Macro-economie samenvatting boek
Chapter 2: macroeconomic accounts
Three definitions of gross domestic product. GDP is measure of productive activity. It is defined over
a time interval, so it is a flow variable. Flow variables differ from stock variables, which are always
defined with reference to a particular point in time. First definition is the sum of final sales within a
geographic location during a period of time, usually a year. Second definition: the sum of value
added occurring within a given geographic location during a period of time. A firm creates value
added by transforming raw materials and unfinished goods into products it can sell in the
marketplace. The value added is the difference between its sales and the costs of raw materials.
Third definition: the sum of factor incomes earned from economic activities within a geographic
location during a period of time.
The distinction between nominal and real GDP can be used as a measure of the general price level,
or the price of goods in terms of money. GDP deflator= nominal GDP: real GDP. An alternative
measure of inflation is based on an average of prices with fixed weights, called a price index. A
basket of goods is used to weight the corresponding prices. -> CPI (consumer price index). real GDP
is computed by prices, corresponding to a chosen base year.
the flow diagram can be summarized using the first and third definitions of GDP. Y= C+I+G+ X-Z. Flow
diagram shows that GDP can be viewed as net incomes earned by factors of production. Income is
used to pay taxes net of transfers; they save and consume. Y= C+S+T. what households actually
receive to spend is called personal disposal income. Depreciation: in the
process of producing GDP, productive equipment is subjected to wear
and tear and obsolescence. This should be subtracted from GDP, to give
a cleared picture of the output that is really available as income if we
wish to preserve the value of our productive capacities, that gives NDP
(net domestic product).
(S-I) + (T-G) = (X-Z). parentheses highlight the fact that the corresponding
expressions appear as net flows of the private sector (household),
government and the rest of the world. If S<I, the private sector is a net borrower. If G>T, the
government is borrowing by issuing public debt to domestic or foreign residents.
Current account balance: the sum of the balances of trade in goods and services, international
income, and current transfers. The current account surplus can be interpreted as the net sales of
goods and services, defined to conclude services of capital and labor services. CA= (T-G) + (S-I). GDP=
Y= C+I+G+CA). GNI= gross national income. If the monetary authorities want to maintain the value of
their country’s exchange rate, they must intervene on exchange rate to match any possible balance
of payments imbalance.
Chapter 3: the fundamentals of economic growth
, Growth theory asks how sustained economic growth across nations and over time is possible. Do we
produce more because we employ more inputs, or because the inputs themselves become more
productive over time. The important tool to use to think about this is: production function: it relates
the output of an economy, its GDP, to productive inputs. The most important inputs are capital and
labor, K and L. Y= F(K, L).
Kaldor’s five stylized facts of economic growth.
1. Both output per capita and capital intensity keep increasing : L grows much slowly than both
K and Y. both average productivity (Y/L) and capital intensity (K/L) keep rising. Because
income per capita (Y/N) is closely related to average productivity or output per hour of work
(Y/L). economic growth implies a continuing increase in material standards of living.
2. The capital-output ratio exhibits little or no trend over time : the capital stock and output
tend to track each other. As a result, the ratio of capital to output (K/Y) shows little or no
systematic trend.
3. Hourly wages keep rising: the long-run increases in the ratios of output and capital to labor
(Y/L) and (K/L) mean that, over time, an hour of work produces ever more output. Workers
become more productive, so their wages per hour should also rise. Growth evidently
delivers ever-increasing living standard for workers.
4. The rate of profit is trendless: K/Y is trendless just like (Y/K), it implies that average capital
productivity too is trendless: over time, the same amount of equipment delivers about the
same amount of output. It is to be expected therefore that the rate of profit does not exhibit
a trend either.
