The document provides an overview of notes from economics lessons on inflation. It includes definitions of inflation, examples of historic inflation rates, factors that cause inflation, how to measure inflation using the Consumer Price Index and GDP deflator, and the effects of inflation on different groups. Practice problems are provided for calculating real GDP, nominal GDP, inflation rates, CPI, and the GDP deflator. The document also discusses the tradeoff between unemployment and inflation.
The document discusses key concepts related to measuring economic activity including Gross Domestic Product (GDP), the Consumer Price Index (CPI), and the unemployment rate. It explains that GDP measures total output, income, and expenditure in an economy. The CPI is used to measure inflation and the cost of living. Different methods for calculating GDP, the GDP deflator, and chained weighted GDP are also outlined.
This document discusses key macroeconomic indicators used to measure and analyze the overall economy. It covers gross domestic product (GDP), which measures total output; the GDP expenditure model; inflation and how it is calculated using price indices; unemployment rates and types; and the business cycle of economic expansions and contractions. Real GDP is used to account for inflation changes over time. The unemployment rate shows what percentage of the civilian labor force is unemployed. Business cycles are measured by changes in real GDP and different economic indicators can predict expansions or contractions in the near future.
- Inflation is a sustained increase in consumer prices that results in a fall in the purchasing power of money. It is measured by changes in the Consumer Price Index (CPI) over time.
- There are two main causes of inflation - cost-push inflation which results from increases in input costs that lead firms to raise prices, and demand-pull inflation which occurs when aggregate demand grows faster than the potential output of the economy.
- The consequences of inflation include a reduction in the purchasing power of money over time, higher costs for businesses to change prices frequently ("menu costs"), and the arbitrary redistribution of income between winners and losers from inflation such as debtors and lenders.
The document discusses fiscal policy effectiveness and the multiplier effect. It uses an example where the government representative, Big G Man, wants to increase aggregate demand (AD) by $10 billion to reach the GDP goal. Big G Man learns that a $1 billion increase in government spending will actually increase AD by $5 billion due to the multiplier effect, where each dollar of initial spending recirculates in the economy and generates further spending. The multiplier depends on the marginal propensity to consume (MPC), and is calculated as 1/(1-MPC). The example illustrates how the multiplier amplifies the impact of fiscal policy on AD and GDP.
Macroeconomics is the study of the economy as a whole. Key topics include national income concepts, determination of national income, international trade, money and prices, macroeconomic problems, and macroeconomic policies. National income accounting can be modeled using circular flow diagrams including two-sector, three-sector, and five-sector models. The two-sector model includes households and firms, while the three-sector model adds the government sector. The five-sector model further includes the financial sector and overseas sector.
This document provides an overview of key macroeconomic concepts including Gross Domestic Product (GDP) and the business cycle. It defines GDP as the total value of final goods and services produced within a country in a given year, which can be measured using either the expenditure approach or the income approach. It also explains how to use price indices to adjust nominal GDP values for inflation and obtain real GDP in order to make accurate comparisons over time. Finally, it outlines the four phases of the typical business cycle: peak, trough, recession, and expansion.
The document defines various economic terms related to inflation including inflation, hyperinflation, deflation, and stagflation. It also discusses how inflation is measured using the Consumer Price Index and some of the key causes of inflation such as increases in the money supply, cost pressures, and demand factors. The impacts of inflation on employment, incomes, and the overall economy are also outlined.
The document discusses key economic goals and indicators used to measure economic performance, including low inflation, low unemployment, a healthy balance of payments, and high economic growth. It defines inflation, unemployment, balance of payments, and economic growth. For each concept, it provides the measurement used (e.g. Consumer Price Index for inflation, unemployment rate for unemployment) and a brief explanation of the measurement. It also discusses GDP and the three approaches used to calculate it - output, expenditure, and income.
The document discusses key concepts related to measuring economic activity including Gross Domestic Product (GDP), the Consumer Price Index (CPI), and the unemployment rate. It explains that GDP measures total output, income, and expenditure in an economy. The CPI is used to measure inflation and the cost of living. Different methods for calculating GDP, the GDP deflator, and chained weighted GDP are also outlined.
This document discusses key macroeconomic indicators used to measure and analyze the overall economy. It covers gross domestic product (GDP), which measures total output; the GDP expenditure model; inflation and how it is calculated using price indices; unemployment rates and types; and the business cycle of economic expansions and contractions. Real GDP is used to account for inflation changes over time. The unemployment rate shows what percentage of the civilian labor force is unemployed. Business cycles are measured by changes in real GDP and different economic indicators can predict expansions or contractions in the near future.
- Inflation is a sustained increase in consumer prices that results in a fall in the purchasing power of money. It is measured by changes in the Consumer Price Index (CPI) over time.
- There are two main causes of inflation - cost-push inflation which results from increases in input costs that lead firms to raise prices, and demand-pull inflation which occurs when aggregate demand grows faster than the potential output of the economy.
- The consequences of inflation include a reduction in the purchasing power of money over time, higher costs for businesses to change prices frequently ("menu costs"), and the arbitrary redistribution of income between winners and losers from inflation such as debtors and lenders.
