Macro

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Samenvatting - Macro

  • 1 A tour of the world

  • Macroeconomics
    A branch of economics that deals with performance, structure, behaviour and decision-making of an economy as a whole.
  • What are the 3 key variables in macroeconomics?
    1. Output
    2. Unemployment Rate
    3. Inflation Rate
  • Output
    The level of production of the economy and its growth rate (GDP)
  • Unemployment rate
    Proportion of workers in an economy who do not work but are actively looking for a job
  • Inflation rate
    The rate at which average prices are increasing over time
  • What are 3 important things to know about EU27?
    1. Average annual output growth was lower from 2001-2011 than the previous decade
    2. The 2009 recession resulted in low output rate and high unemployment rate
    3. Inflation decreased from 1.9% to 1%
  • What are the 3 issues that dominate the agenda of european macroeconomists?
    1. High unemployment
    2. Growth of income per person (or per capita)
    3. Common currency
  • What are the economic advantages of a common currency (e.g. Euro)?
    1. symbolic importance
    2. No more changes in relative prices when travelling
    3. Large economic world zone
  • What are the economic costs/disadvantages of a common currency (e.g. Euro)?
    1. common monetary policy 
    2. same interest rates
  • What were the 4 reasons for the economic slowdown in 2007-2011?
    1. Increase oil price
    2. US house prices booming and afterwards plummeting
    3. Fall in the stock market
    4. A constraint of credit
  • What are the BRIICS countries?
    Brazil, Russia, India, Indonesia, China & South Africa
  • What are two reasons for china's enormous output growth rate?
    1. High accumulation of capital
    2. Fast technological progress due to foreign firms producing in China and joint ventures between China and foreign countries
  • 2 A tour of the book

  • What are the 3 definitions of GDP, the measure of aggregate output?
    1. Value of final goods and services 
    2. The sum of value added (value of its production - value of intermediate goods)
    3. Sum of incomes
  • Nominal GDP
    Summation of the quantities of the goods produced multiplied by their current prices
  • Real GDP
    Summation of final goods multiplied by a common/constant price
  • Real GDP per capita
    Ratio of real GDP to the population of a country, which gives us the average standard of living of the country
  • GDP growth
    The rate of growth of real GDP, (old-new)/old.
    Expansion: positive GDP growth
    Recession: negative GDP growth
  • Employment (N)
    The number of people who have a job
  • Unemployment (U)
    The number of people who do not have a job, but are looking for one
  • Labour force (L)
    The sum of employment and unemployment
    L = N + U
  • Unemployment rate
    unemployed/labour force
  • Why is constructing unemployment hard?
    Because people only register as unemployment when they have a benefit to do so
  • Discouraged workers
    Unemployed people that give up looking for a job and are no longer counted as unemployed
  • Particpation rate
    Ratio of the labour force to the total population of working age (18-65)
  • Why do we care about unemployment?
    1. It directly effects the welfare of the unemployed (financially and psychologically) 
    2. Provides a signal that the economy isn't using its resources efficiently
    - recession (high U) or over-utilising and labor shortage (low U)
  • Inflation
    An increase in the average level of prices
  • Deflation
    A sustatined decline in the average price level
  • Why do we care about inflation?
    - Inflation affects income distribution, because wages doesn't grow proportionally
    - Inflation leads to distortions and uncertainty in investment decisions 
    -> best rate between 1% and 4%
  • What are 2 price indexes to measure the price level?
    1. GDP deflator (Pt) = Nominal GDP/Real GDP
    2. Consumer Price index = average price of the final goods consumed in the economy
  • Why aren't the GDP and CPI the same?
    1) Some of the products produced are bought by the government, other firms or foreigners
    2. Some consumed products are imported
  • What are the differences between the short, medium and long run in determining aggregate output?
    1. Short run (2-3 yrs): demand factors (e.g. confidence & interest rate)
    2. medium run (a decade): supply factors (level of technology, capital stock & size of labor force)
    3. Long run (a few decades): institutional factors (education, savings, quality of the government)
  • Hedonic pricing
    An approach to calculating real GDP that treats goods as providing a collection of characteristics each with an implicit price
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Voorbeelden van vragen in deze samenvatting

Macroeconomics
1
What are the 3 key variables in macroeconomics?
1
Output
1
Unemployment rate
1
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