GDP Deflator
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Inflation is caused by printing money faster than producing goods, which leads to rising prices over time. Real GDP accounts for inflation and uses a base year for prices, while nominal GDP uses current prices. The GDP deflator is used to calculate real GDP and inflation rates by adjusting nominal GDP for changes in prices.
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Inflation
This document defines inflation and discusses its causes and types. Inflation is defined as a sustained increase in prices and fall in the value of money. The main causes of inflation discussed are an increase in the money supply, rising national debt, demand-pull effect, and cost-push effect. Types of inflation include creeping (under 10% annually), walking (over creeping but under 5%), running (over 10% annually) and galloping (over 25%). Inflation can also be defined based on its inducements, such as deficit, wages, profits, scarcity, currency fluctuations, specific economic sectors, foreign trade, and wartime conditions.
Gdp deflator and its implication in indian context
The GDP deflator measures the level of prices of all final goods and services produced in an economy compared to a base year. It is calculated by dividing the nominal GDP by the real GDP and multiplying by 100. The nominal GDP includes current market prices, while the real GDP accounts for inflation/deflation. In India, the GDP deflator is reported by the Ministry of Statistics and Implementation and measures price changes unlike the CPI which uses a fixed basket. India's GDP deflator was highest at 146.5 in 2011 but has fallen to 119.5 currently due partly to demonetization slowing economic activity and consumer prices.
Aggregate demand
1) Aggregate demand is the total demand for goods and services in an economy, including household spending, investment spending, government spending, exports and imports.
2) A rise in the price level causes aggregate demand to contract as real incomes fall, exports become less competitive, and interest rates may rise.
3) Shifts in aggregate demand, caused by factors like fiscal policy changes, monetary policy changes, or external economic events, impact the overall level of output in an economy.
Inflation
This document discusses inflation, defining it as a general increase in prices and a decline in the purchasing power of money. It outlines different types of inflation from creeping to hyperinflation. The main causes of inflation are described as too much demand and too little supply, which can be demand-pull or cost-push inflation. Effects include rising import prices, lower savings, and impacts on investment. Control measures discussed are monetary policy like interest rates and fiscal steps like tax increases. Present inflation rates in India are provided, ranging from -11% to 34% between 1969-2013, with an average of 7.7% over that period.
Basic macroeconomics
This document provides an introduction to basic macroeconomics terminology and concepts. It defines macroeconomics as focusing on the large picture of the overall economy, while microeconomics examines individual markets and economic actors. Key terms explained include inflation, recession, GDP, fiscal and monetary policy tools, and business cycles. GDP is discussed as a measurement of economic growth, and the relationships between actual, potential, nominal, and real GDP are outlined.
Chap1(the science of macroeconomics)
This chapter introduces macroeconomics and the tools used by macroeconomists. It discusses important macroeconomic issues like economic growth, unemployment, inflation, and recessions. Macroeconomists study indicators like GDP, inflation, and unemployment rates. The chapter outlines the structure of the book, which will cover classical economic theory, growth theory, and business cycle theory. It explains that macroeconomists use models to examine different issues and that these models vary in their treatment of price flexibility.
The three approaches to measuring gdp
GDP can be measured in three ways:
1) Expenditure approach measures total expenditures on final goods and services.
2) Income approach measures total income earned from production, including compensation, profits, and rents.
3) Production approach measures total value added at each stage of production.
Real GDP is used to measure economic growth by adjusting for inflation using GDP deflators or price indexes. However, GDP has limitations as a welfare measure since it excludes nonmarket activities and environmental factors.
Chapter 7 - inflation ,unemployment and underemployment for BBA
This document defines various types of inflation including low inflation, galloping inflation, and hyperinflation. It also discusses different measures used to calculate inflation rates such as the Consumer Price Index (CPI) and Wholesale Price Index (WPI). Finally, it outlines several causes of inflation including demand-pull factors related to increases in the money supply according to the Quantity Theory of Money, and cost-push factors like increases in wages or costs of raw materials.
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Inflation
This document defines inflation and discusses its causes and types. Inflation is defined as a sustained increase in prices and fall in the value of money. The main causes of inflation discussed are an increase in the money supply, rising national debt, demand-pull effect, and cost-push effect. Types of inflation include creeping (under 10% annually), walking (over creeping but under 5%), running (over 10% annually) and galloping (over 25%). Inflation can also be defined based on its inducements, such as deficit, wages, profits, scarcity, currency fluctuations, specific economic sectors, foreign trade, and wartime conditions.