The document discusses fiscal policy effectiveness and the multiplier effect. It uses an example where the government representative, Big G Man, wants to increase aggregate demand (AD) by $10 billion to reach the GDP goal. Big G Man learns that a $1 billion increase in government spending will actually increase AD by $5 billion due to the multiplier effect, where each dollar of initial spending recirculates in the economy and generates further spending. The multiplier depends on the marginal propensity to consume (MPC), and is calculated as 1/(1-MPC). The example illustrates how the multiplier amplifies the impact of fiscal policy on AD and GDP.
Macroeconomics is the study of the economy as a whole. Key topics include national income concepts, determination of national income, international trade, money and prices, macroeconomic problems, and macroeconomic policies. National income accounting can be modeled using circular flow diagrams including two-sector, three-sector, and five-sector models. The two-sector model includes households and firms, while the three-sector model adds the government sector. The five-sector model further includes the financial sector and overseas sector.
This document provides an overview of key macroeconomic concepts including Gross Domestic Product (GDP) and the business cycle. It defines GDP as the total value of final goods and services produced within a country in a given year, which can be measured using either the expenditure approach or the income approach. It also explains how to use price indices to adjust nominal GDP values for inflation and obtain real GDP in order to make accurate comparisons over time. Finally, it outlines the four phases of the typical business cycle: peak, trough, recession, and expansion.
The document defines various economic terms related to inflation including inflation, hyperinflation, deflation, and stagflation. It also discusses how inflation is measured using the Consumer Price Index and some of the key causes of inflation such as increases in the money supply, cost pressures, and demand factors. The impacts of inflation on employment, incomes, and the overall economy are also outlined.
The document discusses key economic goals and indicators used to measure economic performance, including low inflation, low unemployment, a healthy balance of payments, and high economic growth. It defines inflation, unemployment, balance of payments, and economic growth. For each concept, it provides the measurement used (e.g. Consumer Price Index for inflation, unemployment rate for unemployment) and a brief explanation of the measurement. It also discusses GDP and the three approaches used to calculate it - output, expenditure, and income.
The document discusses key macroeconomic concepts including aggregate demand, aggregate supply, the consumption function, investment function, and the multiplier. It provides details on how each of these factors impact macroeconomic variables like output, employment, prices, and trade. It also examines the relationship between aggregate demand and supply using the AD-AS framework and how this intersection determines macroeconomic equilibrium.
This document discusses macroeconomic concepts including inflation, aggregate demand, aggregate supply, and monetary policy tools. It provides examples of different types of inflation and how they impact the economy. The effects of various economic events on mainland China's economy are analyzed using aggregate demand and supply diagrams. The importance of economic growth and managing uncertainty in budgeting is covered. Monetary policy tools like contractionary monetary policy are explained in the context of reducing demand-pull inflation.
The document discusses inflation and how it is measured. It defines inflation as a sustained increase in the cost of living leading to a fall in purchasing power. Inflation is mainly measured by changes in the Consumer Price Index (CPI) which tracks the prices of goods in a set basket. The CPI has limitations as it cannot account for new goods, quality changes, or substitution between goods. It may overstate inflation due to these problems.
Monetary and fiscal policy ppt @ becdomsBabasab Patil
The document discusses monetary and fiscal policies used to address short-run economic fluctuations. It introduces the aggregate demand and supply model and explains how shifts in these curves can cause changes in output and price levels. Monetary policy, by adjusting the money supply, and fiscal policy, by changing government spending or taxes, are used to shift aggregate demand to counter recessions or stabilize prices.
1. Inflation means a long-term continuous rise in the general price level of a country, which is calculated as a weighted average of prices of various goods and services, with more important items receiving higher weights.
2. India uses 435 commodities grouped into primary articles, fuel and power, and manufactured products to calculate its general price level. Inflation data is reported weekly by MOSPI.
3. Inflation rate is calculated as the percentage change in price level from the base period to the final period. Items with higher weights have a greater impact on the inflation rate.
The document discusses key macroeconomic indicators such as GDP, unemployment, and inflation that are used to measure the health of the economy. It defines GDP as the total market value of goods and services produced within a country in a given period. Unemployment is defined as adults actively seeking but unable to find work. Inflation is defined as the sustained rise in the general price level over time. These indicators are analyzed to identify economic expansions, contractions, and full employment.
GDP, Inflation and unemployment for assessing Economic Health.MaherMubeen
Why do economists focus on GDP, Inflation, and unemployment for assessing the entire health of the economy? To know how much the countries are economically strong.
This document discusses the relationship between GDP and consumption in Nepal. It finds that consumption is the single most important component of calculating GDP, making up more than 50% of GDP calculations in most countries. GDP and consumption are positively correlated, as a rise in consumption leads to a corresponding rise in GDP. The study analyzes data from Nepal from 1975 to 2011, finding a highly significant relationship between GDP and consumption, with consumption explaining 99.6% of the variation in GDP. It concludes that consumption fully depends on and increases with the level of GDP in Nepal.
aggregate demand and aggregate supply for 2nd semester for BBAginish9841502661
The document discusses aggregate demand and aggregate supply. It defines aggregate demand as being underpinned by consumers, investors, government and foreigners. Aggregate supply reflects a positive relationship between price level and output in the short run due to price-cost dynamics. In the long run, aggregate supply is vertical as output is determined by fixed resources and technology. Macroeconomic equilibrium occurs where aggregate demand and supply intersect.
