Samenvatting Mankiw 5th edition 1 Hugo Hendriks, juni 2004
SAMENVATTING MANKIW, 5TH EDITION
1 THE SCIENCE OF MACROECONOMICS.................................2
2 THE DATA OF MACROECONOMICS...........................3
3 NATIONAL INCOME.................................................6
4 MONEY AND INFLATION..........................................9
5 THE OPEN ECONOMY............................................11
6 UNEMPLOYMENT..................................................13
7 ECONOMIC GROWTH 1.........................................15
9 INTRODUCTION TO ECONOMIC FLUCTUATIONS.......16
10 AGGREGATE DEMAND 1........................................19
14 STABILIZATION POLICY.........................................22
15 Government debt..............................................................24
,Samenvatting Mankiw 5th edition 2 Hugo Hendriks, juni 2004
1 The Science of Macroeconomics
Macroeconomics, the study of the economy as a whole, attempts to answer these and many
related questions.
Real GDP measures the total income of everyone in the economy (adjusted for the level of
prices).
Inflation rate measures how fast prices are rising.
Unemployment rate measures the fraction of the labour force that is out of work.
Periods in wich real GDP falls are called recessions if they are mild and depressions if they
are more severe.
Deflation – Periods of falling prices
Economists use multiple models to understand different issues.
They exists of two variables:
Endogenous variables are those variables that a model tries to explain.
Exogenous variables are those variables that a model accepts as given.
Market clearing: economists assume that a market goes to the equilibrium of supply and
demand (however, in reality this takes some time).
Models with flexible prices describe the economy in the long run, while models with sticky
prices describe the economy in the short run.
Microeconomics is the study of how households and firms make decisions and how these
decision makers interact in the marketplace. The central principle of macroeconomics is
optimize – they do the best they can for themselves gives their objectives and the constraints
they face. Households will try to maximize their level of satisfaction, which economists call
utility.
, Samenvatting Mankiw 5th edition 3 Hugo Hendriks, juni 2004
2 The Data of Macroeconomics
Most economic data is produced by the government.
Gross Domestic Product (GDP), tells us the nation’s total income and the total expenditure
on its output of goods and services. GDP measures the flow of income in this economy.
More precisely: gross domestic product (GDP) is the market value of all final goods and
services produced within an economy in a given period of time.
National income accounting – the accounting system used to measure GDP and many
related statistics.
Economists distinguish between two types of quantity variables: stocks and flows.
A stock is a quantity measures at a given point in time, whereas a flow is a quantity measures
per unit of time.
For example: A person’s wealth is a stock; income and expenditure are flows.
Example with Bread:
GDP = (Price of Bread * Quantity of Bread) = (Prices of Labor * Quantity of Labor)
For the economy as a whole income must equal expenditure.
Used goods are not included as part of GDP as the sale of used goods reflects the transfer of
an asset. GDP Measures the value of currently produced goods and services.
The treatment of Inventories: If something being stored to be sold later, GDP will rise. If it
is spoiled however, nothing happens to the GDP.
Intermediate goods are already included in the price of the final product and therefore, do
not affect GDP. Hence, GDP is the total value of final products and services.
The value added of a firm equals the value of the firm’s output less the value of the
intermediate goods that the firm purchases.
Imputed value: estimate of the value of goods and services which are not sold in the
marketplace and therefore do not have market prices. GDP includes the imputed rent on
owner occupied houses, but not the value on other rental services.
No imputation is made for the value of goods and services sold in the underground economy
(illegal drug trade, “off the books paid domestic workers” etc).
Nominal GDP: the value of goods and services measured at current prices.
Real GDP: the value of goods and services measured using a constant set of prices, called
base-year prices. The raise of prices does not affect real GDP!
SAMENVATTING MANKIW, 5TH EDITION
1 THE SCIENCE OF MACROECONOMICS.................................2
2 THE DATA OF MACROECONOMICS...........................3
3 NATIONAL INCOME.................................................6
4 MONEY AND INFLATION..........................................9
5 THE OPEN ECONOMY............................................11
6 UNEMPLOYMENT..................................................13
7 ECONOMIC GROWTH 1.........................................15
9 INTRODUCTION TO ECONOMIC FLUCTUATIONS.......16
10 AGGREGATE DEMAND 1........................................19
14 STABILIZATION POLICY.........................................22
15 Government debt..............................................................24
,Samenvatting Mankiw 5th edition 2 Hugo Hendriks, juni 2004
1 The Science of Macroeconomics
Macroeconomics, the study of the economy as a whole, attempts to answer these and many
related questions.
Real GDP measures the total income of everyone in the economy (adjusted for the level of
prices).
Inflation rate measures how fast prices are rising.
Unemployment rate measures the fraction of the labour force that is out of work.
Periods in wich real GDP falls are called recessions if they are mild and depressions if they
are more severe.
Deflation – Periods of falling prices
Economists use multiple models to understand different issues.
They exists of two variables:
Endogenous variables are those variables that a model tries to explain.
Exogenous variables are those variables that a model accepts as given.
Market clearing: economists assume that a market goes to the equilibrium of supply and
demand (however, in reality this takes some time).
Models with flexible prices describe the economy in the long run, while models with sticky
prices describe the economy in the short run.
Microeconomics is the study of how households and firms make decisions and how these
decision makers interact in the marketplace. The central principle of macroeconomics is
optimize – they do the best they can for themselves gives their objectives and the constraints
they face. Households will try to maximize their level of satisfaction, which economists call
utility.
, Samenvatting Mankiw 5th edition 3 Hugo Hendriks, juni 2004
2 The Data of Macroeconomics
Most economic data is produced by the government.
Gross Domestic Product (GDP), tells us the nation’s total income and the total expenditure
on its output of goods and services. GDP measures the flow of income in this economy.
More precisely: gross domestic product (GDP) is the market value of all final goods and
services produced within an economy in a given period of time.
National income accounting – the accounting system used to measure GDP and many
related statistics.
Economists distinguish between two types of quantity variables: stocks and flows.
A stock is a quantity measures at a given point in time, whereas a flow is a quantity measures
per unit of time.
For example: A person’s wealth is a stock; income and expenditure are flows.
Example with Bread:
GDP = (Price of Bread * Quantity of Bread) = (Prices of Labor * Quantity of Labor)
For the economy as a whole income must equal expenditure.
Used goods are not included as part of GDP as the sale of used goods reflects the transfer of
an asset. GDP Measures the value of currently produced goods and services.
The treatment of Inventories: If something being stored to be sold later, GDP will rise. If it
is spoiled however, nothing happens to the GDP.
Intermediate goods are already included in the price of the final product and therefore, do
not affect GDP. Hence, GDP is the total value of final products and services.
The value added of a firm equals the value of the firm’s output less the value of the
intermediate goods that the firm purchases.
Imputed value: estimate of the value of goods and services which are not sold in the
marketplace and therefore do not have market prices. GDP includes the imputed rent on
owner occupied houses, but not the value on other rental services.
No imputation is made for the value of goods and services sold in the underground economy
(illegal drug trade, “off the books paid domestic workers” etc).
Nominal GDP: the value of goods and services measured at current prices.
Real GDP: the value of goods and services measured using a constant set of prices, called
base-year prices. The raise of prices does not affect real GDP!
