Basic Macroeconomics - Managerial Economics - Lecture Slides, Slides of Managerial Economics

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Basic Macroeconomics

Recent Hot Macroeconomic Issues in the

World

 Sovereign Bond Crisis in Europe  QE policy in America  Debt Ceiling and Fiscal Cliff in America  Soft Landing in China  Abenomics in Japan

How to Measure National Income?  Gross Domestic Product (GDP)  Gross National Product (GNP)  GDP (Purchasing Power Parity)

Gross Domestic Product

 Gross domestic product (GDP) is a measure of the income and expenditures of an economy.  It is the total “M arket value” of “ all final” “goods and services” “produced” “ within a country” in a “ given period of time”.

Components: C and I

 Consumption (C) :  The spending by households on goods and services, with the exception of purchases of new housing.  Investment (I) :  The spending on capital equipment, inventories, and structures, including new housing.

Components: G and NX

 Government Purchases (G) :  The spending on goods and services by local, state, and federal governments.  Does not include transfer payments because they are not made in exchange for currently produced goods or services.  Net Exports (NX):  Exports minus imports.

Gross National Product

 GNP is the total income earned by a nation’s permanent residents. It differs from GDP by including income that citizens earn abroad and excluding income that foreigners earn here.

Unemployment Rate

Unemployment rate = Number unemployed Labor force  100

Consumer Price Index

 The consumer price index (CPI) is a measure of the overall cost of the goods and services bought by a typical consumer.

Calculating CPI: steps

 Fix the Basket  Find the Prices  Compute the Basket’s Cost  Choose a Base Year and Compute the Index

HOW CAN GDP INCREASE?

 Consumption increases  Investment increases  Government purchase increases  Net export increases

Consumption

 Autonomous consumption spending  Derived consumption spending =c*(disposable income) C: marginal propensity to consume Disposable income= income - tax

The Market for Loanable Funds

Copyright©2003 Southwestern/Thomson Learning Quantity of Loanable Funds Real Interest Rate Supply of loanable funds (from national saving) Demand for loanable funds (for domestic investment and net capital outflow) Equilibrium quantity Equilibrium real interest rate docsity.com

Nominal Interest rate and Money Market

 Money supply  Money demand