This document describes key macroeconomic concepts related to aggregate demand and aggregate supply, including:
1) The components of aggregate demand (C, I, G, X-M) and factors that can change each component.
2) The short-run and long-run aggregate supply curves and how costs of production and productivity can cause shifts.
3) Using AD/AS models to illustrate inflationary and deflationary gaps and analyze the effects of fiscal and monetary policy changes.
The consumer price index (CPI) measures the cost of a basket of goods and services relative to the base year, and is used to calculate the inflation rate. The CPI imperfectly measures cost of living due to substitution bias, new products, and quality changes unaccounted for. It tends to overstate inflation by about 1% annually. The GDP deflator differs in including all goods and services produced rather than consumed, and automatically adjusting its basket over time. Price indexes are needed to correct dollar figures for inflation effects over different time periods.
The consumer price index (CPI) measures the cost of a basket of goods and services relative to a base year, and is used to measure inflation. The CPI has limitations as it does not account for substitution effects, new products, or quality changes. It tends to overstate inflation by around 1% annually. The GDP deflator differs from the CPI as it measures prices of all goods and services produced rather than consumed, and automatically updates the basket over time. High inflation can lead to costs like shoeleather costs and menu costs as people and businesses adjust to rising prices.
This document provides an overview of macroeconomics concepts including national income, aggregate demand and supply, the business cycle, unemployment and inflation, and income distribution. It defines key macroeconomic goals such as economic growth and price stability. It also discusses how macroeconomic equilibrium can be achieved through fiscal and monetary policy and explores supply-side policies and models including the multiplier effect, Phillips curve and NAIRU.
This document provides an overview and outline of macroeconomics topics covered in a textbook. It discusses the key issues macroeconomists study like recessions, inflation, and unemployment. It introduces economic models as simplified representations of reality used to study relationships between variables and devise policies. The document outlines different models used to examine short-run issues when prices are sticky versus long-run issues when prices are flexible. It concludes with a summary of macroeconomics as the study of the overall economy and growth.
This document discusses macroeconomic models, including long-run, medium-run, and short-run models. The long-run model focuses on economic growth and productivity determining output. The medium-run model shows how the economy transitions from short-run to long-run. The short-run model analyzes how output and unemployment fluctuate with demand. Macroeconomics analyzes economic growth, fluctuations, and the impact of policies on goods, labor, and asset markets at an aggregate level.
This document discusses inflation and the quantity theory of money. It begins by explaining how inflation is measured using the consumer price index. It then covers the quantity theory of money, including the quantity equation and using a money supply-demand diagram to show how the quantity of money determines the price level in the long run. The document also discusses the main causes of inflation, including monetary factors like too much money growth as well as cost-push factors like rising input costs.
Measuring the Cost of Living - computing for CPI and Inflation (SS 113)Arvin Maruya
SS 113 (Economic Planning and Strategy) report on measuring the cost of livingg.
Additional References:
N. Gregory Mankiw's Principles of Macroeconomics.
N. Gregory Mankiw's PPT slides for Principles of Macroeconomics.
1. The document discusses the differences between the short run and long run in macroeconomics and introduces the aggregate demand and aggregate supply model.
2. In the short run, prices are sticky and output can deviate from full employment, while in the long run prices are flexible and output depends only on supply.
3. The model shows how shocks like changes in money supply, velocity, or oil prices can affect output and inflation in the short and long run.
This document discusses aggregate demand and aggregate supply models. It begins by introducing the AD/AS model framework and its four components: long-run aggregate supply, short-run aggregate supply, long-run aggregate supply, and aggregate demand. It then focuses on aggregate demand, explaining the downward slope of the AD curve through the wealth, interest rate, and exchange rate effects of price level changes on consumption, investment, and net exports. It also discusses how shifts in consumption, investment, government spending, or net exports from non-price factors change the AD curve. The document provides examples and diagrams to illustrate these concepts.
This document discusses key concepts in macroeconomics related to measuring the economy. It defines labour as the total number of workers available for work between ages 15-16 and over. Labour force participation rate is the percentage of the working age population that is part of the labour force. Labour productivity refers to the quantity of goods and services a worker can produce in a given time period. Price indices like the consumer price index and retail price index are used to calculate price levels and inflation in an economy. Aggregate demand and aggregate supply curves are used to show how output and price levels interact in response to economic factors.
Inflation reduces the purchasing power of currency over time by increasing the prices of goods and services. It is typically measured using the Consumer Price Index (CPI), which tracks the prices of a basket of consumer goods and services. High inflation can negatively impact the economy by redistributing wealth, reducing the value of savings, and creating uncertainty that discourages spending and investment. To accurately measure economic growth, economists calculate real GDP, which factors out the effects of inflation by using a base year's price levels. This distinguishes actual growth in production from growth simply due to rising prices.
The document discusses key macroeconomic concepts including aggregate demand, aggregate supply, the consumption function, investment function, and the multiplier. It provides details on how each of these factors impact macroeconomic variables like output, employment, prices, and trade. It also examines the relationship between aggregate demand and supply using the AD-AS framework and how this intersection determines macroeconomic equilibrium.
