MACROECONOMICS STUDY GUIDE Latest Update 2020
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Macroeconomics Notes
GDP
· Definitions:
o 1) The market value of all final goods and services produced in an economy in a given period of time. This is the TOTAL EXPENIDTURE approach to GDP.
o 2) The sum of all incomes meaning wages, rents and profits generated in an economy in a given period of time. This is the TOTAL INCOME approach to GDP.
o 3) The sum of the value added at each stage of production for a given economy.
· Y = C + I+ G + (X-M)
o GDP = Consumption + Investments + Government expenditures + net exports
§ Consumption includes all private expenditures
§ Investment includes inventories, whatever a firm spends on equipment or machinery. It also includes structures, factories, or plants.
· Exports affect the GDP but imports do not.
· To calculate the GDP:
o Add up all the goods from a given year.
o Example: 10 apples are produced for $1 each in 2010. 12 apples are produced for $2 each in 2011.
o Nominal GDP in 2010 (Does not account for inflation): $10
o Nominal GDP in 2011: $24
o Real GDP in 2010: $10 – same for the base year.
o Real GDP in 2011: To calculate, use the same prices as the base year. $12
· To calculate the growth rate:
o 2011-2010/2010 x 100%
o So: 12-10/10 = .2 x100% = 20% growth rate
· To calculate the GDP deflator:
o The GDP deflator gets rid of the price effect in the nominal GDP. It helps to measure the production of a country. It calculates the inflation rate
o Nominal GDP/Real GDP for a given year.
o 2010: $10/$10 x 100 = 100
o 2011: $24/$12 x 100 = 200
· To calculate the CPI:
o Calculate the cost of the basket.
o Same numbers of items, but use the prices for the individual items.
o If the basket costs $8 in 2010 and $14 in 2011:
o Then divide the price of the basket.
§ 2010: $8/$8 x 100 = 100
§ 2011: $14/$8 x 100 = 175
o To find the changes
§ 175-100/100 x 100 = 75% change
The CPI and the GDP deflator both measure the cost of living.
Biases:
· Substitution bias – change in price of fruit (different prices for different fruits)
· Variety bias – overestimation of cost of living
· Quality bias
Productivity:
· GDP = Technology (Physical capital, human capital, number of workers, natural sources)
· F has constant returns to scale.
[Solved] MACROECONOMICS STUDY GUIDE Latest Update 2020
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Intermediate Macroeconomic Theory
Intermediate Macroeconomics
Test Bank Principles of Macroeconomics, 8th Canadian Edition Mankiw A+
Test Bank Macroeconomics, 9th Edition Andrew B. Abel A+
Test Bank Macroeconomics, 7th Edition R. Glenn Hubbard A+
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