macroeconomics Key aggregates 1 Macroeconomics Study of the
- Slides: 10
macroeconomics Key aggregates 1
§ Macroeconomics § Study of the PPF § Lose the details § Study of aggregates § Lose the details § Key aggregates § § § § GDP, (national) income Growth (rate) Labour force, employment, unemployment (rate) Productivity Price level, inflation (rate) Interest rate Exchange rate Trade volume 2
§ National income § =Y § = all the incomes § = all the output § Measured in … § $$$$$ § Nominal Y § Real Y § GDP 3
§ How does GDP over time look like? § § § Actual (real/nominal) GDP (long-term) growth (short-term) fluctuations Business cycle Potential (full-employment) output Output gap § Recessionary gap § Inflationary gap § GDP roughly reflects how well off we are 4
§ Labour force § Not people but people who could make stuff § That is, a resource § Employment = number of adults who work § Unemployment = number of adults who want to work but don’t work § Unemployment rate = U/(E+U) § = U/L § Frictional unemployment § Structural unemployment § Frictional + structural = natural § People CAN find jobs § Takes time to match § Would be foolish to lower this number? § Full employment § Cyclical unemployment 5
§ How does labour force/employment/unemployment over time look like? § trend § (short-term) fluctuations § Unemployment rate roughly reflects wasted resource § Productivity § = GDP/E § = GDP/hr § Cause-effect direction and importance of productivity 6
§ Price level § index § (weighted) average price of all § Inflation § § Increase in price level Deflation Hyperinflation CPI § example § GDP deflator 7
§ How does CPI over time look like? § trend § (short-term) fluctuations § Inflation redistributes § Inflation = risks, so it lowers investments 8
§ Interest § Payment to lender to… § postpone consumption now § Interest rate § = Interest/Loan § Nominal interest rate § Real interest rate = nominal interest rate – inflation rate (roughly) § Interest rate roughly reflects cost of investment § Growth vs current consumption 9
§ Trade § § Exports Imports Exchange rate (CA$/US$1) Depreciation = increase in exchange rate § News – the opposite § Appreciation = decrease in exchange rate § News – the opposite § Exchange rate is a big deal for exports/imports 10
