Week 1: Intro Flashcards
Macroeconomics
The study of how the interactions of people and firm through markets affect overall economic activity
Macroeconomic Models
simplified mathematical representations of the real world
What is micro data?
unit-level data obtained from sample surveys, censuses and admin systems
Gross Domestic Product (GDP)
the total market value of all final goods and services produced within specific territory in given period
What is GDP used for?
as a measure to monitor overall performance of the economy
GDP per Capita
GDP divided by midyear population
Income measure of GDP (income approach)
measure of all income in the economy
Production measure of GDP (production approach)
measure of the number of goods produced in the economy
Expenditure measure of GDP (expenditure approach)
measure of total purchases in the economy
National Income Accounting Identity (equation)
Y = C + I + G + NX Y = GDP I = investment G = gov purchases NX = exports - imports
Depreciation
Deterioration of capital stock due to wear and tear
Net Domestic Product Equation
GDP - depreciation
Net Domestic Product Definition
annual measure of the economic output of a nation that is adjusted to account for depreciation
What is the share of GDP between labour and capital?
labour 2/3
capital 1/3
Nominal GDP
total value of all goods and services produced in given period of time
How to calculate nominal GDP
multiply current year quantity output by the current market price
(add together if multiple years)
Real GDP
nominal GDP adjusted for inflation – measures the actual growth of production without any distortion effects from inflation
How to calculate real GDP?
Use the base year prices and multiply them by current year quantities
Price Level
Average of current prices across the spectrum of good and services produced in an economy
Implicit GDP Price Deflator Equation
Nominal GDP/real GDP
Consumer Price Index
measure of the average change in prices over time that consumers pay for a basket of goods and services
Consumer Price Index Equation
(current price x base year Q) + (base year price x base year Q)
Problems with Measuring Real GDP and Price Level (3)
- Relative prices change over time
- Quality of good and services change over time
- New goods and services introduced so others become obsolete
What is the income approach to GDP?
Measuring the sum of all income earned in the economy
Depreciation
The deterioration of capital stock due to wear and tear
Net Domestic Product Equation
GDP - depreciation
What is the share of GDP to inputs?
Approx:
Share of labour 2/3
Share of capital 1/3
What does Real GDP equal in the base year?
Real GDP = Nominal GDP
What does CPI equal in the base year?
1
CPI Equation
(current price x base quantity)/(base year price x base quantity)
Implicit price deflator equation
Nominal GDP/Real GDP
The ratio of nominal to real GDP
