Summary Macroeconomics

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ISBN-10 0273717901 ISBN-13 9780273717904
141 Flashcards & Notes
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This is the summary of the book "Macroeconomics". The author(s) of the book is/are Manfred Gärtner. The ISBN of the book is 9780273717904 or 0273717901. This summary is written by students who study efficient with the Study Tool of Study Smart With Chris.

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Summary - Macroeconomics

  • 1.1 The issues of macroeconomics

  • Microeconomics
    Macroeconomics
    Income: revenue derived from work and assets
    Nominal income = prices P x real income Y
    Gross domestic product (GDP)
    Gross national product (GNP)
  • Rule of 72:
    As a rule of thumb, divide by 72 by the annual income growth rate (in per cent) to learn in how many years income doubles
  • 1.2 Essentials of macroeconomic accounting

  • Factors of production:
    all resources used in the production of goods and services: labour, capital goods such as machines, and natural resources such as oil.

    2 majors things that can go wrong with this process:

    1. firms may not use all available production factors to produce output, thus leaving factors idle in the form of unemployment or slack
    2. people may not want to buy all that is being produced, that is, demand may fall short of output
  • Barter economy: economy without money
  • Expenditure approach: measures aggregate output as the sum of all spending

    Income approach: adds up all incomes as the sum of all spending
  • 3 reasons why income received by households is not the same as demand for firms:

    1. People save
    2. Governments levy taxes
    3. People buy foreign goods
  • 3 forms of injections into circular flow:

    1. Firms invest
    2. Government spending
    3. Foreigners buy our goods
  • (S-I) + (T-G) + (IM-EX) = 0
  • Common threads in GDP data:

    1. Most countries still run sizeable budget deficits
    2. In most countries, private savings exceed private investment. This is one way of financing the government budget deficit
    3. About half of the countries shown here export less than they import. In those countries the net injection from the private and government sectors is neutralized by a net leakage of spending to other countries
  • Twin deficits: deficits in both government budget and the current account
  • Quantity equation: M x V = P x Y
  • Quantity theory of money: P x Y = V x M   V is fixed, so money supply determines nominal income
  • Aggregate supply curve: indicates how much output firms are willing to produce at various price levels
  • Balance of payments: records a country's trade in goods, services and financial assets with other countries
  • 3.1 The money market, the interest rate and the LM curve

  • Wat gebeurt er in de money market wanneer Y toeneemt?
    money demand shifts up
  • Why does i has to increase when Y increases in the money market?
    To keep money supply at the same level
  • What is the price of money?
    interest rate
  • What is the money demand function?
    L=kY-hi
  • What is the money supply function?
    M=M
  • What is the LM-curve function?
    i=k/h*Y-1/h*M
  • Does the LM curve shift when L changes?
    No
  • What happens to the LM curve if there is expansionary monetary policy?
    it shifts to the right
  • What happens with M when i becomes exogenous?
    it becomes horizontal
  • What happens to the LM curve when i becomes exogenous?
    it becomes horizontal
  • How can the lm curve shift with exogenous i?
    by changing the targeted interest rate
  • What is the monetary policy rule formula?
    M=M+a(i-i)
  • What happens if i > targeted i?
    M will decrease
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