Macroeconomics
Lecture 31
Macro- study of structure and performance of the domestic economy as a whole and the economic policies
undertaken by the gov to guide this performance.
Stock- variables measured at a specific time. (t0,t1) for example represent a quantity at a given time.
(inventory) (capital stock, stock of wealth, labour pool). Portray a situation at any given time by providing a
snapshot. Stock variables often fed by flow-by-flow variables.
Flow- variables that are measured over an interval of time (t1-t0, t3-t1) that is, the change in quantities is
analysed between two points. (investment, savings, consumption, unemployment, GDP income).
Public debt /=/ budget deficit.
Nominal value- quantities measured in a given national currency (Euros, USD, Pounds) and at current
prices (prices of goods produced in 2007 in 2007 prices). (GDP, Private Consumption, Investment).
Real value- quantities expressed in a given national currency at constant prices (price of goods produced in
2007 at 2000 prices). Same examples.
Lecture 32
Keynesian theory- economy is also forecasted in the long term but emphasizes particularly the stability
within economic cycles (unemployment, inflation). Sometimes prices and wages are fixed in the short
term.
Believe gov should intervene to stabilize the economy. More interested in the actual (as opposed to
potential) output.
Prices and wages do not always adjust quickly to new supply and demand conditions.
Contribution- despite the Economy being able to eventually reach its potential, need for stabilization
within the economic cycles, depending on the scenario.
Neoclassic theory- economy seen in a long-term perspective in which prices and wages are flexible. Ppl use
all available info. No need for gov. to stabilize the economy. More interested in the potential output.
Neoclassical authors believe prices and wages adjust dif to new supply and demand levels. Believe in a
calm economy walking towards its potential.
Contribution- households and firms are seen as intelligent info processors that react to and sometimes
anticipate policies.
, Short vs long term macro. The aim of econ policy is to
create conditions form highest possible growth rate of GDP.
Lecture 33
National accounts- measurements allow for analysing the evolution and situation and adopt the policies
deemed most appropriate. Expression in numbers.
The GDP- variable. Total monetary value of goods and services produced in a given territory/ country
during a period of time. Income obtained in a country in a given year. Comparisons with the previous
quarters show if the economy is expanding or contracting. Level if econ development and social welfare of
a country is measured by GDP per capita (beware of methodologies and dif prices). Y = C + I + G + X – M
Methods to determine GDP:
Expenditure method- GDP = difference expenditure in goods and services. =C+1+G+X-M
Income method- GDP= change in income of productive factors. = W + + T = (W∏ I + ∏I) + (WX +
∏X) + T wages plus the gross operating surplus.
Output method- GDP= change in value added. =change in net value added by business. =gross
value- value of intermediate consumption.
GNP (gross national product)- value of output
each year, from the business owned by a
country’s residents, regardless of location. Thus
GNP excludes contribution of foreign companies
in the domestic production and includes the
production national companies abroad.
Calulate GNP
GNP= GDP + Factor Income
Dif. Between GDP and GNP is marginal (+/-1%)
Lecture 34
Balance of payments (account for the global flows of goods services and capital between country and the
rest of the world). BP (balance of payments) document that records and economy’s inflows and outflows of
foreign exchange (foreign currencies) as they result from external transactions with the rest of the world.
To see if the amount of currency held by a given country increases or decreases.
Components of BP:
Current account CA
Lecture 31
Macro- study of structure and performance of the domestic economy as a whole and the economic policies
undertaken by the gov to guide this performance.
Stock- variables measured at a specific time. (t0,t1) for example represent a quantity at a given time.
(inventory) (capital stock, stock of wealth, labour pool). Portray a situation at any given time by providing a
snapshot. Stock variables often fed by flow-by-flow variables.
Flow- variables that are measured over an interval of time (t1-t0, t3-t1) that is, the change in quantities is
analysed between two points. (investment, savings, consumption, unemployment, GDP income).
Public debt /=/ budget deficit.
Nominal value- quantities measured in a given national currency (Euros, USD, Pounds) and at current
prices (prices of goods produced in 2007 in 2007 prices). (GDP, Private Consumption, Investment).
Real value- quantities expressed in a given national currency at constant prices (price of goods produced in
2007 at 2000 prices). Same examples.
Lecture 32
Keynesian theory- economy is also forecasted in the long term but emphasizes particularly the stability
within economic cycles (unemployment, inflation). Sometimes prices and wages are fixed in the short
term.
Believe gov should intervene to stabilize the economy. More interested in the actual (as opposed to
potential) output.
Prices and wages do not always adjust quickly to new supply and demand conditions.
Contribution- despite the Economy being able to eventually reach its potential, need for stabilization
within the economic cycles, depending on the scenario.
Neoclassic theory- economy seen in a long-term perspective in which prices and wages are flexible. Ppl use
all available info. No need for gov. to stabilize the economy. More interested in the potential output.
Neoclassical authors believe prices and wages adjust dif to new supply and demand levels. Believe in a
calm economy walking towards its potential.
Contribution- households and firms are seen as intelligent info processors that react to and sometimes
anticipate policies.
, Short vs long term macro. The aim of econ policy is to
create conditions form highest possible growth rate of GDP.
Lecture 33
National accounts- measurements allow for analysing the evolution and situation and adopt the policies
deemed most appropriate. Expression in numbers.
The GDP- variable. Total monetary value of goods and services produced in a given territory/ country
during a period of time. Income obtained in a country in a given year. Comparisons with the previous
quarters show if the economy is expanding or contracting. Level if econ development and social welfare of
a country is measured by GDP per capita (beware of methodologies and dif prices). Y = C + I + G + X – M
Methods to determine GDP:
Expenditure method- GDP = difference expenditure in goods and services. =C+1+G+X-M
Income method- GDP= change in income of productive factors. = W + + T = (W∏ I + ∏I) + (WX +
∏X) + T wages plus the gross operating surplus.
Output method- GDP= change in value added. =change in net value added by business. =gross
value- value of intermediate consumption.
GNP (gross national product)- value of output
each year, from the business owned by a
country’s residents, regardless of location. Thus
GNP excludes contribution of foreign companies
in the domestic production and includes the
production national companies abroad.
Calulate GNP
GNP= GDP + Factor Income
Dif. Between GDP and GNP is marginal (+/-1%)
Lecture 34
Balance of payments (account for the global flows of goods services and capital between country and the
rest of the world). BP (balance of payments) document that records and economy’s inflows and outflows of
foreign exchange (foreign currencies) as they result from external transactions with the rest of the world.
To see if the amount of currency held by a given country increases or decreases.
Components of BP:
Current account CA
