This document provides an overview of key macroeconomic concepts including aggregate demand and supply, fiscal policy, consumption and saving, investment, and the multiplier effect. It defines these terms, explains how they relate to each other, and outlines models to illustrate their interactions in the macroeconomy. The document also discusses debates around aggregate supply assumptions and the effectiveness of fiscal policy tools.
National Income and Its Measurement
Techniques
• Inflation, Causes and Controlling
• Business Cycle
• Forms of Business
• Management Functions
• Managerial Skills
• Levels of Management
• Role of a manager
These points are taken from Macroeconomics Theory and Practice of HL Ahuja. The textbook is recommended for level course in Macro Economics offered to BS(BA) students in CIIT Attock.
Key concepts
• Measuring economic activity – GDP and GNP/GNI
• Output, income and expenditure methods of GDP accounting
• From GDP to GNP
• Nominal and real GDP
• Nominal and real GNP/GNI
• Per capita income
• Use of national income figures
• Green GDP
KEY TAKE AWAYS
Objectives
Definition
Basic macroeconomic concepts
Types of Macro economic Policy
Monetary Policy
Fiscal Policy
Comparison between Monetary and Fiscal Policy
Features of Macroeconomic Policy
Effect of Macro economic Policy
Importance of Macroeconomic Policy
Weakness of Macroeconomics Policy
Conclusion
National Income and Its Measurement
Techniques
• Inflation, Causes and Controlling
• Business Cycle
• Forms of Business
• Management Functions
• Managerial Skills
• Levels of Management
• Role of a manager
These points are taken from Macroeconomics Theory and Practice of HL Ahuja. The textbook is recommended for level course in Macro Economics offered to BS(BA) students in CIIT Attock.
Key concepts
• Measuring economic activity – GDP and GNP/GNI
• Output, income and expenditure methods of GDP accounting
• From GDP to GNP
• Nominal and real GDP
• Nominal and real GNP/GNI
• Per capita income
• Use of national income figures
• Green GDP
KEY TAKE AWAYS
Objectives
Definition
Basic macroeconomic concepts
Types of Macro economic Policy
Monetary Policy
Fiscal Policy
Comparison between Monetary and Fiscal Policy
Features of Macroeconomic Policy
Effect of Macro economic Policy
Importance of Macroeconomic Policy
Weakness of Macroeconomics Policy
Conclusion
Fiat value in the theory of value, by Edward C Prescott (Arizona State Univer...ADEMU_Project
Technology is rapidly advancing in the information processing area, which is changing the monetary/payment system. It's now technically feasible to have a currency–less monetary system; Professor Prescott explores such a system.
This presentation is part of the programme of the International Seminar "Social Protection, Entrepreneurship and Labour Market Activation: Evidence for Better Policies", organized by the International Policy Centre for Inclusive Growth (IPC-IG/UNDP) together with Canada’s International Development Research Centre (IDRC) and the Colombian Think Tank Fedesarrollo held on September 10-11 at the Ipea Auditorium in Brasilia.
Impact of Gross Domestic Product (GDP) on Economic Development of A Country
Blog presentation
1.
2. Unit III Learner’s Guide
Aggregate Demand/Supply
Investment
Consumption/Saving
Fiscal Policy
3.
4. What is it?
• The relationship between price level(PL) and
Real Gross Domestic Product(RGDP) is inverse
• Shows the amount of RGDP that the private,
public, and foreign sector collectively desire to
purchase at each possible PL
5. Reasons it is Downward Sloping?
• Real Balances Effect
• Interest Rate Effect
• Foreign purchases Effect
7. Shifts in AD
• Caused by changes in
C(consumption), I(investment), G(government
spending), Xn (net exports)
• in AD= shifts to the right
• in AD= shifts to the left
SHIFT TO THE RIGHT
SHIFT TO THE LEFT
8.
9. What is it??
• The level of RGDP that firms will produce at
each PL
• 2 types of AS:
– Long Run (LRAS):period of time where input
prices are flexible and adjust to PL
– Short Run (SRAS):period of time where input
prices are sticky and doesn’t adjust to PL
10. Long Run Aggregate Supply
• Marks level of full employment in economy
• Analogous to PPC
• Measures potential output
• Causes of LRAS to shift:
– Increase in capital
– Technology
– Eco growth
– Entrepreneurship
– Resource availability
12. Short Run Aggregate Supply
• Shifts caused by change in input/resource
prices
• in resource prices= SRAS shifts left
• in resource prices= SRAS shifts right
• in SRAS= shifts to the right
• in SRAS= shifts to the left
13. SRAS (cont’d.)
• Key to understanding shifts in SRAS is per unit
production cost
• FORMULA:
– per unit prod. cost= total input cost
total output
• Productivity
• FORMULA:
– Productivity= total output
total input
• More prod.= lower unit prod. cost=SRAS
• Less prod.= higher unit prod. cost= SRAS
19. Ranges/Shapes of AS
• Keynesian Range:
– Has a horizontal AS curve when eco is below full
employment which cause AD to shift outward
• RGDP , u% , PL is constant
– Demand creates its own supply
• Intermediate Range:
– AS is in btwn Classical and Keynesian range
– When occurs AS shifts outward
• GDP & PL
• Classical Range:
– In Long Run, AS curve is vertical
– Supply creates its own demand(Say’s Law)
27. What is it??
• Money spent or expenditures on:
– New plants(factories)
– Capital equipment(machinery)
– Technology(hardware/software)
– New homes
– Inventories(goods sold by prod)
28. Expected Rates of Return
• How does business make investment decisions?
