macro Economics: chapters 15,16,20,17,...

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Unit 3: Macro Economics: chapters 15,16,20,17, 23 Macro Essentials A) Macro a. What’s it about? a.i. Data a.i.1. Income a.i.2. Inflation a.i.3. Unemployment >>> What does this data tell us? a.i.3.a. Macro economy in long-run vs. short run a.i.3.a.i. Economic Growth (long-run) a.i.3.a.ii. Business Cycle (short-run) a.i.3.b. Macro policies to promote stabilization and growth a.i.3.b.i. Fiscal taxation and spending a.i.3.b.ii. Monetary federal reserve prints/ regulates amount of money B) Measuring National Income a. Circular flow diagram a.i. Someone’s income is another’s expenditure b. GDP b.i. GDP market value of all final goods and services produced in a given period of time. b.ii. Intermediate goods do not count as GDP. Why? b.ii.1. The price of the intermediate good is reflected in the price of the final good sold b.iii. GDP per capita= GDP/ population b.iii.1. Definition Income/ Expenditure of the average person in the economy b.iv. Components of GDP (C+I+G+N) b.iv.1. Consumption b.iv.1.a. Spending by households on goods and services with the exception of purchase of new housing b.iv.1.b. Drives the GDP (2/3 of 2008 GDP) b.iv.2. Investment b.iv.2.a. Spending on capital equipment, inventories, and structures including household purchases of new housing b.iv.2.b. Rising inventories is a double edged sword. Contributes to GDP, but too much investment could lead to companies halting production due to having too much in inventory b.iv.3. Government Spending b.iv.3.a. Spending on goods and services by local, state, and federal governments b.iv.4. Net Exports
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Spending on domestically produced goods by foreigners minus spending on foreign goods by domestic residents Example: US Economy 2008 Total in Billions Per Person (in dollars) Percentage of Total GDP,Y 14,264 47,000 100% Consumption, C 10, 058 33,105 70.5% Investment, I 1,994 6, 563 14% Government Purchases, G 2,882 20.2% Net Exports -669 -4.7% b.v. Real Vs. Nominal GPD b.v.1. Nominal GDP the production of goods and services valued at current prices b.v.1.a. Reflects change in quantity and prices of the goods being produced b.v.2. Real GDP the production of goods and services valued at constant or base year prices (adjusted for inflation) b.v.3. Nominal and Real GDPs are always the same in the base year GDP deflator (variable weight price index) Definition a measure of the price level only(not quantities) calculated as the ratio of nominal GDP to real GDP multiplied by 100 (Nominal GDP/Real GDP)X100 Growth rate formula: ((X current)- (X last year))/(X last year) C) Measuring the cost of living a. Consumer Price Index A measure of the overall costs of the goods and services bought by a typical consumer a.i. How is it computed? a.i.1.
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This note was uploaded on 03/25/2012 for the course ECON 190 taught by Professor Belasen during the Fall '08 term at Saint Louis.

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Third Unit - Unit 3: Macro Economics: chapters 15,16,20,17,...

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