Gdp deflator and its implication in indian context
The GDP deflator measures the level of prices of all final goods and services produced in an economy compared to a base year. It is calculated by dividing the nominal GDP by the real GDP and multiplying by 100. The nominal GDP includes current market prices, while the real GDP accounts for inflation/deflation. In India, the GDP deflator is reported by the Ministry of Statistics and Implementation and measures price changes unlike the CPI which uses a fixed basket. India's GDP deflator was highest at 146.5 in 2011 but has fallen to 119.5 currently due partly to demonetization slowing economic activity and consumer prices.
Aggregate demand
1) Aggregate demand is the total demand for goods and services in an economy, including household spending, investment spending, government spending, exports and imports.
2) A rise in the price level causes aggregate demand to contract as real incomes fall, exports become less competitive, and interest rates may rise.
3) Shifts in aggregate demand, caused by factors like fiscal policy changes, monetary policy changes, or external economic events, impact the overall level of output in an economy.
Inflation
This document discusses inflation, defining it as a general increase in prices and a decline in the purchasing power of money. It outlines different types of inflation from creeping to hyperinflation. The main causes of inflation are described as too much demand and too little supply, which can be demand-pull or cost-push inflation. Effects include rising import prices, lower savings, and impacts on investment. Control measures discussed are monetary policy like interest rates and fiscal steps like tax increases. Present inflation rates in India are provided, ranging from -11% to 34% between 1969-2013, with an average of 7.7% over that period.
Basic macroeconomics
This document provides an introduction to basic macroeconomics terminology and concepts. It defines macroeconomics as focusing on the large picture of the overall economy, while microeconomics examines individual markets and economic actors. Key terms explained include inflation, recession, GDP, fiscal and monetary policy tools, and business cycles. GDP is discussed as a measurement of economic growth, and the relationships between actual, potential, nominal, and real GDP are outlined.
Chap1(the science of macroeconomics)
This chapter introduces macroeconomics and the tools used by macroeconomists. It discusses important macroeconomic issues like economic growth, unemployment, inflation, and recessions. Macroeconomists study indicators like GDP, inflation, and unemployment rates. The chapter outlines the structure of the book, which will cover classical economic theory, growth theory, and business cycle theory. It explains that macroeconomists use models to examine different issues and that these models vary in their treatment of price flexibility.
The three approaches to measuring gdp
GDP can be measured in three ways:
1) Expenditure approach measures total expenditures on final goods and services.
2) Income approach measures total income earned from production, including compensation, profits, and rents.
3) Production approach measures total value added at each stage of production.
Real GDP is used to measure economic growth by adjusting for inflation using GDP deflators or price indexes. However, GDP has limitations as a welfare measure since it excludes nonmarket activities and environmental factors.
Chapter 7 - inflation ,unemployment and underemployment for BBA
This document defines various types of inflation including low inflation, galloping inflation, and hyperinflation. It also discusses different measures used to calculate inflation rates such as the Consumer Price Index (CPI) and Wholesale Price Index (WPI). Finally, it outlines several causes of inflation including demand-pull factors related to increases in the money supply according to the Quantity Theory of Money, and cost-push factors like increases in wages or costs of raw materials.
Theory of Production and Costs & Cost Concepts
This document discusses theories of production and cost concepts. It defines production as the conversion of raw materials into goods and services to satisfy consumer demand. It identifies the four factors of production as land, labor, capital, and entrepreneurship. It then explains various cost concepts like fixed, variable, total, average, and marginal costs. Finally, it describes break-even analysis, including how to calculate the break-even point using graphs and equations. It shows the break-even point as the level of output where total revenue and total costs are equal.
Aggregate Demand and Aggregate Supply
This document discusses short-run economic fluctuations using the aggregate demand and aggregate supply model. It explains that in the short-run, the aggregate supply curve slopes upward due to sticky wages and prices. Shifts in aggregate demand or supply can cause fluctuations in output and unemployment. Recessions occur when aggregate demand decreases, causing output and employment to fall.