This document discusses macroeconomic concepts including inflation, aggregate demand, aggregate supply, and monetary policy tools. It provides examples of different types of inflation and how they impact the economy. The effects of various economic events on mainland China's economy are analyzed using aggregate demand and supply diagrams. The importance of economic growth and managing uncertainty in budgeting is covered. Monetary policy tools like contractionary monetary policy are explained in the context of reducing demand-pull inflation.
The document discusses inflation and how it is measured. It defines inflation as a sustained increase in the cost of living leading to a fall in purchasing power. Inflation is mainly measured by changes in the Consumer Price Index (CPI) which tracks the prices of goods in a set basket. The CPI has limitations as it cannot account for new goods, quality changes, or substitution between goods. It may overstate inflation due to these problems.
Monetary and fiscal policy ppt @ becdomsBabasab Patil
The document discusses monetary and fiscal policies used to address short-run economic fluctuations. It introduces the aggregate demand and supply model and explains how shifts in these curves can cause changes in output and price levels. Monetary policy, by adjusting the money supply, and fiscal policy, by changing government spending or taxes, are used to shift aggregate demand to counter recessions or stabilize prices.
1. Inflation means a long-term continuous rise in the general price level of a country, which is calculated as a weighted average of prices of various goods and services, with more important items receiving higher weights.
2. India uses 435 commodities grouped into primary articles, fuel and power, and manufactured products to calculate its general price level. Inflation data is reported weekly by MOSPI.
3. Inflation rate is calculated as the percentage change in price level from the base period to the final period. Items with higher weights have a greater impact on the inflation rate.
The document discusses key macroeconomic indicators such as GDP, unemployment, and inflation that are used to measure the health of the economy. It defines GDP as the total market value of goods and services produced within a country in a given period. Unemployment is defined as adults actively seeking but unable to find work. Inflation is defined as the sustained rise in the general price level over time. These indicators are analyzed to identify economic expansions, contractions, and full employment.
GDP, Inflation and unemployment for assessing Economic Health.MaherMubeen
Why do economists focus on GDP, Inflation, and unemployment for assessing the entire health of the economy? To know how much the countries are economically strong.
This document discusses the relationship between GDP and consumption in Nepal. It finds that consumption is the single most important component of calculating GDP, making up more than 50% of GDP calculations in most countries. GDP and consumption are positively correlated, as a rise in consumption leads to a corresponding rise in GDP. The study analyzes data from Nepal from 1975 to 2011, finding a highly significant relationship between GDP and consumption, with consumption explaining 99.6% of the variation in GDP. It concludes that consumption fully depends on and increases with the level of GDP in Nepal.
aggregate demand and aggregate supply for 2nd semester for BBAginish9841502661
The document discusses aggregate demand and aggregate supply. It defines aggregate demand as being underpinned by consumers, investors, government and foreigners. Aggregate supply reflects a positive relationship between price level and output in the short run due to price-cost dynamics. In the long run, aggregate supply is vertical as output is determined by fixed resources and technology. Macroeconomic equilibrium occurs where aggregate demand and supply intersect.
This document describes key macroeconomic concepts related to aggregate demand and aggregate supply, including:
1) The components of aggregate demand (C, I, G, X-M) and factors that can change each component.
2) The short-run and long-run aggregate supply curves and how costs of production and productivity can cause shifts.
3) Using AD/AS models to illustrate inflationary and deflationary gaps and analyze the effects of fiscal and monetary policy changes.
The consumer price index (CPI) measures the cost of a basket of goods and services relative to the base year, and is used to calculate the inflation rate. The CPI imperfectly measures cost of living due to substitution bias, new products, and quality changes unaccounted for. It tends to overstate inflation by about 1% annually. The GDP deflator differs in including all goods and services produced rather than consumed, and automatically adjusting its basket over time. Price indexes are needed to correct dollar figures for inflation effects over different time periods.
The consumer price index (CPI) measures the cost of a basket of goods and services relative to a base year, and is used to measure inflation. The CPI has limitations as it does not account for substitution effects, new products, or quality changes. It tends to overstate inflation by around 1% annually. The GDP deflator differs from the CPI as it measures prices of all goods and services produced rather than consumed, and automatically updates the basket over time. High inflation can lead to costs like shoeleather costs and menu costs as people and businesses adjust to rising prices.
This document provides an overview of macroeconomics concepts including national income, aggregate demand and supply, the business cycle, unemployment and inflation, and income distribution. It defines key macroeconomic goals such as economic growth and price stability. It also discusses how macroeconomic equilibrium can be achieved through fiscal and monetary policy and explores supply-side policies and models including the multiplier effect, Phillips curve and NAIRU.
This document provides an overview and outline of macroeconomics topics covered in a textbook. It discusses the key issues macroeconomists study like recessions, inflation, and unemployment. It introduces economic models as simplified representations of reality used to study relationships between variables and devise policies. The document outlines different models used to examine short-run issues when prices are sticky versus long-run issues when prices are flexible. It concludes with a summary of macroeconomics as the study of the overall economy and growth.
This document discusses macroeconomic models, including long-run, medium-run, and short-run models. The long-run model focuses on economic growth and productivity determining output. The medium-run model shows how the economy transitions from short-run to long-run. The short-run model analyzes how output and unemployment fluctuate with demand. Macroeconomics analyzes economic growth, fluctuations, and the impact of policies on goods, labor, and asset markets at an aggregate level.
