Macroeconomics Flashcards
focus of macroeconomics
- Focus on the overall economy
- Production and output of entire nations
- How aggregate economies react, and respond
Examples of Macroeconomic Situations
- What is a country’s Gross Domestic Product (GDP)
- How tax policy changes impact unemployment rates
- Why and when recessions occur
- Interest rates and inflation
- International trade
what is GDP? what does it measure?
- GDP measures the size of an economy
- Value of all goods and services produced
- Different ways of measuring GDP
> Income or expenditure
> Real or nominal
Shortcomings of GDP
Doesn’t measure many important factors
* Quality of life
* Environment
* Health
* Education
* Wealth and income inequality
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Can be distorted or miss things
* Free services (e.g., email instead of mail)
* Non-market transactions
GDP Importance as a metric
- Despite flaws, provides a useful way to measure economy
- Focus on rate of change
- Increasing GDP means economy growing
and expanding - Decreasing GDP means economy contracting
what qualifies as a technical recession
Two consecutive quarters (six months) of negative GDP growth qualifies as a technical recession
relevance of GDP decline to veterinarians
- GDP declines mean recession
- Recessions mean less spending
- Less spending may mean veterinary hospitals generate less revenue
Economic Cycles - what are they and what is the long term trend? how are cycles measured?
- Economies move from expansion to contraction again and again in the short term
- Over the long run, economies will tend to grow as population increases, technology and productivity improve, infrastructure ameliorates, etc.
- Economic cycle often measured in Real (inflation adjusted) GDP
Economic Growth: Deterministic or Stochastic
- what are these two philosophies?
Deterministic
* Everything will eventually get to a certain point
* GDP is knocked off its course, it corrects and gets to the same end point
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Stochastic
* Everything is random
* GDP is knocked off its course and stays off course
Historically, do we have evidence that veterinary medicine follows a deterministic or stochastic economic growth model
BSE derailed mixed animal hospital revenue and it never recovered to resume its previous trend
- evidence of stochastic
what does unemployment rate measure?
- Measures the number of people who are looking for work, but do not have a job
> Excludes retirees, students, people who have given up searching for work, etc.
how does unemployment rate change during the economic cycle?
Unemployment tends to rise in recessions, falls during GDP expansion
unemplyment rates relevance to veterinarian?
- Employment rates may change spending at the veterinarian
- Also impacts hiring for veterinarians and other veterinary staff
- Low unemployment rates spurs increases in wages
what is inflation? what does it measure? how is it expressed? target?
- Consumer Price Index is final key macroeconomic indicator
- Measures how much overall prices in the economy have increased
- Often expressed as a percentage change from one year to the next
- Bank of Canada targets 2% inflation year- over-year
consumer price index - what is this?
- Statistics Canada measures prices of a basket of goods and services
> Eight main categories, e.g., shelter, food, clothing, transportation etc. - May substitute some goods and services depending on price
- Everyone has a different level of inflation, depending on location, purchases