Inflation
This document discusses inflation, including its definition, types, theories, causes, and impact in India. Inflation is defined as a rise in general price levels over time. The main causes of inflation are an increase in demand for goods/services and a decrease in supply. There are two theories of inflation - demand-pull (excess demand) and cost-push (rising costs). Factors that can cause inflation include increased money supply, disposable income, deficit financing, and foreign exchange reserves on the demand side, and rising administered prices, erratic agriculture, price policies, and inadequate industry on the supply side. Measures to control inflation focus on underlying causes and include investment, interest rate adjustments, demonetization, fiscal
Business cycle/ Trade Cycle/Economic Cycle
The business cycle refers to the periodic fluctuations in economic activity, measured by variables such as GDP, employment, and prices. There are four main phases of the business cycle: boom, recession, depression, and recovery. During a boom, economic activity peaks as GDP, employment, incomes, and prices are highest. A recession is a period of declining economic activity marked by falling GDP, incomes, and employment. A depression is a more prolonged and severe recession with a sharp drop in economic activity. Recovery begins as the economy starts to grow again, GDP and employment increase from their lows. The causes of business cycles include fluctuations in demand and supply, capital and consumer goods, purchasing power, population changes, and human psychology. Governments
Chapter 3 elasticity for economics
1. A new, more productive variety of paddy increases supply, shifting the supply curve to the right.
2. With inelastic demand, this leads to a large fall in price and a proportionately smaller increase in quantity sold.
3. As a result, total revenue for farmers falls despite the increased supply.
Business cycle: Meaning, types and phases
The document discusses the business cycle, which refers to the regular fluctuations in economic activity between periods of expansion and contraction. It describes the different types of business cycles including minor, major, very long period, and Kuznets cycles. The phases of the business cycle are also outlined, including expansion, peak, recession, and trough. Finally, the document analyzes various internal and external causes that can trigger business cycles such as consumer spending, investment, government policy, technology, and human psychology.
Theory of Labour
This document discusses key concepts related to the theory of labour, including:
- The definition of labour and how it differs from other factors of production.
- The concept of division of labour and how it leads to increased specialization and output.
- Factors that influence the mobility, size, and structure of the labour force such as birth rates, death rates, and migration patterns.
- Key labour force metrics like the dependency ratio and participation rate.
Fiscal Policy
This document discusses fiscal policy and its objectives. It provides information on fiscal policy tools used by governments to influence economic growth, employment and prices. The key objectives of fiscal policy are mobilizing resources, accelerating economic growth, minimizing income inequality, increasing employment opportunities, and maintaining price stability. Examples of fiscal tools include taxation, public expenditure, borrowing. The document also summarizes Indian fiscal policy goals of rapid growth, employment expansion, reducing disparities.
classical theory of employement
The classical theory of employment and output assumed full employment, perfect competition, and wage-price flexibility. It was based on Say's Law that supply creates its own demand and the quantity theory of money that money only impacts prices, not output. Under these assumptions, the economy would always attain general equilibrium with full employment determined by the intersection of labor demand and supply curves. However, the Great Depression showed the flaws in these assumptions and need for government intervention.
Philip's Curve
The Phillips curve describes an inverse relationship between unemployment and inflation, such that lower unemployment is associated with higher inflation. While observed to be stable in the short-run, it does not hold in the long-run. The document discusses the origins of the Phillips curve from William Phillips' 1958 paper and subsequent modifications by economists like Friedman and Phelps who argued it does not reflect long-run economic realities. It also examines shifts to the Phillips curve from supply shocks and how the relationship between unemployment and inflation is now understood with incorporation of inflation expectations.
Effective demand
Effective demand refers to the total demand for goods and services in an economy, which includes consumption demand and investment demand. According to Keynes, effective demand determines the level of output and employment in an economy. Effective demand is low in capitalist systems because savings increase as income rises, creating a "leakage" out of the system that must be filled by investment in order to maintain output and employment levels. The economy reaches equilibrium at the point where aggregate demand and aggregate supply curves intersect, but this equilibrium may occur at less than full employment if investment is insufficient to make up the gap between income and consumption. The government therefore has an important role in managing aggregate demand to minimize unemployment.
inflation- cost push and demand pull
This document discusses inflation, including its causes, types, effects, and methods for controlling it. It outlines two main types of inflation - cost-push inflation, which is caused by increases in production costs, and demand-pull inflation, which occurs when demand increases faster than supply. The document also examines the impacts of inflation and various monetary and fiscal policies that can be used to reduce inflation, such as increasing interest rates, reducing government spending, and implementing price controls.