This document discusses inflation and the quantity theory of money. It begins by explaining how inflation is measured using the consumer price index. It then covers the quantity theory of money, including the quantity equation and using a money supply-demand diagram to show how the quantity of money determines the price level in the long run. The document also discusses the main causes of inflation, including monetary factors like too much money growth as well as cost-push factors like rising input costs.
Measuring the Cost of Living - computing for CPI and Inflation (SS 113)Arvin Maruya
SS 113 (Economic Planning and Strategy) report on measuring the cost of livingg.
Additional References:
N. Gregory Mankiw's Principles of Macroeconomics.
N. Gregory Mankiw's PPT slides for Principles of Macroeconomics.
1. The document discusses the differences between the short run and long run in macroeconomics and introduces the aggregate demand and aggregate supply model.
2. In the short run, prices are sticky and output can deviate from full employment, while in the long run prices are flexible and output depends only on supply.
3. The model shows how shocks like changes in money supply, velocity, or oil prices can affect output and inflation in the short and long run.
This document discusses aggregate demand and aggregate supply models. It begins by introducing the AD/AS model framework and its four components: long-run aggregate supply, short-run aggregate supply, long-run aggregate supply, and aggregate demand. It then focuses on aggregate demand, explaining the downward slope of the AD curve through the wealth, interest rate, and exchange rate effects of price level changes on consumption, investment, and net exports. It also discusses how shifts in consumption, investment, government spending, or net exports from non-price factors change the AD curve. The document provides examples and diagrams to illustrate these concepts.
This document discusses key concepts in macroeconomics related to measuring the economy. It defines labour as the total number of workers available for work between ages 15-16 and over. Labour force participation rate is the percentage of the working age population that is part of the labour force. Labour productivity refers to the quantity of goods and services a worker can produce in a given time period. Price indices like the consumer price index and retail price index are used to calculate price levels and inflation in an economy. Aggregate demand and aggregate supply curves are used to show how output and price levels interact in response to economic factors.
Inflation reduces the purchasing power of currency over time by increasing the prices of goods and services. It is typically measured using the Consumer Price Index (CPI), which tracks the prices of a basket of consumer goods and services. High inflation can negatively impact the economy by redistributing wealth, reducing the value of savings, and creating uncertainty that discourages spending and investment. To accurately measure economic growth, economists calculate real GDP, which factors out the effects of inflation by using a base year's price levels. This distinguishes actual growth in production from growth simply due to rising prices.
This document discusses inflation and how it is measured. It provides the following key points:
1. Inflation is defined as a general rise in prices over time which reduces the purchasing power of money. It is commonly measured using price indices like the Consumer Price Index (CPI).
2. The CPI tracks the prices of goods and services in a market basket over time, using a base year (often 1982) as a benchmark. It expresses current prices as a percentage of base year prices to calculate inflation rates.
3. There are three main causes of inflation - too much money printing by the government, too much spending outpacing production (demand-pull), and higher production costs pushing prices up (
The document discusses business cycles and fluctuations in economic growth. It notes that a business cycle consists of expansions and contractions in most economic activities over time, varying in length from over a year to around a decade. It also discusses indicators used to predict and describe business cycles, such as leading, lagging, and coincident indicators tracked by organizations like the Conference Board and Bureau of Labor Statistics.
The document discusses key macroeconomic indicators used to measure the health of an economy, including Gross Domestic Product (GDP), inflation, and unemployment. It defines GDP as the total market value of goods and services produced within a country in a given period. Inflation is defined as the percentage increase in average prices from one period to the next, as measured by the Consumer Price Index. Unemployment is the percentage of the civilian labor force that is unemployed and actively seeking work. The document also outlines the business cycle and phases of expansion, contraction, recession and depression.
The document discusses macroeconomic measures like GDP and economic growth. It defines GDP as the total value of goods and services produced within a country in a year. GDP is calculated by adding up consumer spending, investment, government spending, and net exports. Nominal GDP uses current prices, while real GDP adjusts for inflation to show changes in the actual quantity of goods produced. The document also discusses related concepts like GNP, NNP, and the components and calculation of GDP.
Macroeconomic that will help you understand more and help the country by understanding the topic well. Other than that, it also emphasizes in the stability of the country's economical state. Food security as well no poverty plays a huge part in the balance of the economic state of the country.
The document provides an overview of macroeconomics and how countries measure economic growth and standards of living. It defines macroeconomics as the study of the overall economy rather than individual components. Gross Domestic Product (GDP) is introduced as the primary measure of a country's economic growth, representing the total value of final goods and services produced annually. Real GDP per capita is identified as the best measure of a country's standard of living, as it accounts for inflation and divides GDP by population size.
This document provides an overview of GDP and economic growth. It defines GDP as the total market value of all final goods and services produced within a country in a given period. GDP is measured using both expenditure and income approaches. The document discusses real GDP, nominal GDP, and per capita GDP. It also covers economic growth, business cycles, and factors that influence growth such as productivity, technology, and trade. The aggregate demand-aggregate supply model is introduced as a framework for understanding output and price levels in the short-run.
macro 1 Fundamentals of macro economics(1).pptMohtishamUlhaq1
This document provides an overview of macroeconomics concepts including:
- Macroeconomics studies the whole economy rather than individual consumers or businesses.
