Econ 130: Macroeconomics & National Accounts (på norsk)

• Econ 130 Makroøkonomi V2025 Forelesningsnotat 1 covers introduction and national accounts
• Kjell Erik Lommerud is the lectures for this module

Practical Information

• Lectures are held Tuesdays 14:15-16:00 in Egget
• Lectures are held Thursdays 10:15-12:00 in Egget
• Steinar Holden's "Makroøkonomi 2016" is a recommended book; however, some data may be outdated
• The lectures plan to start at chapter 1 and continue to chapter 16

About the Lectures

• There will be more lectures than required
• Some cancellations are possible
• Video notes will be available
• Press releases will be used to connect the subject to real-world situations
• There will be guest lectures
• Open book exams may be considered

Moralisme

• Memory is said to reside in the pencil
• Distributed PowerPoints are not meant to be full lecture notes
• PowerPoints are made available so students can take them and take notes; rewriting is recommended
• There are no actual prior knowledge requirements

What is Macro?

• Macro is large
• Micro is small
• There are relationships between "aggregate sizes", interest rates, inflation, unemployment and exchange rates
• Considered is the entirety of the economy - not individual markets

Macro Questions

• Is interest rate policy too brutal?
• Why is the exchange rate so weak?
• Is the Russian war economy doing well or badly?
• If Trump pursues a policy with a higher debt ceiling in the USA, will it go well?
• Should central banks be independent?

Microfundament?

• It may be thought that if the analysis of individual markets are put together, a model of the "whole" is obtained
• Macro has traditionally been allowed to be a little "rougher" in assumptions than micro
• Lower grade macro vs research macro: Research macro typically includes optimal savings and time dimension, lower grade macro takes easier routes
• Lower-level macros still provide a very good basis for understanding the macroeconomic debate

Short-Term Macro vs Long-Term Macro

• Long-term macro focuses on growth and development and why some countries are much richer than others and the optimal developing strategy
• Medium-term macro considers structural conditions, why unemployment is so high in the Mediterranean and whether low productivity growth in Europe is worrying
• Short-term macro focuses on stabilization policy and how to use interest rate setting and fiscal budgets to stabilize employment and inflation

Stabilization Policy

• The course involves stabilization policies
• The course has a Keynesian twist and contemplates if free markets solve stabilization problems themselves
• Originally, Keynesianism stated that the state must regulate economic activity
• This is not an advertisement for a particular type of macro policy, but to understand the actual macro policies that are pursued in many countries

Key Figures: GDP

• Gross domestic product is the most common measure of society's value creation; it’s imperfect but manageable
• GDP in Norway (roughly, 2021): 4000 billion NOK; the mainland is over 3000 billion NOK with 1.6 million per employee, or 0.8 million per inhabitant
• This is world class and due to oil
• Further data is found on Statistics Norway's (SSB) website under "Macroeconomic key figures."

Key Figures: GDP PPP-Adjusted

• For GDP adjusted for purchasing power parity (PPP), Luxembourg and Ireland rank higher
• Norway ranks third after adjusting for price levels

Fastlandsnorge

• Mainland Norway accounts for approximately 85% of Norway's GDP

Annual Growth

• Annual quarterly growth indicates a trend towards lower growth

Facts about BNP

• Relevant Wikipedia links:
  • List of countries by GDP
  • GDP per capita in PPP (fn.no)
  • World's 10 fastest growing economies
  • Economic growth

Is it one of the richest countries in the world? Some critical remarks

• Adjusting for high prices in Norway still indicates it is very rich
• There is a large export surplus, as the oil money is partly saved
• Private consumption is large
• It is questioned whether the public sector is worth the money
• Professionalizing the health sector in Norway, does that make us richer?

Export Surplus

• The export surplus was decreasing before 2021

Important Measurement Problems With GDP

• Public administration
• Work outside the market, such as women's or undocumented labor
• Tapping of non-renewable resources or consumption of environmental goods
• Changes in definitions affect the level of GDP and the growth
• It is important to identify changes in elements that are not included, such as the increase in the number of women in employment

Happiness

• Bhutan determined that BNP is not reflective of whether a society is good or lacking and that "interpersonal relations" appear in the same category as "environmental goods."
• Bruttonasjonallykke?
• Bhutan is often considered the world's happiest country
• Measuring happiness is dependent on the method
• It questions if "Trump states" are happier than Scandinavia

"Ecosirken"

• "The three main markets": An insight: Don't double count when calculating GDP
  • Product market, financial market, and labor market
• Economic sizes can be measured in either the real economy or the financial economy; avoid confusion and double counting
• In Fig 1.12 an easier visualization of the "ecosirken" is displayed

More About BNP

• Production – product input = gross product
• Gross national product is the sum of gross product in all the country's companies/businesses
• Production in Norway is not performed by "Norwegians" - but within its borders

Value Creation vs Income? Different Concepts (2023 Billion NOK)

• Gross National Product (BNP) = 5129
• Net National Product (NNP)= GDP - Depreciation of Capital (5129-903 = 4226)
• Gross national income (BNI)= GDP + net income from wages and property from abroad (5129 + 726 – 489 = 5305)
• Net National Income (NNI) = BNI - Depreciation of Capital (5305 – 903 = 4462)
• Disposable Income (R) = NNI + net transfers from abroad (4462 + 94 – 169 = 4388)

Comments

• NNP is a better concept for value creation than GDP, it is more difficult to measure, so GDP is still often used to measure other goals
• GDP/NNP measures value creation domestically, whereas BNI is aimed at measuring "Norwegians'" income
• Depending on its relevance, the composition can be important to know

Is GDP A Good Income Measure? NNP

• BNP – NNP - National Income – Disposable Income
• NNP corrects GDP for replacement investments (capital consumption)
• NNP = BNP – D
• NNP is a more accurate measure; however, it is hard to establish

National Income

• NNP + Net Financial Income = National Income
• Now, Norway has, although not a considerable amount, positive net financial income

Disposable Income

• Disposable income = National income + Net transfers
• Transfers are gifts from states and private people
• Foreign aid + Remittance home from migrants
• Aid in Norway is ~1% GDP; not a significant correction when compared to other measurement problems