Samenvatting - Macroeconomics UA Social Economic Sciences.
Samenvatting met grafieken (getekend en van de cursus), notities erbij en tekst van de cursus zelf.
Output= measured by real gross domestic product (real gdp)
Business cycle= period between 2 peaks or 2 throughs
Short run = year to year movements primarily driven by demand
Medium run= economy tends to return to level of output determined by supply factors such as
capital stock,..
Long run= eco depends on its ability to innovate and introduce new tech,...
Exogeneous or external shocks= covid 2020
● Breaking the production chain= a negative supply shock
○ couldnt produce in lockdown
● Limit mobility of workers= negative supply shock
○ couldnt go to work
○ higher unemployment
● Fall in income= negative demand shock
○ there was no demand because people didnt have money
○ drop in consumption
● government intervention
If demand drops for example the gasoline demand then the price will also drop
Internal shocks= The crisis of 2008-2009
● Decline in the housing prices led to problems in financial sector
● Banks made losses because the prices of houses went down and get losses in the
mortgages that they gave out
● Banks held top little capital to absorb losses and they stopped lending
Chapter 2
The common currency a mistake?
benefits Costs
● SYmbolic importance ● common monetary policy
● no changes in exchange rates fpr ○ what if one country is in a
european firms or consumers recession and the other in
○ price transpharancy aboom
● Larger market (economies of scale= ● Can´t use your exchange rate
reducing costs and prices) anymore to devalue against other
currencies
Definitions
, - Aggregate output = the measure of aggregate output is GDP (gross domestic product)
- 1. Gdp = value of the final goods and services produced in the economy
during a given period
- intermediate goods are not counted in gdp,only final goods
- intermediate goods= good used in production of another good (e.g
steel for a car)
- 2. Gdp = sum of value added in the economy during a given period
- value added by a firm = value of its production minus the value of the
intermediate goods used in production
- 3. Gdp = sum of incomes in the economy during a given period
- AGGREGATE PRODUCTION= AGGREGATE INCOME
- Profit + labour = value added
Limits to gdp
● Doesnt measure everything
● Does not take households production in account
● Black economy difficult to register
● Effects on environment and psychological wellbeing is NOT take in accoun
● Negative increase gdp are taken in account ( e.g car accidents) but are bad for welfare
● IT IS A measure of economic activity and not welfare
REAL GDP NOMINAL GDP
● Sum of quantities of final goods times ● Sum of quantities of final goods
constant prices produced times their current prices
● use base year to construct prices] ○ nominal gdp increases
● gdp in terms of goods because these current prices
● Notation:Yt increases over time as most
production of goods increase
over time
● dollar gdp
● gdp in current dollars
● Notation : $Yt
Hedonic pricing = treats the goods as providing a collection of characteristics
Growth rates
● Quarter on quarter growth (QoQ)= GDp t- GDP (t-1)/ GDP(t-1) = GDPt/GDP(t-1) -1
Unemployment rate is a lagging indicator= it takes time for the current economic situation to
translate into the labour market
It will move after GDP
1. The unemployment rate = u
,=the number of people who do not have a job BUT are LOOKING for one
- ratio of people who are unemployed to the number of people in the labour force
- Employment rate = number of people who have a job
- Labor force= sum of unemployment and employment
- L= N (employment) + U (unemployment)
- u = U/L
- The participation rate = ratio of labor force to the total population of working age
(U/population)
- A high unemployment rate is often associated to a lower participation rate
Why unemployment rate important?
1. Because of its direct effect on the welfare of the unemployed, especially those
remaining unemployed for long periods of time.
2. It is a signal that the economy is not using its human resources efficiently
Very low unemployment can lso be a problem as the economy runs into labor shortages
2. The inflation rate
Inflation = sustained(if it lasts a few years) rise in prices - price level
Inflation rate is the rate at wich the price level increases
Deflation= a sustained decrease in the price level (negative inflation rate)
Hyperinflation = value of money becomes worthless
Shrinkflation= Make packaging smaller or less product for the same price.
The GDP deflator in year t (Pt) = nominal GDPt/ Real GDPt = $Yt/Yt
The rate of inflation=
The CPI= consumer price index = measure of the costs of living in countries themselves, each
country has own cpi and use HCIP for comparison
● if the cpi moves or goes up then the GDP will move the same
○ exception if for example prices of imported goods are increasing relative to the
price of domestic produced goods.
HICP= harmonised index of consumer prices between EU countries
ECB= determines monetwary policy for whole EU so HICP is necesairy— to keep CPI inflation
in check is central banks goal
, Pure inflation: Core inflation:
proportional increase in prices and wages. inflation rate when volatile components such
● Type of inflation causes only minor as energy and food products are excluded.
inconveniences as relative prices are for example oil prices
unaffected
● REAL WAGE (measures wage in
goods rather than dollars) would be
unaffected
● There is no such thing as pure
inflation
Why is inflation rate important?
1. Inflation affects income distribution when not all prices and wages rise proportionally
2. Inflation leads to distortions due to uncertainty, some prices that are fixed by law or by
regulation, and its interaction with taxation
a. income raises so you come in a new income bracket where you pay more tax
3. best inflation between 1-4%
Relationship between variables
Output , unemployment and the inflation rate : OKUNS LAW and the PHILIPS CURVE
● if growth goes down , unemployment goes up = okuns law
● THE more growth the less unemployment
● e.g Unemployment is 0 where growth is 0,5 %
Inflation rate vs unemployment rate = PHILIPS CURVE
- have a negative relationship
- Low unemployment , has higher inflation
- higher unempl, lower inflation
- A jobseeker doesnt have a lot of bargaining power when unemployment high
chapter 3
The goods market
When economists think about year to year movements (short run) they focus on interecations
among demand, production adn income.
● a change in demand causes a change in production, which may cause a change in
income and so on again in demand,..
THe composition of GDP
➢ Consumption C = goods and services purchased by consumers
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