Macro 4

2. Lecture 4
Macroeconomics

3. Quiz
1. What does equilibrium mean?
2. Do price ceilings create surpluses or
shortages?

7. $10.95. Blue-collar compensation
was around $3.72 per hour. It took
around three hours to earn the
money to buy your own tool that
would let you do about one
calculation per second.

8. You can have a new Xbox One X for
$499 dollars. Blue-collar
compensation is now around
$33.00 per hour. It will take you
around 15 hours to earn the money
to buy your console.

9. The graphical processing unit (GPU)
in this device runs at 12 teraflops. A
teraflop a trillion operations per
second.

10. 1 per second

11. 12 trillion per second

12. For the time it took to work to buy a
device in 1969 that could do one
calculation you will get 2.4 trillion
calculations

13. GDP
Gross Domestic Product
The market value of all
final goods and services
produced in a country in
a given time

14. How do you
calculate
GDP?

15. GDP =
C = Consumption
I = Investment
G = Government
X = Exports
M = Imports

16. GDP =
C + I + G + (X - M)

17. Consumption
Spending by
households on
goods and services,
except new housing

18. Investment
Spending on capital
equipment, inventories, and
structures, including new
housing

19. Government
Spending on goods
and services from
local, state, and
federal governments.

20. Net Exports
Exports minus
imports

21. Net Exports
Foreigners buying
exports minus
domestic residents
buying foreign goods

22. What is GDP?
C = 105
I = 40
G = 25
X = 30
M = 20

23. GDP
= C + I + G + (X - M)
= 105 + 40 + 25 +(30-20)
= 105 + 40 + 25 +10
= 180

24. GDP
GDP per Capita

25. GDP $86 trillion
Population 7.6 billion
GDP Per Capita $11,315

26. GDP $20 trillion
Population 325 million
GDP Per Capita $61,538
United States
Per Day $170

27. GDP $13 trillion
Population 1.4 billion
GDP Per Capita $9,285
Per Day $25
China

28. activated their entrepreneurs

29. https://fred.stlouisfed.org
Public Data Explorer

30. Real
vs.
Nominal

32. When you have lines waiting to buy
your product, you can do two
things:
make more, or raise prices

36. Prices
Nominal or Current
Real or Constant

37. Inflation
Cause:
Printing money faster than
making goods and services
Effect:
Rising prices

38. Nominal
Current prices
Current quantity

39. Real
will always have
a base year

40. Real
Constant prices
Current quantity

41. Pizza Soda
Year Price Qty Total Price Qty Total
Total
Total
%
Change
2010 $5 100 $500 $1.00 50 $50 $550
2011 $6 134 $804 $1.50 40 $60 $864 57.1%
2011* $5 134 $670 $1.00 40 $40 $710 29.1%
2012 $10 150 $1500 $2.00 30 $60 $1,560 80.6%
2012* $5 150 $750 $1.00 30 $30 $780 9.9%
* Prices adjusted to 2010 Rates
Real versus Nominal GDP

42. GDP Deflator
Nominal GDP
Real GDP= x 100

43. GDP Deflator
$1,560
$780= x 100
= 200 Prices have
doubled

44. If the the GDP Deflator is
178 and a Pizza cost $15,
what was the price in the
base year?
$15 ÷ 1.78 = $8.43

45. GDP Inflation Rate
GDP DeflatorYear 2 - GDP DeflatorYear 1
GDP DeflatorYear 1= x 100

46. If the the GDP Deflator is
178 in 2010 and 192 in 2011,
what was the rate of
inflation?
192-178
178
x 100 =7.86%

47. Year Nominal Real
GDP
Deflator
2010 550 550
2011 864 710
2012 1560 780
GDP Deflator = (Nominal ÷ Real ) x 100

48. Problems with GDP
Inequality
Types of Goods and Services
Happiness
Others?