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57 Cards in this Set

  • Front
  • Back
When macroeconomists study an economy they first look at what three variables?
Output (GDP)
Unemployment Rate
Inflation Rate
output
level of production of the economy as a whole, and its rate of growth.
unemployment rate
proportion of workers in the economy who are not employed AND LOOKING FOR JOBS.
inflation rate
rate at which the average price of the goods in the economy is increasing over time.
productivity
output per hour worked
trade export
imports exceeding exports
EU27
European Union of 27 countries under free trade agreement, and in 2002 making the euro.11 and then 4 more joined the euro.
whats the euro mean for europe?
1. symbolic, in the past many wars have divided europe, now they are trying to promote unity.
2. one less obstacle to trade without worrying about exchange rates continually changing.

But, the question of recession affecting only one country and a need for low interest brings up some problems.
Comparisons to china
One must use PPP, purchasing power parity, to compare China to the US. average output in china is $2100(1/20 of USA) but using the PPP it changes to $8000, a much clearer comparison.
Why no pre 1980s numbers for China? Or lacking unemployment?
Not reliable data. This happens when you deal with communists.
In poor countries unemployment rates are very sketchy because many workers may opt to stay in agriculture than be unemployed, but theres no way to know for sure.
Why is growth so high?
1. Reliable numbers? China is a communist country...
2. High capital and investment. 40-45% of output is investment. And then Many foreign firms are encouraged to come over and build factories, these are usually more productive than chinese firms, and thus a big boom in productivity is noticed. also Chinese firms learn from these foreign firms.

Also move from central planning to market economy happened in a slow, controlled transition unlike the slowdown experienced in other countries with similar transitions.
short run
from year to year
medium run
over a decade or so
the long run
over a half century or longer
aggregate
total
intermediate good
used up in the production
Does GDP include intermediate goods?
No, only final goods.
GDP from three views
production side, value of final goods and services during a given period.
also sum of value added in the economy during a given period.
income side , sum of incomes in the economy during a given period.
real gdp in chained dollars
using weights to reflect relativve prices and change over time.
nominal gdp
dollar gdp, or gdp in current dollars
real rdp
gdp in terms of goods
gdp in constant dollars
gdp adjusted for inflation
gdp in 2000 dollars (or year it is adjusted for)
negative gdp growth
recession
positive gdp growth
expansion
gdp per capita
ratio of real gdp to the population of the country.
CPS
Current Population survey
a survey of 50,000 households each month. classifies person as employed or unemployed and has been looking for a job in the past four weeks. In 2006 144.4 mil were employed, 7 mil were not.
7 / (7 + 144.4 ) = 4.6%
if nominal gdp increases faster than real gdp...
increase in prices (inflation)
gdp deflator
nominal gdp / real gdp
to measure the cost of living or the price of consumption...
the consumer price index, CPI, is analyzed by macroeconomists.
C
consumption - goods and services purchased by consumers.
I
investment, sometimes called fixed investment to distinguish from inventory investment. sum of nonresidential investment, purchase by firms of new plants or new machines and residential investment, the purchase by ppeople of new houses and apartments.
G
government spending. purchases of goods and services by federal, state and local governments. office equipment, airplanes, etc.
G does not include...
governement transfers, such as medicare or social security payments. nor interest payments on gov't debt.
IM
imports
X
exports
Net exports
X-IM
trade balance=?
also called trade balance
trade surplus
exports > imports
trade deficit
exports < imports
inventory investment
Good produced - Goods sold.
typically small.
when production exceeds sales and firms accumulate inventories....
inventory investment is positive.
production is less than sales and firms inventories fall
inventory investment is negative.
Z
demand for goods
Z = C + I + G + X - IM
behavioral equation
indicates some sort of behavior. i.e. consumption
C = C (Yd)
+
As disposable income goes up, so does consumption.
c1 =
propsensity to consume
exogenous
variables not explained within the model.
endogenous
variables explained within the model
autonomous spending
[c0 + I + G - c1T]
demand for goods that does not depend on output.
very likely to be positive.
consumer confidence index
5000 households asked how confident they are in future and current economic conditions, from job opportunities to expected income.
forecast error
difference between actual value of GDP and GDP forecasted 1 quarter earlier.
publlic saving
is equal to taxes.
private saving
S = I + G - T
investment
I = S + (T - G)
1-c1
propensity to save
paradox of saving
as people save more,, the result is both a decline in output and unchanged saving.
in the short run, paradox of saving comes into play and...
leads to recession
in the medium and long run saving leads to...
higher saving and income.
high powered money
central bank money.
because increases in H can lead to more than one for one increases in the overall money. because of the money multiplier.