Market Failure
This document discusses various types of market failures including externalities, public goods, and imperfect information. It provides examples of negative and positive externalities and how they can lead to inefficient market outcomes. Methods for dealing with externalities include direct regulation, tax incentives, and market incentives. Public goods are nonexclusive and nonrival, but their value is difficult to determine via markets due to free rider problems. Imperfect information between buyers and sellers can also cause market failures. While government intervention may aim to correct market failures, governments can also fail due to issues like lack of proper incentives, information, and flexibility.
Consumer Demand
The document summarizes key concepts related to consumer demand, including:
1. The income-consumption curve shows how consumption of goods changes as income increases, holding prices constant. It is positively sloped for normal goods and negatively sloped for inferior goods.
2. The Engel curve relates the quantity purchased of a good to income levels, holding other factors constant. It is derived from the income-consumption curve.
3. The price-consumption curve shows how consumption changes as the price of a good changes, holding income and other prices constant. It is negatively sloped for normal goods and positively sloped for Giffen goods.
4. The Marshallian demand curve relates the quantity demanded of
Inflation
In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.
Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy.
Inflation rate, the annualized percentage change in a general price index, usually the consumer price index, over time.
Consumer Price Index @ Economics
The document discusses various price indices used to measure inflation and price changes in an economy including the Consumer Price Index (CPI), Wholesale Price Index (WPI), and Sensitive Price Indicator (SPI). The CPI measures price changes of consumer goods and services and is the main measure of inflation in a country. The WPI measures price changes in primary and wholesale markets. The SPI measures price movements of essential commodities on a weekly basis. Each index provides important information about inflation and price levels in different sectors of the economy.
Addendum to lecture 4 okun's law
Okun's Law describes the relationship between unemployment and economic output, where a 1% increase in unemployment is associated with a 2% decrease in output relative to potential output. The document discusses how Okun's Law has been calculated for the United States, with unemployment 1% above the natural rate leading to output falling 2% below potential. It also notes that while unemployment is above the natural rate in Ghana, causing output to fall below potential there as well. An example is given for Ghana in June 1983, showing a 3.33% recessionary gap between actual and potential output.
Bilateral monopoly
This document discusses bilateral monopoly, which refers to a market situation with a single seller (monopolist) and single buyer (monopsonist) of a product. It outlines the assumptions of bilateral monopoly and describes how price and output are determined. Specifically, it notes that the monopolist will seek to sell at a higher price where marginal cost equals marginal revenue, while the monopsonist will seek to buy at a lower price where marginal expenditure equals marginal utility. The actual price and quantity transacted will depend on the relative bargaining strengths of the monopolist and monopsonist, settling somewhere between the two preferred prices.
INFLATION : NATURE,EFFECT AND CONTROL
Inflation is defined as a sustained increase in the general price level of goods and services in an economy over time. It can be caused by factors on both the demand side, such as an increase in money supply, and the supply side, such as a rise in production costs. Inflation is measured by indexes that track changes in consumer prices (CPI) or wholesale prices (WPI) over time. There are different views on the causes and solutions for inflation, with Keynesians focusing on demand management and monetarists emphasizing the role of money supply.
Business cycle
The document discusses the business cycle, which refers to periods of economic expansion and contraction over time. A business cycle consists of expansions, recessions/general contractions, and revivals. Expansions are periods of increased production, prices, and employment. Recessions involve declining output, prices, and rising unemployment. Contractions occur when the economy experiences a steep decline. Revivals mark the beginning of the next expansion phase. The phases of the business cycle - peak, recession, trough, recovery - are explained in detail. Causes of recessions and theories to explain business cycles like Keynesian and real business cycle theories are also summarized.
Gdp+deflator+vs+cpi
GDP deflator and CPI are both used to measure inflation in an economy. GDP deflator measures the price changes of all goods and services produced in the economy, while CPI measures the price changes of goods and services purchased by households. CPI is more focused on consumer prices and assigns fixed weights to goods, so it can overstate inflation, while GDP deflator assigns changing weights and may understate inflation. Both measures generally agree on the overall inflation trend, but may diverge in specific cases like a crop failure, which would impact CPI more than GDP deflator.
Gdp ppt
The document summarizes the key components of Gross Domestic Product (GDP):
1) Consumption (C) which includes durable goods, non-durable goods, and services. Durable goods have a longer lifespan while non-durable goods have a shorter lifespan. Services are the fastest growing component.
2) Investment (I) which refers to business investment in capital.
3) Government spending (G) which is the sum spent on final goods and services by the government including salaries and weapons.