5. The relative income shares of GDP paid to labor and capital are trendless : incomes from
labor and capital increase secularly, they also tend to increase at the same rate, so that the
distribution of GDP between capital and labor and capital shares have no long-run trend
Chapter 2: macroeconomic accounts
Three definitions of gross domestic product. GDP is measure of productive activity. It is defined over
a time interval, so it is a flow variable. Flow variables differ from stock variables, which are always
defined with reference to a particular point in time. First definition is the sum of final sales within a
geographic location during a period of time, usually a year. Second definition: the sum of value
added occurring within a given geographic location during a period of time. A firm creates value
added by transforming raw materials and unfinished goods into products it can sell in the
marketplace. The value added is the difference between its sales and the costs of raw materials.
Third definition: the sum of factor incomes earned from economic activities within a geographic
location during a period of time.
The distinction between nominal and real GDP can be used as a measure of the general price level,
or the price of goods in terms of money. GDP deflator= nominal GDP: real GDP. An alternative
measure of inflation is based on an average of prices with fixed weights, called a price index. A
basket of goods is used to weight the corresponding prices. -> CPI (consumer price index). real GDP
is computed by prices, corresponding to a chosen base year.
the flow diagram can be summarized using the first and third definitions of GDP. Y= C+I+G+ X-Z. Flow
diagram shows that GDP can be viewed as net incomes earned by factors of production. Income is
used to pay taxes net of transfers; they save and consume. Y= C+S+T. what households actually
receive to spend is called personal disposal income. Depreciation: in the
process of producing GDP, productive equipment is subjected to wear
and tear and obsolescence. This should be subtracted from GDP, to give
a cleared picture of the output that is really available as income if we
wish to preserve the value of our productive capacities, that gives NDP
(net domestic product).
(S-I) + (T-G) = (X-Z). parentheses highlight the fact that the corresponding
expressions appear as net flows of the private sector (household),
government and the rest of the world. If S<I, the private sector is a net borrower. If G>T, the
government is borrowing by issuing public debt to domestic or foreign residents.
Current account balance: the sum of the balances of trade in goods and services, international
income, and current transfers. The current account surplus can be interpreted as the net sales of
goods and services, defined to conclude services of capital and labor services. CA= (T-G) + (S-I). GDP=
Y= C+I+G+CA). GNI= gross national income. If the monetary authorities want to maintain the value of
their country’s exchange rate, they must intervene on exchange rate to match any possible balance
of payments imbalance.
Chapter 3: the fundamentals of economic growth
, Growth theory asks how sustained economic growth across nations and over time is possible. Do we
produce more because we employ more inputs, or because the inputs themselves become more
productive over time. The important tool to use to think about this is: production function: it relates
the output of an economy, its GDP, to productive inputs. The most important inputs are capital and
labor, K and L. Y= F(K, L).
Kaldor’s five stylized facts of economic growth.
1. Both output per capita and capital intensity keep increasing : L grows much slowly than both
K and Y. both average productivity (Y/L) and capital intensity (K/L) keep rising. Because
income per capita (Y/N) is closely related to average productivity or output per hour of work
(Y/L). economic growth implies a continuing increase in material standards of living.
2. The capital-output ratio exhibits little or no trend over time : the capital stock and output
tend to track each other. As a result, the ratio of capital to output (K/Y) shows little or no
systematic trend.
3. Hourly wages keep rising: the long-run increases in the ratios of output and capital to labor
(Y/L) and (K/L) mean that, over time, an hour of work produces ever more output. Workers
become more productive, so their wages per hour should also rise. Growth evidently
delivers ever-increasing living standard for workers.
4. The rate of profit is trendless: K/Y is trendless just like (Y/K), it implies that average capital
productivity too is trendless: over time, the same amount of equipment delivers about the
same amount of output. It is to be expected therefore that the rate of profit does not exhibit
a trend either.
5. The relative income shares of GDP paid to labor and capital are trendless : incomes from
labor and capital increase secularly, they also tend to increase at the same rate, so that the
distribution of GDP between capital and labor and capital shares have no long-run trend