- The three major economic goals for all countries are to promote economic growth, limit unemployment, and keep prices stable by limiting inflation.
- Gross Domestic Product (GDP) is the primary measure of economic growth. Real GDP, which adjusts for inflation, is a better measure than nominal GDP.
- Unemployment rates are used to measure success in limiting unemployment, with full employment meaning only frictional and structural unemployment remain.
- Inflation is measured using indexes like the Consumer Price Index (CPI) and GDP deflator,
The document discusses economic challenges related to inflation and unemployment. It defines inflation as a general increase in prices over time which decreases purchasing power. Unemployment is defined as people who are currently not working but have actively sought work in the past four weeks. Different types of unemployment are explained such as frictional, structural, seasonal, and cyclical unemployment. Factors that cause inflation like the quantity theory, cost-push theory, and demand-pull theory are also summarized.
This document discusses tracking the economy through measures like GDP and productivity. It provides information on GDP components and how GDP is calculated through the expenditure and income approaches. Specific data is given for an artificial economy as an example. The document also discusses deflating nominal values to obtain real values and explains why this is important for understanding economic growth. Productivity, interest rates, bonds, and inflation measures like the CPI are also overviewed at a high level.
measuring the cost of living
Consumer Price Index
How the CPI Is Calculated
Problems with the CPI
Contrasting the CPI and GDP Deflator
Correcting Variables for Inflation:
This document contains an outline of macroeconomics topics organized into parts and chapters. Part I discusses measuring a nation's income and cost of living using metrics like GDP, inflation rates, and CPI. Part II examines the real economy in the long run, covering topics like production, growth, saving, investment and unemployment. Part III looks at money and prices in the long run, including monetary systems and inflation. Further parts discuss open economy macroeconomics, short-run economic fluctuations, and debates around macroeconomic policy. Chapters delve deeper into specific macroeconomic concepts and indicators.
This document discusses various topics related to inflation including:
1. Definitions of inflation, real vs nominal GDP and interest rates, and different indices used to measure inflation like the GDP deflator, CPI, and PPI.
2. Causes of inflation including demand shocks, supply shocks, and increases in the money supply from a Keynesian and monetarist perspective.
3. Costs of inflation such as its impact on savers, wage-price spirals, arbitrary redistributions of income, and disruption to business planning.
This document defines inflation as an increase in the average price level of all products in an economy. It discusses how economists measure inflation using tools like the Consumer Price Index (CPI) and Producer Price Index (PPI). The CPI specifically tracks the prices of goods in a market basket and is used to calculate inflation rates. Causes of inflation include increases in aggregate demand and costs, as well as growth in the money supply. Effects of inflation are a decrease in purchasing power, the value of real wages, and savings.
This document defines key economic concepts like GDP, price indexes, and real GDP. It explains that GDP measures total output in currency terms, but rising prices can make GDP rise even if actual output does not change. To account for changing prices, economists use price indexes like the GDP price deflator. Real GDP divides nominal GDP by the price deflator to express output in constant base year prices, allowing more accurate comparisons of how output changes over time independent of inflation.
Notes for Principles of Macroeconomics (ECON 10020 or ECON 20020) at the University of Notre Dame. Topics include the role of financial institutions and financial markets in capitalist economies, government management of the business cycle, and current monetary policy in the United States. Etc.
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
Vicinity Jobs’ data includes more than three million 2023 OJPs and thousands of skills. Most skills appear in less than 0.02% of job postings, so most postings rely on a small subset of commonly used terms, like teamwork.
Laura Adkins-Hackett, Economist, LMIC, and Sukriti Trehan, Data Scientist, LMIC, presented their research exploring trends in the skills listed in OJPs to develop a deeper understanding of in-demand skills. This research project uses pointwise mutual information and other methods to extract more information about common skills from the relationships between skills, occupations and regions.
Optimizing Net Interest Margin (NIM) in the Financial Sector (With Examples).pdfshruti1menon2
NIM is calculated as the difference between interest income earned and interest expenses paid, divided by interest-earning assets.
Importance: NIM serves as a critical measure of a financial institution's profitability and operational efficiency. It reflects how effectively the institution is utilizing its interest-earning assets to generate income while managing interest costs.
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Macro 2.3 inflation
1. Tuesday, September 26
• Please get out a piece
of paper and number it
1-11.
• You need your
Outside Work ready
for today!
• We will be taking notes on
Inflation Today
• Reminder, Problem Set is
due Monday. I know, I
know…. You’re welcome!
1
3. REVIEW ACTIVITY
Name That Concept
Rules:
1. Cannot use the word(s)
2. Focus on the concept not word
Ex: Price Maker
3
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ACDC Leadership 2015
5. NAME THAT CONCEPT
1.REAL GDP
2.FULL EMPLOYM.
3.CYCLICAL UNEMP.