– Cost/benefit Analysis
• How does business count the cost?
– Expected Rate of Return
• How does business determine the amount of
investment they undertake?
– Compare Expected Rate of Return to interest cost
• If E.R.R > interest cost, then invest
• If E.R.R < interest cost, then don’t invest
29. Real v. Nominal
• Nominal: the observable rate of interest
• Real: subtracts out inflation(π%) and is only
known
– Example- post facto
• FORMULA (real int. rate (r%)):
– r%= i% - π%
30. Investment Demand Curve(ID)
• Shape of curve is downward sloping
• Why?
– When int. rates are high, fewer investments are
profitable, when int. rates are low, more investments are
profitable
– There are few investments that yield high rates of
return, and many that yield low rates of return
• Shifts in ID Curve:
• $ of prod
• Business taxes
• Tech change
• Stock of capital
• expectations
31.
32. What is Consumption?
• Household spending
• Ability to consume is constrained by
– Amt of disposable income (DI)
– Propensity to save
• Do household consume if DI=0?
– Autonomous consumption
– Dissaving
• *Disposable Income : income after taxes or
net income
33. What is Saving?
• Household NOT spending
• Ability to save is constrained by
– Amt of DI
– Propensity to consume
• Do households save if DI=0?
– NO!!
• *Disposable Income: income after taxes or net
income
34. APS & APC
• APC= Average Propensity to Consume
• APS= Average Propensity to Save
• FORMULAS:
– APC + APS= 1
– 1 – APC= APS
– 1 – APS= APC
– APC > 1: dissaving
– -APS: dissaving
35. MPC & MPS
• MPC= Marginal Propensity to Consume
• MPS= Marginal Propensity to Save
• % of every extra $ earned that is saved
• FORMULAS:
– MPC= ∆ C
∆DI
– MPS= ∆ S
∆DI
– MPS + MPC= 1
– 1 – MPC= MPS
– 1- MPS= MPC
36. Determinants of C & S
• Wealth
• Expectations
• Household debt
• Taxes
37.
38. What is it?
• An initial ∆ in spending (C,I,G,Xn) causes a
larger ∆ in aggregate spending or AD
• Why?
– Expenditures and income flow continuously which
sets off a spending increase in the eco
• FORMULA:
– 1/ 1 – MPC OR 1/ MPS
• *multipliers are (+) where there is an increase
in spending and (-) when there is a decrease.
39. Tax Multiplier
• When gov’t taxes, the multiplier works in
reverse
• Why?
– Because now money is leaving the circular flow
• FORMULAS:
– -MPC/1 – MPC or –MPC/MPS
• *if there is a tax cut, then multiplier is (+)
because there is now more $ in circular flow
40.
41. What is it?
• Changes in the expenditures or tax revenues of
the fed gov’t
– 2 tools of fiscal policy:
• Taxes: gov’t can increase or decrease taxes
• Spending: gov’t can increase or decrease spending
• Fiscal policy is enacted to promote our nation’s
eco goals:
– Full employment
– Price stability
– Eco growth
42. Deficits, Surpluses, and Debt
• Balanced budge
– Revenues= expenditures
(profit) ($ spent)
• budget deficit
– Revenues < expenditure
• Budget surplus
– Revenues > expenditure
• Gov’t debt
– Sum of all deficits – sum of all surpluses
• Gov’t must borrow $ when it runs a budget deficit
• Gov’t borrows from:
• Individuals (savings bonds)
• Corporations
• Financial institution
• Foreign gov’t/ entities
44. Discretionary v. Automatic Fiscal
Policies
• Discretionary:
– or gov’t spending and/or taxes in order to return
the eco to FE
– Involves policy makers doing fiscal policy in response
to an eco problem
• Automatic:
– Unemployment compensation & marginal tax rates
are examples of automatic policies that help mitigate
the effects of recession and inflation
– Takes place w/o policy makers having to respond to
current eco problems
45. Contradictory v. Expansionary
Fiscal Polices
• Contradictory:
– Policy designed to decrease AD
– Strategy for controlling inflation
– Inflation is counted
– gov’t spending
– taxes
• Expansionary:
– Policy designed to increase AD
– Strategy for increasing GDP, combating recession
– Reducing unemployment
– Recession is counted
– gov’t spending
– taxes
46. Weaknesses of Fiscal Policy
• Progressive Tax System
– Avg tax rate rises w/ GDP
• Proportional Tax System
– Avg tax rate remains constant as GDP ∆
• Regressive Tax System
– Avg tax rate falls w/ GDP
• *the more progressive the tax sys, the greater
the econ’s built in stability