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57 Cards in this Set
- Front
- Back
When macroeconomists study an economy they first look at what three variables?
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Output (GDP)
Unemployment Rate Inflation Rate |
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output
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level of production of the economy as a whole, and its rate of growth.
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unemployment rate
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proportion of workers in the economy who are not employed AND LOOKING FOR JOBS.
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inflation rate
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rate at which the average price of the goods in the economy is increasing over time.
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productivity
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output per hour worked
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trade export
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imports exceeding exports
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EU27
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European Union of 27 countries under free trade agreement, and in 2002 making the euro.11 and then 4 more joined the euro.
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whats the euro mean for europe?
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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. |
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Comparisons to china
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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.
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Why no pre 1980s numbers for China? Or lacking unemployment?
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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. |
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Why is growth so high?
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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. |
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short run
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from year to year
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medium run
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over a decade or so
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the long run
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over a half century or longer
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aggregate
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total
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intermediate good
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used up in the production
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Does GDP include intermediate goods?
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No, only final goods.
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GDP from three views
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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. |
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real gdp in chained dollars
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using weights to reflect relativve prices and change over time.
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nominal gdp
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dollar gdp, or gdp in current dollars
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real rdp
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gdp in terms of goods
gdp in constant dollars gdp adjusted for inflation gdp in 2000 dollars (or year it is adjusted for) |
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negative gdp growth
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recession
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positive gdp growth
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expansion
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gdp per capita
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ratio of real gdp to the population of the country.
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CPS
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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% |
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if nominal gdp increases faster than real gdp...
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increase in prices (inflation)
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gdp deflator
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nominal gdp / real gdp
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to measure the cost of living or the price of consumption...
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the consumer price index, CPI, is analyzed by macroeconomists.
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C
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consumption - goods and services purchased by consumers.
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I
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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.
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G
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government spending. purchases of goods and services by federal, state and local governments. office equipment, airplanes, etc.
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G does not include...
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governement transfers, such as medicare or social security payments. nor interest payments on gov't debt.
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IM
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imports
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X
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exports
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Net exports
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X-IM
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trade balance=?
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also called trade balance
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trade surplus
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exports > imports
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trade deficit
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exports < imports
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inventory investment
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Good produced - Goods sold.
typically small. |
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when production exceeds sales and firms accumulate inventories....
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inventory investment is positive.
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production is less than sales and firms inventories fall
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inventory investment is negative.
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Z
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demand for goods
Z = C + I + G + X - IM |
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behavioral equation
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indicates some sort of behavior. i.e. consumption
C = C (Yd) + As disposable income goes up, so does consumption. |
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c1 =
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propsensity to consume
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exogenous
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variables not explained within the model.
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endogenous
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variables explained within the model
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autonomous spending
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[c0 + I + G - c1T]
demand for goods that does not depend on output. very likely to be positive. |
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consumer confidence index
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5000 households asked how confident they are in future and current economic conditions, from job opportunities to expected income.
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forecast error
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difference between actual value of GDP and GDP forecasted 1 quarter earlier.
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publlic saving
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is equal to taxes.
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private saving
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S = I + G - T
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investment
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I = S + (T - G)
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1-c1
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propensity to save
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paradox of saving
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as people save more,, the result is both a decline in output and unchanged saving.
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in the short run, paradox of saving comes into play and...
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leads to recession
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in the medium and long run saving leads to...
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higher saving and income.
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high powered money
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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. |