4.NATURAL RATE
5.FRICTIONAL
UNEMPLOYMENT
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ACDC Leadership 2015
6. Goal #3
LIMIT INFLATION
Country and Time-
Zimbabwe, 2008
Annual Inflation Rate-
79,600,000,000%
Time for Prices to Double-
24.7 hours
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ACDC Leadership 2015
7. What is Inflation?
Inflation is rising general level of prices and
it reduces the “purchasing power” of
money
Examples:
•It takes $2 to buy what $1 bought in 1987
•It takes $6 to buy what $1 bought in 1970
•It takes $24 to buy what $1 bought in 1913
When inflation occurs, each dollar of income
will buy fewer goods than before
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ACDC Leadership 2015
9. Good or Bad?
In general, ramped inflation is bad because
banks don’t lend and people don’t save.
This decreases investment and GDP.
What about deflation?
Deflation- Decrease in general prices or a
negative inflation rate.
Deflation is bad because people will hoard
money (financial assets)
This decreases consumer spending and GDP.
Disinflation- Prices increasing at slower rates
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ACDC Leadership 2015
10. But inflation doesn’t effect everyone equally.
Identify which people are helped and which
are hurt by unanticipated inflation
1. A man who lent out $500 to his friend in 1960
and gets paid back in 2015.
2. A tenant who is charged $850 rent each year.
3. An elderly couple living off fixed retirement
payments of $2000 a month
4. A man that borrowed $1,000 in 1995 and paid
it back in 2014.
5. A women who saved $500 in 1950 by putting it
under her mattress
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ACDC Leadership 2015
11. Effects of Unanticipated Inflation
• Borrowers-People
who borrow money
• A business where the
price of the product
increases faster than
the price of resources
• Lenders-People who
lend money (at fixed
interest rates)
• People with fixed
incomes
• Savers
Hurt by Inflation Helped by Inflation
Nominal Wage- Wage measured by dollars rather
than purchasing power
Real Wage- Wage adjusted for inflation
If there is inflation, you must ask your
boss for a raise
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ACDC Leadership 2015
15. Wednesday, September 27
• Notes today!
• Problem Set Due Monday
• FRQ Tuesday, MC Wednesday…. You need to
practice often over the weekend
15
16. How is inflation measured?
The government tracks the prices of specific “market
baskets” that included the same goods and services.
There are two ways to look at inflation over time:
The Inflation Rate- The percent change in prices from
year to year
Price Indices- Index numbers assigned to each year that
show how prices have changed relative to a specific
base year.
Examples:
•The U.S. inflation rate in 2014 was 0.8%.
•The Consumer Price Index for 2014 was 235 (base
year 1982). This means that prices have increased
135% since 1982.
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ACDC Leadership 2015
18. = Price of market
basket in base year
x 100
CPI Price of market basket
Consumer Price Index (CPI)
The most commonly used measurement of inflation for
consumers is the Consumer Price Index (CPI)
Here is how it works:
• The base year is given an index of 100
• To compare, each year is given an index # as well
1997 Market Basket: Movie is $6 & Pizza is $14
Total = $20 (Index of Base Year = 100)
2009 Market Basket: Movie is $8 & Pizza is $17
Total = $25 (Index of )
125
•This means inflation increased 25% b/w ’97 & ‘09
•Items that cost $100 in ’97 cost $125 in ‘09
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ACDC Leadership 2015
20. Problems with the CPI
1. Substitution Bias- As prices increase for the fixed
market basket, consumers buy less of these products
and more substitutes that may not be part of the
market basket. (Result: CPI may be higher than
what consumers are really paying)
2. New Products- The CPI market basket may not
include the newest consumer products. (Result: CPI
measures prices but not the increase in choices)
3. Product Quality- The CPI ignores both
improvements and decline in product quality.
(Result: CPI may suggest that prices stay the same
though the economic well being has improved
significantly)
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ACDC Leadership 2015
22. Calculating CPI
1
2
3
4
5
10
10
15
20
25
$ 4
5
6
8
4
Units of
Output
Year
Nominal,
GDP
Real,
GDP
Make year one the base year
= Price of the same market
basket in base year
x 100
CPI
Price of market basket in
the particular year
Price
Per Unit
CPI/ GDP
Deflator
(Year 1 as
Base Year)
Inflation
Rate
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ACDC Leadership 2015
23. 1
2
3
4
5
10
10
15
20
25
$ 4
5
6
8
4
$40
40
60
80
100
Price
Per Unit
Units of
Output
Year
$40
50
90
160
100
100
125
150
200
100
Nominal,
GDP
Real,
GDP
% Change
in Prices = Year 2 - Year 1
Year 1
X 100
Inflation Rate
Inflation
Rate
N/A
25%
20%
33.33%
-50%
CPI/ GDP
Deflator
(Year 1 as
Base Year)
Calculating CPI
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ACDC Leadership 2015
25. = Real GDP
x 100
GDP
Deflator
Nominal GDP
CPI vs. GDP Deflator
The GDP deflator measures the prices of all goods
produced, whereas the CPI measures prices of only
the goods and services bought by consumers.
An increase in the price of goods bought by firms or the
government will show up in the GDP deflator but not in the
CPI.
The GDP deflator includes only those goods and services produced
domestically. Imported goods are not a part of GDP and
therefore don’t show up in the GDP deflator.
If the nominal GDP in ’09 was 25 and the real GDP
(compared to a base year) was 20 how much is the
GDP Deflator?