4) Net exports (X-M) which is gross exports minus imports of goods and services.
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This document discusses theories of production and cost concepts. It defines production as the conversion of raw materials into goods and services to satisfy consumer demand. It identifies the four factors of production as land, labor, capital, and entrepreneurship. It then explains various cost concepts like fixed, variable, total, average, and marginal costs. Finally, it describes break-even analysis, including how to calculate the break-even point using graphs and equations. It shows the break-even point as the level of output where total revenue and total costs are equal.
Aggregate Demand and Aggregate Supply
This document discusses short-run economic fluctuations using the aggregate demand and aggregate supply model. It explains that in the short-run, the aggregate supply curve slopes upward due to sticky wages and prices. Shifts in aggregate demand or supply can cause fluctuations in output and unemployment. Recessions occur when aggregate demand decreases, causing output and employment to fall.
Inflation
This document discusses inflation, including its definition, types, theories, causes, and impact in India. Inflation is defined as a rise in general price levels over time. The main causes of inflation are an increase in demand for goods/services and a decrease in supply. There are two theories of inflation - demand-pull (excess demand) and cost-push (rising costs). Factors that can cause inflation include increased money supply, disposable income, deficit financing, and foreign exchange reserves on the demand side, and rising administered prices, erratic agriculture, price policies, and inadequate industry on the supply side. Measures to control inflation focus on underlying causes and include investment, interest rate adjustments, demonetization, fiscal
Business cycle/ Trade Cycle/Economic Cycle
The business cycle refers to the periodic fluctuations in economic activity, measured by variables such as GDP, employment, and prices. There are four main phases of the business cycle: boom, recession, depression, and recovery. During a boom, economic activity peaks as GDP, employment, incomes, and prices are highest. A recession is a period of declining economic activity marked by falling GDP, incomes, and employment. A depression is a more prolonged and severe recession with a sharp drop in economic activity. Recovery begins as the economy starts to grow again, GDP and employment increase from their lows. The causes of business cycles include fluctuations in demand and supply, capital and consumer goods, purchasing power, population changes, and human psychology. Governments
Chapter 3 elasticity for economics
1. A new, more productive variety of paddy increases supply, shifting the supply curve to the right.
2. With inelastic demand, this leads to a large fall in price and a proportionately smaller increase in quantity sold.
3. As a result, total revenue for farmers falls despite the increased supply.
Business cycle: Meaning, types and phases
The document discusses the business cycle, which refers to the regular fluctuations in economic activity between periods of expansion and contraction. It describes the different types of business cycles including minor, major, very long period, and Kuznets cycles. The phases of the business cycle are also outlined, including expansion, peak, recession, and trough. Finally, the document analyzes various internal and external causes that can trigger business cycles such as consumer spending, investment, government policy, technology, and human psychology.
Theory of Labour
This document discusses key concepts related to the theory of labour, including:
- The definition of labour and how it differs from other factors of production.
- The concept of division of labour and how it leads to increased specialization and output.
- Factors that influence the mobility, size, and structure of the labour force such as birth rates, death rates, and migration patterns.
- Key labour force metrics like the dependency ratio and participation rate.
Fiscal Policy
This document discusses fiscal policy and its objectives. It provides information on fiscal policy tools used by governments to influence economic growth, employment and prices. The key objectives of fiscal policy are mobilizing resources, accelerating economic growth, minimizing income inequality, increasing employment opportunities, and maintaining price stability. Examples of fiscal tools include taxation, public expenditure, borrowing. The document also summarizes Indian fiscal policy goals of rapid growth, employment expansion, reducing disparities.
classical theory of employement
The classical theory of employment and output assumed full employment, perfect competition, and wage-price flexibility. It was based on Say's Law that supply creates its own demand and the quantity theory of money that money only impacts prices, not output. Under these assumptions, the economy would always attain general equilibrium with full employment determined by the intersection of labor demand and supply curves. However, the Great Depression showed the flaws in these assumptions and need for government intervention.
Philip's Curve
The Phillips curve describes an inverse relationship between unemployment and inflation, such that lower unemployment is associated with higher inflation. While observed to be stable in the short-run, it does not hold in the long-run. The document discusses the origins of the Phillips curve from William Phillips' 1958 paper and subsequent modifications by economists like Friedman and Phelps who argued it does not reflect long-run economic realities. It also examines shifts to the Phillips curve from supply shocks and how the relationship between unemployment and inflation is now understood with incorporation of inflation expectations.
