Gdp

1. Macroeconomics
Khanim Guliyeva

2. Macroeconomics: The Big Picture
Chapter 5

3. Macroeconomics: The Big Picture
Growth of Real GDP and Business Cycles
Price-Level Changes
Unemployment

4. • What determines a country’s output, and why does
output in some economies expand while in others it
contracts?
• Why do some economies grow faster than others?
• What causes prices throughout an economy to
fluctuate, and how do such fluctuations affect people?
• What causes employment and unemployment?
• Why does a country’s unemployment rate fluctuate?
• Why do different countries have different
unemployment rates?

5. • This chapter provides a preliminary sketch of the
most important macroeconomic issues: growth of
total output and the business cycle, changes in the
price level, and unemployment.

6. GDP
• It represents the total dollar value of all goods
and services produced over a specific time
period, often referred to as the size of the
economy.

7. GDP
• It is the monetary value of all the finished
goods and services produced within a
country's borders in a specific time period and
includes anything produced by the country's
citizens and foreigners within its borders.

8. GDP is calculated by adding together:
• Personal and public consumption
• Public and private investment
• Government spending
• Exports fewer imports

9. These are not included in GDP:
• Bartered goods
• Prostitution
• Illegal drugs sales
• Money laundering
• Activities done by housewives
• Sale of second hand goods
• Indexed Payments

10. The figure is generally expressed as a
percentage.

11. The GDP value of Azerbaijan represents 0.08 percent of the
world economy.

12. • Why did the rate of GDP decline to a low at
37.87 billion dollars in 2016?
• How did the rate of GDP increased to a high at
75,24 billion dollars in 2014 whilst there was a
big economic crisis all over the world?

13. Nominal GDP vs. Real GDP
Meaning
• The aggregate market value of the economic
output produced in a year within the
boundaries of the country is known as
Nominal GDP.
• Real GDP refers to the value of economic
output produced in a given period, adjusted
according to the changes in the general price
level.

14. Nominal GDP vs. Real GDP
What is it?
• GDP without the effect of inflation.
• Inflation adjusted GDP

15. Nominal GDP vs. Real GDP
Expressed in
• Current year prices
• Base year prices or constant prices.

16. Nominal GDP vs. Real GDP
Value
• Higher
• Generally, lower

17. Nominal GDP vs. Real GDP
Uses
• Comparison of various quarters of the given
year can be made.
• Comparison of two or more financial year can
be done easily.

18. Nominal GDP vs. Real GDP
Economic growth
• Cannot be analyzed easily.
• Good indicator of economic growth.

19. Phases of the Business Cycle

20. • A sustained period in which real GDP is rising
is an expansion;
• A sustained period in which real GDP is falling
is a recession

21. Inflation and Deflation
• Inflation is an increase in the average level of
prices, and deflation is a decrease in the
average level of prices.

22. • Hyperinflation is generally defined as an
inflation rate in excess of 200% per year.

23. • Do the problems associated with inflation
imply that deflation would be a good thing?

24. • A price index is a number whose movement
reflects movement in the average level of
prices.

26. The Consumer Price Index

27. • substitution bias
• new-product bias
• quality-change bias
• outlet bias

28. The personal consumption expenditures price index
• PCE price index, includes durable goods, nondurable goods,
and services and is provided along with estimates for prices of
each component of consumption spending.

31. The unemployment rate is the percentage of
the labor force that is unemployed.

32. Types of Unemployment
Frictional Unemployment
Structural Unemployment
Cyclical Unemployment

33. Thank you for your attention! 