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Summary macroeconomics for business

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Instelling
Hogeschool Van Amsterdam (HvA)

Boek
Economics

Summary for the course of Macroeconomics for Business year 2 at the Hogeschool van Amsterdam. Covers chapters 20,21,22,24,29,30 of the book Economics, tenth European edition, ISBN 978-1-292-14785-7

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Heel boek samengevat? Nee
Wat is er van het boek samengevat? Chapters 20,21,22,24 and part of 29,30
Geupload op 11 januari 2022
Bestand laatst geupdate op 20 januari 2022
Aantal pagina's 11
Geschreven in 2021/2022
Type Samenvatting

macroeconomics
economics tenth edition
gdp
summary macroeconomics for business
hogeschool van amsterdam
international macroeconomics for business

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Macroeconomics = is about entire economies and nations.
Economic growth = is the expansion of the economy’s production possibilities, assessing the
economy’s overall performance and health. Is measured by the increase in real GDP.
Determinants of productivity = physical capital (land, building), human cap (teacher knowledge),
natural cap (all nature provide), tech cap (innovation, entrepreneurship).
GDP = the market value of the total production of all products and services within a country. Is
measured in the prices of a single year. Within (no exports), final good (no intermediate). It excluded :
stock and bonds, public and private transfer payments and other financial transactions. Sales of
used/2hands goods (it would be counting output of that particular year, plus sales of goods produced in
a previous year). Household production. Illegal transactions.
2 approaches – expenditure a., sum of money spent buying the final goods. Income a., counts income
derived from production, wages, rental income, interest income, profit.
GDP = Y = C+I+G (X-M)
- Consumption (households) – purchase of bread
- Investments (firms) – purchase of computer by a business
- Government purchases – military aircraft
- Net exports – Mozzarella for Italy
For an economy as a whole, total income must equal total expenditure
because: every trans has a buyer and a seller, every euro of spending by
some buyer is a euro of income for some seller, circular-flow diagram
illustrate the equality of income and expend. →
- Nominal GDP = value of final goods and services valued at the
prices of that year. Will grow as prices increase, even if the country
does not produce more .
- Potential = what a country can potentially produce
- Real = value of goods and services valued at the prices of a
reference base year. Base year : nominal GDP = real GDP. If real
GDP increases, the economy has really grown.
GDP deflator = is a measure of the price level calculated as the ratio of nominal GDP to real GDP
times 100 → (nom/real)*100. It tells us the rise in nominal GDP that is attributable to a rise in prices
rather than a rise in the quantities produced.
Advantages of GDP – it is objectively measured and fairly easy to accurately collect data. It is well
understood by policy makers. Also that GDP has a correlation with other objective measures such as
life expectancy and education standards.
Limitations of GDP – GDP doesn’t measure the standard of living. Ignore income inequality,
environment, quality of life, crime, freedom, pollution.

, When real < potential = resources are underused. (unemployment). When real > potential = res are
overused (people working overtime, land used too intensively)
Business cycle = (not predictable), GDP falls quickly and recover slowly.
Is the natural rise and fall of economic growth that occurs over time
- Contraction = the economy has a shrunk
- Amplitude = difference between peak and trough
- Trend = underlying long-term movement
- Stationary and nonstationary data = time-series data with a constant
mean (or not)
- Procyclical and countercyclical = the behaviour of variable with respect
to GDP. It move along (pro) or not (counter).
Causes of shocks – irregular innovations, changes in productivity, monetary
factors, political events, financial instability.
GDP gap = real GDP – potential → Okun’s law = every 1% of cyclical
unemployment creates a 2% GDP gap.
Causes in changes in the business cycle – households, external factors, companies, gov policy.
Variables indicators:
- Leading = indicator tends to forecast changes in the economy (average weekly hours worked
in manufacturing)
- Lagging = indicator changes after the change in the economy (employment rate, customer
confidence)
- Coincident = indicator changes at time as changes in the economy (personal income, GDP)
Level of nation’s GDP = measures both the total income earned in the economy and the total expenditure
on the economy's output of goods and services. The level of real GDP is a good gauge of economic
prosperity, and the growth of real GDP is a good gauge of economic progress.
Economic growth rate is the annual percentage change of real GDP, it explain how rapidly the tot
𝑟𝑒𝑎𝑙 𝐺𝐷𝑃 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑦𝑒𝑎𝑟−𝑟𝑒𝑎𝑙 𝐺𝐷𝑃 𝑝𝑟𝑒𝑣 𝑦𝑒𝑎𝑟
economy is expanding → 𝑟𝑒𝑎𝑙 𝐺𝐷𝑃 𝑝𝑟𝑒𝑣 𝑦𝑒𝑎𝑟
x 100

Standard of living depends on real GDP per capita = real GDP / population
𝑟𝑒𝑎𝑙 𝐺𝐷𝑃 𝑝𝑒𝑟 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑦𝑒𝑎𝑟−𝑟𝑒𝑎𝑙 𝐺𝐷𝑃 𝑝𝑒𝑟 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑝𝑟𝑒𝑣 𝑦𝑒𝑎𝑟
Real GDP per person growth rate = 𝑟𝑒𝑎𝑙 𝐺𝐷𝑃 𝑝𝑒𝑟 𝑐𝑎𝑝𝑖𝑡𝑎 𝑝𝑟𝑒𝑣 𝑦𝑒𝑎𝑟
x 100
or real GDP growth rate – population growth rate
Determinants of growth :
- Supply – increases in quantity and quality of natural resources (oil), incr in quantity and quality
human resource, incr in the supply of capital goods, improvements in technology.
- Demand factors – households, businesses, gov must purchase the economy’s expanding output
of goods and services.

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