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Title: Macroeconomics Variables
Description: There are 4 variables total. My notes go up to the third variable, i will include notes with the 4th variable soon, The three Variables include: 1,input/output 2. inflation 3.unemployment These notes are for the basic Macroeconomics class The name of the class was Macroeconomics 1202
Description: There are 4 variables total. My notes go up to the third variable, i will include notes with the 4th variable soon, The three Variables include: 1,input/output 2. inflation 3.unemployment These notes are for the basic Macroeconomics class The name of the class was Macroeconomics 1202
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Economics 1202
Notes
Look at the economy as a whole
What makes up our economy?
Macroeconomic variables
1
...
Inflation (prices)
3
...
Interest Rates
Build a model to explain how economy works
Divide the economy into sectors
1
...
Business Sector- Employ labor (provides benefits), produce goods and
services, pay taxes, investment- (The firm either purchased or built a
physical capital like machines, tools, new buildings, trucks, computers, ect )
Investment is not stocks and bonds it is physical capital
...
Government Sector- Collect taxes, infrastructures, provide aid to foreign
sector, national defense, social services,
4
...
Foreign sector- exchange rates, US imports, US exports
Macroeconomics variables
OutPut- GDP is our broadest measure of output
A
...
I
...
2012 output is measures by 2012 prices
II
...
It directly includes the value of final goods
...
The car is the final good and that
goes toward the GDP
...
However, if Good year sells their tires directly to us then it will affect
the GDP
Final Goods: GDP does not include the value of previously produced goods,
regardless of when they are sold
Example: If a house is made in 2000 but sold in 2016 then is would only
count in the year 2000, it will not affect the current year
...
But an extension will be included in the produced year, paint
job in 2016, then it will count toward 2016 GDP
Nominal GDP= the average price of all newly produced final goods (P)*
quantity of all newly produced final goods
...
B
...
GDP Implicit Price Deflator
- The Deflator identifies prices of a given year as a percent of a base year
prices
...
Ex
...
Reflator -118
2
...
PPI – 107
4
...
Inflation in 2015=4% that will tell us prices rose by 4% during 2015
Inflation does not compare prices to a base year
Inflation (P)- the percent increase in prices over a period of time( 1 year) Also a
measure of prices
...
P I 2013= 5%
Prices rose by 5% during 2013
Ex
...
% increase in prices
Inflation as measured by the government, addresses the average price of consumer
goods
The inflation rate overstates the “true” problem of inflation
1
...
Increase in Quality effect- part of a price increase affect an increase in the
quality of a good
...
New product affect- As the price of basket good increase, consumers may
turn to good, not included in the basket
...
Outlet effect- the government measures the price of goods at retails stores
whereas consumers buy goods more cheaply at outlets, or online
...
CPI in 2015 = 107
CPI in 2014=104
Inflation in 2015= CPI in 2015-CPI in 2014/CPI 2014 100 107-104/104100= 2
...
8% in 2015
3rd Macroeconomic variable
Unemployment= (Labor force)= Employed + unemployed
Employed- those who worked in the past week *vacation, sickness, strike, you are
still considered as employed
Unemployed- Those who did not work in the past week but looked for work in the
past four weeks
...
Full time students, retirement, active military, institutionalize
...
Employed= 100
Unemployed =20
Working age population=150
Unemployment rate= 20/ 100+20*100= 17%
Labor force participation rate= 100+20/150*100= 80%
Title: Macroeconomics Variables
Description: There are 4 variables total. My notes go up to the third variable, i will include notes with the 4th variable soon, The three Variables include: 1,input/output 2. inflation 3.unemployment These notes are for the basic Macroeconomics class The name of the class was Macroeconomics 1202
Description: There are 4 variables total. My notes go up to the third variable, i will include notes with the 4th variable soon, The three Variables include: 1,input/output 2. inflation 3.unemployment These notes are for the basic Macroeconomics class The name of the class was Macroeconomics 1202