Macroeconomics BSc Kenntnisse Flashcards
Basics of circular Flow theory
- The circular flow model demonstrates how money moves from producers to households and back again in an endless loop.
- Money moves from producers to workers as wages and then back from workers to producers as workers spend money on products and services.
- Can be made more complex to include additions to the money supply, like exports, and leakages from the money supply, like imports.
- All factors totaled = gross domestic product (GDP) or the national income.
GDP
- Gross domestic product is the monetary value of all finished goods and services made within a country during a specific period.
- GDP provides an economic snapshot of a country, used to estimate the size of an economy and its growth rate.
- GDP can be calculated in three ways, using expenditures, production, or incomes and it can be adjusted for inflation and population to provide deeper insights.
- Real GDP takes into account the effects of inflation while nominal GDP does not.
- GDP=C+G+I+NX
- C=Consumption
- G=Governmentspending
- I=Investment
- NX=Netexports
Private Consumption
- Consumer spending is all spending on final goods and services for current personal and household use.
- Key driving force in the economy and a critical concept in economic theory.
- Investors, businesses, and policymakers closely follow published statistics and reports on consumer spending in order to help forecast and plan investment and policy decisions.
Investment
Inmacroeconomics,investment“consists of the additions to the nation’s capital stock of buildings, equipment, software, and inventories during a year”or, alternatively,investment spending— “spending on productive physical capital such as machinery and construction of buildings, and on changes to inventories — as part of total spending” ongoods “Good (economics)”)and services per year.
Net export
- A nation’s net exports number is a straightforward calculation: The value of its total exports minus the value of its total imports equals its net exports.
- NX= All Exports - All Imports
- A positive net export number indicates a trade surplus, while a negative number means a trade deficit.
- A weak currency exchange rate makes a nation’s exports more competitive in price in other countries.
- Countries with comparative advantages such as natural resources or a skilled workforce tend to be net exporters.
Government Consumption
represents government consumption expenditure and gross investment. Governments spend money on equipment, infrastructure, and payroll. Government spending may become more important relative to other components of a country’s GDP when consumer spending and business investment both decline sharply.
Inflation
- Inflation is the rate at which prices for goods and services rise.
- Inflation is sometimes classified into three types: demand-pull inflation, cost-push inflation, and built-in inflation.
- The most commonly used inflation indexes are the Consumer Price Index and the Wholesale Price Index.
- Inflation can be viewed positively or negatively depending on the individual viewpoint and rate of change.
- Those with tangible assets, like property or stocked commodities, may like to see some inflation as that raises the value of their assets.
Unemployment rate
- Erwerbslose in % des Arbeitskräftepotential
- natürliche: normale Quote um die die Quoten zyklisch schwanken
- zyklische: Abweichung von natürlicher Quote, z.B. durch Jahreszeiten
Productivity
- Productivity, in economics, measures output per unit of input.
- When productivity fails to grow significantly, it limits potential gains in wages, corporate profits, and living standards.
- The calculation for productivity is output by a company divided by the units used to generate that output.
- Productivity in the workplace refers simply to how much “work” is done over a specific period of time.
Growth Path
- A country is said to have a balanced growth path (BGP) if the following four conditions hold:
- The growth rate of GDP per capita g(y) is stable
- The ratio of gross capital formation to GDP I/Y is stable
- Labor’s share ofcostsϕ(L) is stable
- The capital/output ratio K/Y is stable
Potential Output
Potential output isthe maximum amount of goods and services an economy can turn out when it is most efficient—that is, at full capacity. Often, potential output is referred to as the production capacity of the economy.
Capital
In economics, capital refers to the assets—physical tools, plants, and equipment—that allow for increased work productivity.
By increasing productivity through improved capital equipment, more goods can be produced and the standard of living can rise.
The four major factors of production are capital, land, labor, and entrepreneurship.
Capacity Utilisation Rate
(Actual Output/Potential Output)*100
Difference between nominal an real terms
The nominal value is the current value, without taking inflation or other market factors into account. It is the face value of the good. The real value is the nominal value after it has been adjusted for inflation. Inflation is an overall increase in price across the entire economy.
Neoclassical economic policy
- Growth depends on 3 factors: labour, capital, technology
- While an economy has limited resources in terms of capital and labor, the contribution from technology to growth is boundless.
- growth without technology advancement impossible
- growth equilibrium
- $Y=AF(K,L)$
- Y = GDP
- K = Capital
- L = Amount of unskilled labour
- A = level of technology
- $Y=AF(K,L)$
- Theneoclassical perspectiveon macroeconomics is based on two building blocks (or assumptions):
- Since in the long run, the economywill fluctuate aroundits potential GDP and its natural rate of unemployment,the size of the economy is determined by potential GDP.
- wages and prices will adjust in a flexible manner so thatdisturbances such as recessions will be temporary and the economy will always return to its potential level of output on its own.
- The key policy implication is this: government should focus more on promoting long-term economic growth and on controlling inflation rather than worrying about recession or cyclical unemployment. This focus on long-run growth instead of short-run fluctuations in the business cycle means that neoclassical economics is more useful for long-run macroeconomic analysis andKeynesian economicsis more useful for analyzing the macroeconomic short run. Let’s consider the two neoclassical building blocks in turn, and how they can be embodied in theaggregate demand-aggregate supply model.
