Macroeconomics
focuses on issues such as economic growth, output of the economy (GDP), inflation rates, employment, unemployment, and interest rates
Major events that shaped Macroeconomic ideas
Great depression UE-25%, episodes of hyperinflation, budget deficits
Macroeconomic goals of the gov't
provide full employment, stimulate economic growth, and provide price stability
U.S. unemployment rate
5-7%
U.S. inflation rate
3-4%
Business cycles
alternating increases and decreases in economic activity
4 phases of business cycle
Peak, recession, trough, recovery
Peak
upward trend, "boom", economy is operating at its capacity
Recession
downturn, follows peak, vary in length and intensity
Trough
bottom of the cycle
Recovery
expansion to another peak, vary in length and intensity
National income and product accounts
NIPA, measures economic output and national income
Department of Commerce
collects, modifies, improves, and updates the data for NIPA
Circular flow diagram
shows how businesses and households interact through the product and resource markets, households supply labor and receive wages --> Labor is used to provide goods and services -->Households then use income to buy goods from businesses, Spending=Income
Gross Domestic Product
GDP, a measure of the economy's total output and is the total market value of all final goods and services produced by resources in the U.S. in a time frame, measures final value of goods and services produced not intermediate products, the sale of used g
Calculating GDP
C+I+G+NX
4 major categories of spending
personal consumption expenditures, gross private domestic investment, government purchases, and net exports
Personal consumption expenditures
C", good and services purchased by residents of the U.S., goods and services divided into 3 categories
3 goods and services categories
Durable goods, nondurable goods, and services `
Durable goods
goods that last 3 yrs or more
Nondurable goods
food, socks, less than 3 yrs
Services
ex. accountant
Gross private domestic investment
I", GPDI, spending on things like structure, equipment software, and changes in inventories, 3 categories of investment, about 11% of GDP and is very volatile
3 categories of investment
fixed nonresidential, fixed residential, changes in inventories
Fixed nonresidential
Ex. new Dillons, Hilton hotel, company buys computer, reconstruction
Fixed residential
apartments and homes
Change in inventories
a change in the physical volume of the inventory a private business owns, valued at the average prices over the period
Government purchases
the wages and salaries of gov't employees as well as the purchase of goods and services from private resources, 2 categories
Categories of government purchases
Federal, State and local
Federal
Ex. Obama's salary
State and local
Ex. building new fire station, KDOT funding new highways
Net exports
exports minus imports for the current period
Nominal GDP
unadjusted GDP, the value of final goods and services evaluated at current-year prices
Real GDP
the value of final goods and services evaluated at base year prices
Calculating real GDP
prices of base year X the quantity in current year