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ACDC Leadership 2015
26. Calculating GDP Deflator
= 100
Nominal
GDP
(Deflator) x (Real GDP)
= Real GDP
x 100
GDP
Deflator
Nominal GDP
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ACDC Leadership 2015
27. Calculations
1. In an economy, Real GDP (base year = 1996) is $100
billion and the Nominal GDP is $150 billion.
Calculate the GDP deflator.
2. In an economy, Real GDP (base year = 1996) is $125
billion and the Nominal GDP is $150 billion.
Calculate the GDP deflator.
3. In an economy, Real GDP for year 2002 (base year =
1996) is $200 billion and the GDP deflator 2002 (base
year = 1996) is 120. Calculate the Nominal GDP for
2002.
4. In an economy, Nominal GDP for year 2005 (base year
= 1996) is $60 billion and the GDP deflator 2005 (base
year = 1996) is 120. Calculate the Real GDP for 2005.
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ACDC Leadership 2015
32. Review
1. Identify the 3 goals of all economies
2. Define Natural Rate of Unemployment
3. Define inflation rate
4. What is a market basket?
5. Explain the difference between nominal
and real interest rates
6. How do you calculate CPI?
7. What does a CPI of 130 mean?
8. Who is helped and hurt by inflation?
9. Why did Bolivia experience
hyperinflation?
10.List 10 old-school Nintendo games
33. Three Causes of
Inflation
1. If everyone suddenly had a million dollars, what
would happen?
2. What two things cause prices to increase? Use
Supply and Demand
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ACDC Leadership 2015
34. 1. The Government Prints TOO MUCH
Money (The Quantity Theory)
3 Causes of Inflation
• Governments that keep
printing money to pay debts
end up with hyperinflation.
• Result: Banks refuse to lend
so investment falls and
people don’t save up to buy
things.
Examples:
• Bolivia, Peru, Brazil
• Germany after WWI
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ACDC Leadership 2015
35. Quantity Theory of Money
If the real GDP in a year is $400 billion but the
amount of money in the economy is only $100
billion, how are we paying for things?
The velocity of money is the average times a
dollar is spent and re-spent in a year.
How much is the velocity of money in the above
example?
Quantity Theory of Money Equation:
M x V = P x Y
M = money supply P = price level
V = velocity Y = quantity of output
Notice that P x Y is Nominal GDP
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ACDC Leadership 2015
36. M x V = P x Y
Why does printing money lead to inflation?
•Assume the velocity is relatively constant because
people's spending habits are not quick to change.
•Also assume that output (Y) is not affected by the
amount of money because it is based on
production, not the value of the stuff produced.
If the govenment increases the amount of money
(M) what will happen to prices (P)?
Ex: Assume money supply is $5 and it is being used to buy
10 products with a price of $2 each.
1. How much is the velocity of money?
2. If the velocity and output stay the same, what will
happen if the amount of money is increase to $10?
Notice, doubling the money supply doubles prices 36
38. 2. Demand- Pull Inflation
DEMAND PULLS UP PRICES!!!
“Too many dollars chasing too few goods”
An overheated economy with excessive
spending but same amount of goods.
3 Causes of Inflation
3. Cost-Push Inflation
Higher production costs increase prices
A negative supply shock increases the costs of
production and forces producers to increase
prices.
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ACDC Leadership 2015
39. A Perpetual Process:
1.Workers demand raises
2.Owners increase prices to
pay for raises
3. High prices cause workers
to demand higher raises
4. Owners increase prices to
pay for higher raises
5. High prices cause workers
to demand higher raises
6. Owners increase prices to
pay for higher raises
The Wage-Price Spiral
41. Interest Rates and Inflation
What are interest rates? Why do lenders charge them?
Who is willing to lend me $100 if I will pay a
total interest rate of 100%?
(I plan to pay you back in 2050)
If the nominal interest rate is 10% and the inflation
rate is 15%, how much is the REAL interest rate?
Real Interest Rates-
The percentage increase in purchasing power that a
borrower pays. (adjusted for inflation)
Real = nominal interest rate - expected inflation
Nominal Interest Rates-
the percentage increase in money that the borrower
pays not adjusting for inflation.
Nominal = Real interest rate + expected inflation
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ACDC Leadership 2015
42. Nominal vs. Real Interest Rates
Example #1:
You lend out $100 with 20% interest. Inflation is 15%.
A year later you get paid back $120.
What is the nominal and what is the real interest rate?
Nominal interest rate is 20%. Real interest rate was 5%
In reality, you get paid back an amount with less
purchasing power.
Example #2:
You lend out $100 with 10% interest. Prices are expected
to increased 20%. In a year you get paid back $110.
What is the nominal and what is the real interest rate?
Nominal interest rate is 10%. Real rate was –10%
In reality, you get paid back an amount with
less purchasing power.
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ACDC Leadership 2015
43. Achieving the Three Goals
Unemployment Inflation GDP Growth
Good 6% or less 1%-4% 2.5%-5%
Worry 6.5%-8% 5%-8% 1%-2%
Bad 8.5 % or more 9% or more .5% or less
The governments role is to prevent unemployment and
prevent inflation at the same time.
•If the government focuses too much on preventing
inflation and slows down the economy we will have
unemployment.
•If the government focuses too much on limiting
unemployment and overheats the economy we will have
inflation
Editor's Notes
GDP deflator=150
GDP deflator=120
Nominal GDP=$240 billion
Real GDP=$50