Effective demand
Effective demand refers to the total demand for goods and services in an economy, which includes consumption demand and investment demand. According to Keynes, effective demand determines the level of output and employment in an economy. Effective demand is low in capitalist systems because savings increase as income rises, creating a "leakage" out of the system that must be filled by investment in order to maintain output and employment levels. The economy reaches equilibrium at the point where aggregate demand and aggregate supply curves intersect, but this equilibrium may occur at less than full employment if investment is insufficient to make up the gap between income and consumption. The government therefore has an important role in managing aggregate demand to minimize unemployment.
inflation- cost push and demand pull
This document discusses inflation, including its causes, types, effects, and methods for controlling it. It outlines two main types of inflation - cost-push inflation, which is caused by increases in production costs, and demand-pull inflation, which occurs when demand increases faster than supply. The document also examines the impacts of inflation and various monetary and fiscal policies that can be used to reduce inflation, such as increasing interest rates, reducing government spending, and implementing price controls.
Market Failure
This document discusses various types of market failures including externalities, public goods, and imperfect information. It provides examples of negative and positive externalities and how they can lead to inefficient market outcomes. Methods for dealing with externalities include direct regulation, tax incentives, and market incentives. Public goods are nonexclusive and nonrival, but their value is difficult to determine via markets due to free rider problems. Imperfect information between buyers and sellers can also cause market failures. While government intervention may aim to correct market failures, governments can also fail due to issues like lack of proper incentives, information, and flexibility.
Consumer Demand
The document summarizes key concepts related to consumer demand, including:
1. The income-consumption curve shows how consumption of goods changes as income increases, holding prices constant. It is positively sloped for normal goods and negatively sloped for inferior goods.
2. The Engel curve relates the quantity purchased of a good to income levels, holding other factors constant. It is derived from the income-consumption curve.
3. The price-consumption curve shows how consumption changes as the price of a good changes, holding income and other prices constant. It is negatively sloped for normal goods and positively sloped for Giffen goods.
4. The Marshallian demand curve relates the quantity demanded of
Inflation
In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.
Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy.
Inflation rate, the annualized percentage change in a general price index, usually the consumer price index, over time.
Consumer Price Index @ Economics
The document discusses various price indices used to measure inflation and price changes in an economy including the Consumer Price Index (CPI), Wholesale Price Index (WPI), and Sensitive Price Indicator (SPI). The CPI measures price changes of consumer goods and services and is the main measure of inflation in a country. The WPI measures price changes in primary and wholesale markets. The SPI measures price movements of essential commodities on a weekly basis. Each index provides important information about inflation and price levels in different sectors of the economy.
Addendum to lecture 4 okun's law
Okun's Law describes the relationship between unemployment and economic output, where a 1% increase in unemployment is associated with a 2% decrease in output relative to potential output. The document discusses how Okun's Law has been calculated for the United States, with unemployment 1% above the natural rate leading to output falling 2% below potential. It also notes that while unemployment is above the natural rate in Ghana, causing output to fall below potential there as well. An example is given for Ghana in June 1983, showing a 3.33% recessionary gap between actual and potential output.
Bilateral monopoly
This document discusses bilateral monopoly, which refers to a market situation with a single seller (monopolist) and single buyer (monopsonist) of a product. It outlines the assumptions of bilateral monopoly and describes how price and output are determined. Specifically, it notes that the monopolist will seek to sell at a higher price where marginal cost equals marginal revenue, while the monopsonist will seek to buy at a lower price where marginal expenditure equals marginal utility. The actual price and quantity transacted will depend on the relative bargaining strengths of the monopolist and monopsonist, settling somewhere between the two preferred prices.
INFLATION : NATURE,EFFECT AND CONTROL
Inflation is defined as a sustained increase in the general price level of goods and services in an economy over time. It can be caused by factors on both the demand side, such as an increase in money supply, and the supply side, such as a rise in production costs. Inflation is measured by indexes that track changes in consumer prices (CPI) or wholesale prices (WPI) over time. There are different views on the causes and solutions for inflation, with Keynesians focusing on demand management and monetarists emphasizing the role of money supply.
