Macroeconomic Measurement Flashcards
Week 2
What are the steps taken to get from theory to reality? What does this imply?
- Theory -> Model -> Measurement -> Data -> Reality
- Variables hence must be quantifiable
What are measurements of the aggregate economy (Think of Market Types)?
- 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
What is GDP? What are some characteristics of GDP?
- 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
What is the difference between Real and Nominal GDP?
- Nominal GDP takes things for face value
- Real GDP uses a ‘base year’ to take a constant
What is GDP per capita?
- GDP per capita divides GDP (a whole number) by population
What are the 3 different ways that GDP can be calculated (Think about approaches)?
- 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
How is Price Level measured? Examples?
- 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
What is the GDP deflator? What is the formula used to calculate this?
- 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%
How are movements in Capital Markets measured (Quantity Examples)?
- 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
How are movements in Capital Markets measured (Price Examples)?
- Prices of Capital are nominal or real concepts
- Interest Rates; Policy Rates, Bank Rates, Discount Rates, Rental Rates
How are movements in Labour Markets measured (Quantity Examples)? Denote these into intensive/extensive
- Quantity of Labour are extensive or intensive concepts
- Unemployment Rate = Unemployed / LF (EXT)
- Participation Rate= LF / Working Age Population (EXT)
- Working Hours (INT)
How are movements in Labour Markets measured (Price Examples)?
- Prices of Labour are Nominal or Real concepts
- Nominal Vs Real Wages
How are movements in International Markets measured (Quantity Examples)?
- Quantities are foreign goods/services or foreign assets concepts
- BoP = Current Account [Trade Balance] + Capital Account [FDI]
How are movements in International Markets measured (Price Examples)?
- Prices are nominal or real concepts
- Nominal/Real Exchange Rates
- Terms of Trade (negatively related to competitiveness)