Macroeconomics weeks 1&2 (ec108)

Macroeconomics week 1 + 2
Module code: EC108
Lecturer: Natalie Chen




Topics
● Output and GDP
● Inflation
● Unemployment


Output and GDP
Aggregate output - the level of GDP in an economy
Intermediate good - a good used in the production of another

The value of a firm:
- A firm's value added = the revenue - cost of intermediate goods (NOT PROFIT)
- Not all costs to avoid double counting
- Double counting: if you count the value of cars and the value of tyres you will
count the tires twice

Calculating/defining GDP
1. Total value of final goods and services
2. The sum of value added in the economy
- The value of its production minus the value of the intermediate goods
3. The sum of incomes in the economy
- The labour income and capital/profit income

Nominal GDP
- Nominal GDP is the sum of the quantities of final goods produced x current price
- It may increase because:
- The production of most goods increases
- The price of most goods increase
- Real GDP is the sum of quantities of final goods x constant prices

Real GDP
- GDP in terms of goods
- GDP in constant dollars
- Adjusted for inflation
- Yt = real GDP in year t
- Real GDP growth in year t = (Yt - (Yt-1)/(Yt-1))