Business cycle
The document discusses the business cycle, which refers to periods of economic expansion and contraction over time. A business cycle consists of expansions, recessions/general contractions, and revivals. Expansions are periods of increased production, prices, and employment. Recessions involve declining output, prices, and rising unemployment. Contractions occur when the economy experiences a steep decline. Revivals mark the beginning of the next expansion phase. The phases of the business cycle - peak, recession, trough, recovery - are explained in detail. Causes of recessions and theories to explain business cycles like Keynesian and real business cycle theories are also summarized.
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GDP deflator and CPI are both used to measure inflation in an economy. GDP deflator measures the price changes of all goods and services produced in the economy, while CPI measures the price changes of goods and services purchased by households. CPI is more focused on consumer prices and assigns fixed weights to goods, so it can overstate inflation, while GDP deflator assigns changing weights and may understate inflation. Both measures generally agree on the overall inflation trend, but may diverge in specific cases like a crop failure, which would impact CPI more than GDP deflator.
Gdp ppt
The document summarizes the key components of Gross Domestic Product (GDP):
1) Consumption (C) which includes durable goods, non-durable goods, and services. Durable goods have a longer lifespan while non-durable goods have a shorter lifespan. Services are the fastest growing component.
2) Investment (I) which refers to business investment in capital.
3) Government spending (G) which is the sum spent on final goods and services by the government including salaries and weapons.
4) Net exports (X-M) which is gross exports minus imports of goods and services.
Consumer Price Index
The FAO food price index averaged 196.6 points in August 2014, its lowest level since September 2010, down 7.3 points from July 2014. The indexes for cereals, vegetable oils, dairy, and sugar all declined in August while the meat price index rose slightly. The consumer price index is a measure of the average price of consumer goods and services that reflects inflation in an economy. It represents a fixed basket of goods purchased by a typical consumer and is used to determine price changes from the base year. The CPI is an important indicator for central banks in setting monetary policy and interest rates.
CPI Measurement.
The document discusses the consumer price index (CPI), which is a measure of the average price of goods and services purchased by consumers used to indicate inflation. CPI is calculated based on a basket of commonly purchased goods and services, with prices tracked over time and compared to a base year. It is a weighted average that assigns different importance levels to items based on consumer spending habits. The document provides the methodology for calculating a simple CPI and weighted CPI, including examples.
Chapter 24 measuring the cost of living
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The document discusses stagflation that occurred in the late 1970s to early 1980s. Stagflation is defined as high inflation combined with high unemployment and economic recession. It was caused by external shocks like increased oil prices which raised production costs. Central banks faced a policy dilemma of whether to prioritize fighting inflation or recession. The Bank of Canada chose to target inflation, gradually reducing money supply growth and accepting short-term higher unemployment. This slowed inflation over time, though it caused economic turmoil initially. The Bank of Canada now uses an inflation target of 2% to guide monetary policy decisions.
Micro ppt of hicks n slutsky
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This document discusses stagflation in Pakistan and the ineffectiveness of monetary policy. It covers three periods of stagflation in Pakistan from the 1970s to today. The current situation includes high inflation, energy crisis, and economic mismanagement. Causes of stagflation include reduced productive capacity and inappropriate fiscal and monetary policies. Monetary policy conducted by the State Bank of Pakistan has been ineffective at controlling money supply and inflation due to a lack of coordination with fiscal authorities. Suggestions include attracting FDI, reducing inflation pressures, enforcing effective monetary policy, and improving tax collection.
Real vs. Nominal GDP
Lecture slides for an undergraduate course on Basic Macroeconomics that I taught in the Fall of 2007.
This lecture goes over the difference between real and nominal GDP.
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This document provides an overview of Keynesian economics and the development of macroeconomic thought after Keynes. It discusses:
1) Key aspects of Keynes' work including his critique of classical assumptions, development of aggregate demand and supply analysis, and emphasis on unemployment equilibrium.
2) Post-Keynesian developments like the Hicks-Hansen IS-LM model, the Phillips curve, and the emergence of inflation in the 1960s.
3) Milton Friedman's monetarist critique which emphasized the stability of demand for money and argued that monetary policy focused on steady money growth was better than Keynesian fiscal policies at achieving price stability and low unemployment.
Stagflation
This document defines and explains the concept of stagflation. Stagflation occurs when inflation rises alongside a stagnant economy, with both prices and unemployment increasing. The Reserve Bank of India must balance fighting inflation through interest rate hikes with avoiding damaging economic growth and causing stagflation. For India's robust economy, this balancing act is less risky than for slower-growing countries. Removing structural obstacles and reforms can help unlock growth and steer an economy out of stagflation.
