Macroeconomic Measurement Flashcards

Week 2

1
Q

What are the steps taken to get from theory to reality? What does this imply?

A
  • Theory -> Model -> Measurement -> Data -> Reality
  • Variables hence must be quantifiable
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2
Q

What are measurements of the aggregate economy (Think of Market Types)?

A
  • Output Market- GDP, RPI, CPI, PPI, deflator
  • Labour Market- Unemployment rate, Hours, Wages
  • Capital Market- Savings, Investment, Interest Rate
  • International Market- Trade Balance, Exchange Rate
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3
Q

What is GDP? What are some characteristics of GDP?

A
  • GDP= The Monetary value of final output produced during a given period of time
  • This measures outputs and is determined by countries (as opposed to people)
  • Quantity driven, flow concept
  • Contains market goods, not domestic production
  • No thought for equality
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4
Q

What is the difference between Real and Nominal GDP?

A
  • Nominal GDP takes things for face value
  • Real GDP uses a ‘base year’ to take a constant
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5
Q

What is GDP per capita?

A
  • GDP per capita divides GDP (a whole number) by population
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6
Q

What are the 3 different ways that GDP can be calculated (Think about approaches)?

A
  • Demand Side (EXPENDITURE approach):
    GDP = C + I + G + NX
  • Distribution Side (INCOME approach):
    GDP = W + π + r + T
  • Supply Side (PRODUCT approach):
    GDP = Σ value of all products
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7
Q

How is Price Level measured? Examples?

A
  • Price Indices are weighted averages of the prices of a set of goods and services produced in an economy
  • Examples include CPI, RPI and PPI
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8
Q

What is the GDP deflator? What is the formula used to calculate this?

A
  • GDP deflator measures the changes in the general price level (covers a greater range than CPI, PPI and RPI)
  • GDP Deflator = NGDP / RGDP x 100%
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9
Q

How are movements in Capital Markets measured (Quantity Examples)?

A
  • Quantity of Capital are flow or stock concepts
  • Savings and Credits (Public Vs Private Sector)
  • Investments or Fixed formation of Capital Stock
  • Depreciation
  • Capital Stock: Physical Vs Financial Capital
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10
Q

How are movements in Capital Markets measured (Price Examples)?

A
  • Prices of Capital are nominal or real concepts
  • Interest Rates; Policy Rates, Bank Rates, Discount Rates, Rental Rates
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11
Q

How are movements in Labour Markets measured (Quantity Examples)? Denote these into intensive/extensive

A
  • Quantity of Labour are extensive or intensive concepts
  • Unemployment Rate = Unemployed / LF (EXT)
  • Participation Rate= LF / Working Age Population (EXT)
  • Working Hours (INT)
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12
Q

How are movements in Labour Markets measured (Price Examples)?

A
  • Prices of Labour are Nominal or Real concepts
  • Nominal Vs Real Wages
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13
Q

How are movements in International Markets measured (Quantity Examples)?

A
  • Quantities are foreign goods/services or foreign assets concepts
  • BoP = Current Account [Trade Balance] + Capital Account [FDI]
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14
Q

How are movements in International Markets measured (Price Examples)?

A
  • Prices are nominal or real concepts
  • Nominal/Real Exchange Rates
  • Terms of Trade (negatively related to competitiveness)
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