Introduction to Macroeconomics PDF

Introduction to Macroeconomics Agenda 10/4/24 1. Unit 2: Introduction to Indicators 2. Homework Tonight: Create A Fred Account Upcoming Due Dates Honors Application Due tonight. Problem Set 1 is due Oct 21th. Problem Set 2 is due Oct 29th Fol...

Introduction to Macroeconomics Agenda 10/4/24 1. Unit 2: Introduction to Indicators 2. Homework Tonight: Create A Fred Account Upcoming Due Dates Honors Application Due tonight. Problem Set 1 is due Oct 21th. Problem Set 2 is due Oct 29th Following Unit Test is Nov 4th. $25,440,000,000,000 Macroeconomics Macroeconomics is the branch of economics concerned with the overall state of the economy. In particular, it seeks both to understand and to shape the business cycle, or the cyclical fluctuations in economic output. Macroeconomics The first goal of macroeconomic policy: economic growth (or an increase in the total/aggregate output of an economy) The second goal of macroeconomic policy: full employment (or, getting unemployment to a minimum) The third goal of macroeconomic policy: price stability (avoiding excessive inflation or deflation) A piece of data used to interpret past, present, and future economic trends GDP! Unemployment rate! Inflation rate!  Part One: Principles of Macroeconomics Macro Macro-unit (GDP, unemployment, inflation, fiscal policy) Test: Nov 4th Part Two: Money and Finance (Banking system, the Federal Reserve, interest rates) Test: Early December TBD Part Three: Global Trade and Development (Productivity, foreign exchange, trade policy) Test: January TBD The Circular Flow Model Firms Households Products Market Factors Market  World Products Market Government Factors Market Financial Sector Gross Domestic Product The total monetary value of all final goods and services produced within (GDP) one country over a specified time frame. Back to the Circular Flow Model In the simplified circular flow model, where is GDP represented? Firms Households Three Approaches to Calculating GDP 1. Expenditures approach: total aggregate spending, in dollar value, on all final goods produced in the economy 2. Income approach: add up the income earned by factors of production 3. Value-added approach: add up the value of all domestically produced final goods and services Two crucial things that GDP excludes -Intermediate goods (avoid double-counting) -Transfer payments (gifts, grants, etc. that are not exchanged for goods or services) I. Expenditures approach GDP = C + I + G + (X - IM) C - consumption I - investment G - government purchases X - exports IM - imports GDP = C + I + G + (X - IM) C - consumer spending -fairly straight-forward: total of all consumer spending on final, new goods (used goods are not included, nor are any illegal transactions) I - investment spending -spending on new productive capital and changes to inventory (any spending that is intended to increase future sales) GDP = C + I + G + (X - IM) G - government spending -all the goods and services that the government purchases (does not include any direct transfers) X - IM - net exports (or exports minus imports)  Is it counted as GDP = C + I + G + (X - IM) GDP? 1. A monthly check received by an economics student who has been granted a government scholarship 2. A farmer’s purchase of a new tractor 3. A plumber’s purchase of a two-year-old used truck 4. Cashing a U.S. bond 5. The services of a barber cutting his own hair 6. A Social Security check from the government to a retired store clerk 7. Chevrolet’s purchase of tires to put on the cars they are producing 8. The government’s purchase of a new submarine for the navy 9. Payment to a barber for a haircut 10. Income received from the sale of Nike stock  Is it counted as GDP = C + I + G + (X - IM) GDP? 1. A monthly check received by an economics student who has been granted a government scholarship NO--transfer payment 2. A farmer’s purchase of a new tractor YES--investment (I) 3. A plumber’s purchase of a two-year-old used truck NO--used good 4. Cashing a U.S. bond NO--financial asset 5. The services of a barber cutting his own hair NO--not a sale 6. A Social Security check from the government to a retired store clerk NO 7. Chevrolet’s purchase of tires to put on the cars they are producing NO-intermediate good 8. The government’s purchase of a new submarine for the navy YES--gov’t 9. Payment to a barber for a haircut YES--consumer spending on services 10. Income received from the sale of Nike stock NO--financial asset