Ppt on wpi cpi
The document discusses the Whole Sale Price Index (WPI) and Consumer Price Index (CPI). The WPI measures price changes in the primary and wholesale markets, while the CPI measures the overall cost of goods and services bought by a typical consumer. The CPI is used to monitor changes in the cost of living over time. It measures price changes of a fixed basket of goods and services of constant quality and quantity to determine inflation rates.
Interest rate
The document is a presentation on the Indian financial system covering various topics such as interest rates, types of interest rates set by the Reserve Bank of India, factors affecting market interest rates, government securities, and public deposits. It provides definitions and levels of interest rates according to different theories. It also outlines the structure and policy rates in India including the repo rate, reverse repo rate, cash reserve ratio, and statutory liquidity ratio set by RBI. Finally, it discusses reasons for changes in interest rates and characteristics of business cycles.
Interest Rates
1) Interest rates affect consumption, investment, and net exports which determines aggregate demand. Higher rates decrease borrowing and demand while lower rates increase borrowing and demand.
2) Interest rates can be used to target inflation levels. Higher rates lead to lower inflation while lower rates lead to higher inflation.
3) Changing interest rates also impacts unemployment levels. Raising rates decreases output and employment while lowering rates increases output and employment.
GDP:an overview
The document defines GDP (gross domestic product) and provides three equivalent definitions:
1) Total expenditures on final goods and services produced domestically in a year
2) Sum of the value added at each stage of production by all domestic industries plus taxes and subsidies
3) Sum of all domestic income including employee compensation, business profits, taxes, and subsidies.
Balance Of Payment ( Bo P)
The Balance of Payments (BoP) is a systematic record of all economic transactions between residents of a country and the rest of the world. It includes a country's trade balance, financial capital flows, services, and international transfers. Changes in a country's BoP can signal pressures on its foreign exchange rates and provide insights into its economic strengths and weaknesses relative to trade partners. India's BoP includes details of its imports, exports, invisibles, capital account and reserves. Its major trading partners are members of the European Union, OECD, OPEC, and developing countries like China.
Balance of payments
The Balance of Payments is a systematic record of all economic transactions between residents of a country and the rest of the world over a given period of time. It is a double-entry accounting statement that records a nation's exports and imports of goods and services, as well as financial capital inflows and outflows. Maintaining a balanced Balance of Payments is important for a stable economy, so nations aim to reduce deficits through policies targeting exports, imports, currency values, and international capital flows.
Consumption And Investment Function
This document provides information on consumption, investment, and savings functions. It defines consumption as the use of goods and services by households. Investment is expenditures on capital goods for future income generation. Savings are disposable income left over after consumption expenditures. The document discusses consumption and investment functions, which relate these variables to income. It also outlines factors that determine consumption, investment, and savings like income, interest rates, and expectations. The document concludes with a case study comparing consumption functions in India and Iran.
Methods of measuring National Income
National income can be measured using three methods:
1) The value added or product method measures the market value of final goods produced. It deducts intermediate goods and costs from total output.
2) The income method measures payments (rent, wages, interest, profit) to factors of production. It sums labour income, capital income, and mixed income.
3) The expenditure method measures total domestic expenditure by summing household consumption, investment, government spending, and exports minus imports.
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GDP Deflator
- 1. Inflation Cause: Printing money faster than making goods Effect: Rising prices
- 3. Nominal vs. Real Real Real
- 4. Nominal Current prices Current quantity Current quantity Current quantity
- 5. Real will always have a base year a base year a base year
- 6. Real Constant prices Current quantity Current quantity Current quantity
- 7. GDP Deflator Nominal GDP = x 100 Real GDP
- 8. Real versus Nominal GDP Pizza Soda Total % Year Price Qty Total Price Qty Total Total Change 2010 25 100 2500 5 50 250 2750 2011 35 134 4690 6 40 240 4930 79.3% 2011* 25 134 3350 5 40 200 3550 29.1% 2012 45 150 6750 7 30 210 6960 41.2% 2012* 25 150 3750 5 30 150 3900 9.9% * Prices adjusted to 2010 Rates
- 9. GDP Inflation Rate = x 100 GDP Delflator Year 2 - GDP Delflator Year 1 GDP Delflator Year 1
- 10. GDP Inflation Rate = x 100 GDP Delflator Year 2 - GDP Delflator Year 1 GDP Delflator Year 1