ECON 358 Intermediate MacroEconomics Final
Exam study notes 2025 Athabasca University
Lesson 1 notes
Basics
GDP = Measure of aggregate out put in the nation income accounts
Think of it like
1. GDP is the value of final goods and services in an economy during a given period
2. GDP is the sum of value added in the economy in a given period
3. GDP is the sum of incomes in the economy in a given
period Should give you the GDP each way
Nomilal GDP sum of the quantities of final goods produced times their current price (Nom GPD increase
over time due to price or production increase)
Real GDP the sum of the quantities of final goods times constant prices.
Formula
Yt = GDP (output) in year t
,Rate of output grown:
(Yt − Yt−1) / Yt−1
Unemployment rate = unemployed/labor force
u = unemployment rate
u = (U/L) x 100
Labour force = Employed + Unemployed
L=N+U
Unemployed only those looking for work are counted
Participation rate is the ration of labour force to the total population of working age
persons Okuns Law
High output grown -> lower unemployment rate
Low output grown -> Higher unemployment
rate 2 measures of price level (price indexes
,(GDP Deflator and Consumer price index)
Formula
Ratio of nominal GDP to real GDP in year t
Pt = NomGDPt/Real GDPt = $Yt/Yt
GDP delator is an index number.
Base year Pt = 1
Rate of inflation = (Pt – Pt-1)/Pt-1
Nominal GDP = GDP deflator x Real GDP
Consumer price index the cost in dollars of a specific list of goods and services over time
CPI = Average price of consumption = the cost-of-living index.
Negative relation between unemployment rate and change in inflation.
When unemployment is low, inflation tends to increase.
When unemployment rate is high, inflation tends to decrease.
This relation is called the Phillips Relation
Macroeconomic policy goals
• Keep unemployment from being too high
• Keep inflation from becoming a problem
• Create conditions where output per person grows in the long run
Lesson 2 notes
The goods
market C =
consumption
I = Fixed Investment
Is = Inventory investment
G = Government Spending
X – Q = Net exports
, X = Exprts
Q= Imports
Z≡C+I+G+X–Q
Consumption (C)
C mainly is disposable income YD
Yd = Y – T (Income minus Tax)
Yd = + which is a increase in disposable income income leads to an increase in C This is a behavioural
equation
C = C0 + C1(Yd)
Investment (I) does not respond to changes in production
Investment is an Exogenous variable (are assumed to be given and not explained) I =I
Government spending and taxes do not respond to changes in
production Z ≡ c0 + c1 (Y-T) + I + G + X – Q
Y=Z
Using Algebra
Y = c0 + c1(Y-T) + I + G
Y - c1Y = c0 - c1T + I +
G
(1 - c1)Y = c0 - c1T + I + G
1
Y= (c 0−c 1T + I + G)
1−c 1
1
Y= > 1:
Multiplier 1−c 1
The larger the propensity to consume (c1) the larger the multiplier.
A change in autonomous spending will change output more than the direct change in autonomous
spending
Alternate way of thinking
S = private saving = YD – C = Y – T – C
S=I+G+T
Exam study notes 2025 Athabasca University
Lesson 1 notes
Basics
GDP = Measure of aggregate out put in the nation income accounts
Think of it like
1. GDP is the value of final goods and services in an economy during a given period
2. GDP is the sum of value added in the economy in a given period
3. GDP is the sum of incomes in the economy in a given
period Should give you the GDP each way
Nomilal GDP sum of the quantities of final goods produced times their current price (Nom GPD increase
over time due to price or production increase)
Real GDP the sum of the quantities of final goods times constant prices.
Formula
Yt = GDP (output) in year t
,Rate of output grown:
(Yt − Yt−1) / Yt−1
Unemployment rate = unemployed/labor force
u = unemployment rate
u = (U/L) x 100
Labour force = Employed + Unemployed
L=N+U
Unemployed only those looking for work are counted
Participation rate is the ration of labour force to the total population of working age
persons Okuns Law
High output grown -> lower unemployment rate
Low output grown -> Higher unemployment
rate 2 measures of price level (price indexes
,(GDP Deflator and Consumer price index)
Formula
Ratio of nominal GDP to real GDP in year t
Pt = NomGDPt/Real GDPt = $Yt/Yt
GDP delator is an index number.
Base year Pt = 1
Rate of inflation = (Pt – Pt-1)/Pt-1
Nominal GDP = GDP deflator x Real GDP
Consumer price index the cost in dollars of a specific list of goods and services over time
CPI = Average price of consumption = the cost-of-living index.
Negative relation between unemployment rate and change in inflation.
When unemployment is low, inflation tends to increase.
When unemployment rate is high, inflation tends to decrease.
This relation is called the Phillips Relation
Macroeconomic policy goals
• Keep unemployment from being too high
• Keep inflation from becoming a problem
• Create conditions where output per person grows in the long run
Lesson 2 notes
The goods
market C =
consumption
I = Fixed Investment
Is = Inventory investment
G = Government Spending
X – Q = Net exports
, X = Exprts
Q= Imports
Z≡C+I+G+X–Q
Consumption (C)
C mainly is disposable income YD
Yd = Y – T (Income minus Tax)
Yd = + which is a increase in disposable income income leads to an increase in C This is a behavioural
equation
C = C0 + C1(Yd)
Investment (I) does not respond to changes in production
Investment is an Exogenous variable (are assumed to be given and not explained) I =I
Government spending and taxes do not respond to changes in
production Z ≡ c0 + c1 (Y-T) + I + G + X – Q
Y=Z
Using Algebra
Y = c0 + c1(Y-T) + I + G
Y - c1Y = c0 - c1T + I +
G
(1 - c1)Y = c0 - c1T + I + G
1
Y= (c 0−c 1T + I + G)
1−c 1
1
Y= > 1:
Multiplier 1−c 1
The larger the propensity to consume (c1) the larger the multiplier.
A change in autonomous spending will change output more than the direct change in autonomous
spending
Alternate way of thinking
S = private saving = YD – C = Y – T – C
S=I+G+T
