Macroeconomics
Contents
Chapter 1............................................................................................................................................1
Chapter 2............................................................................................................................................2
GDP (Gross Domestic Product).......................................................................................................2
GNP (Gross National Product)........................................................................................................3
NNP (Net National Product)............................................................................................................3
CPI (Consumer Price index).............................................................................................................3
Unemployment rate.......................................................................................................................3
Chapter 3............................................................................................................................................3
Supply: Production.........................................................................................................................3
Income distribution........................................................................................................................4
Demand: Consumption...................................................................................................................4
Demand: investment......................................................................................................................4
Demand: government.....................................................................................................................4
Equilibrium.....................................................................................................................................5
Chapter 4............................................................................................................................................5
Private banks..................................................................................................................................5
Central banks..................................................................................................................................5
Chapter 5............................................................................................................................................6
Chapter 6:...........................................................................................................................................7
Exchange rate.................................................................................................................................7
Chapter 1
Macroeconomics studies aggregate phenomena of entire economies such as comparing the inflation
of Belgium with France.
If GDP grows over time, then people became richer over time… but doesn’t always grow (WOII…).
Inflation is never zero and isn’t constant long term. Also the employment varies much over time
(there is always some).
Endogenous variables: what the model tries to explain (endo = outside). Such as the price of the end
product and the quantity of the end product.
Exogenous variables: what the model takes as given (exo = inside). Such as: the income of people
and the price of materials.
, Demand: Qd = D(P,Y) with y = income.
Supply: Qs = S(P,Pm) with P the price and Pm the price of materials.
If Qs = Qd then we find the market equilibrium.
It is good to make a simple model of something complex, but you need to watch out; don’t
oversimplify it (then you can miss the essence).
Market clearing prices: prices adjust tob ring supply and demand into balance, but this is not always
the case. This because; collective bargaining, agreements, subscriptions (on a paper…), menu costs…
you have to take the time horizon into account.
So, you have flexibles prices and sticky prices. But also, prices are not stuck forever, only on the short
run.
Chapter 2
Stock variable: quantity measured at a given point in time.
Flow variable: quantity measured per unit of time. Such as GDP.
GDP (Gross Domestic Product)
- Total income of everyone in the economy
- Total consumption of everyone in the economy
- Total production of everyone in the economy
GDP = how much economic activity happens in a specific entity during a specific time period. Is the
market value of all final goods and services produced whitin an economy in a given time.
GDP is both the total expenditure and
the total income of the production.
GDP can also be computed by looking
at the value added; this equals the
value of the firm’s output less the
value of the intermediate goods and
services that the firm purchases.
GDP can only change if the prices or
quantities change.
Nominal GDP: using current prices.
Real GDP: using constant prices (with a base year updated every 5 years or so). CAN ONLY CHANGE
DUE TO CHANGES IN QUANTITIES.
GDP Deflator indicates the change in price since the base year: nominal GDP/real GDP.
Y = C + I + G + NX
Consumption
Consumption is the spending on goods and services:
- Non-durable goods
- Durable goods
- Semi-durable goods (clothing)
Contents
Chapter 1............................................................................................................................................1
Chapter 2............................................................................................................................................2
GDP (Gross Domestic Product).......................................................................................................2
GNP (Gross National Product)........................................................................................................3
NNP (Net National Product)............................................................................................................3
CPI (Consumer Price index).............................................................................................................3
Unemployment rate.......................................................................................................................3
Chapter 3............................................................................................................................................3
Supply: Production.........................................................................................................................3
Income distribution........................................................................................................................4
Demand: Consumption...................................................................................................................4
Demand: investment......................................................................................................................4
Demand: government.....................................................................................................................4
Equilibrium.....................................................................................................................................5
Chapter 4............................................................................................................................................5
Private banks..................................................................................................................................5
Central banks..................................................................................................................................5
Chapter 5............................................................................................................................................6
Chapter 6:...........................................................................................................................................7
Exchange rate.................................................................................................................................7
Chapter 1
Macroeconomics studies aggregate phenomena of entire economies such as comparing the inflation
of Belgium with France.
If GDP grows over time, then people became richer over time… but doesn’t always grow (WOII…).
Inflation is never zero and isn’t constant long term. Also the employment varies much over time
(there is always some).
Endogenous variables: what the model tries to explain (endo = outside). Such as the price of the end
product and the quantity of the end product.
Exogenous variables: what the model takes as given (exo = inside). Such as: the income of people
and the price of materials.
, Demand: Qd = D(P,Y) with y = income.
Supply: Qs = S(P,Pm) with P the price and Pm the price of materials.
If Qs = Qd then we find the market equilibrium.
It is good to make a simple model of something complex, but you need to watch out; don’t
oversimplify it (then you can miss the essence).
Market clearing prices: prices adjust tob ring supply and demand into balance, but this is not always
the case. This because; collective bargaining, agreements, subscriptions (on a paper…), menu costs…
you have to take the time horizon into account.
So, you have flexibles prices and sticky prices. But also, prices are not stuck forever, only on the short
run.
Chapter 2
Stock variable: quantity measured at a given point in time.
Flow variable: quantity measured per unit of time. Such as GDP.
GDP (Gross Domestic Product)
- Total income of everyone in the economy
- Total consumption of everyone in the economy
- Total production of everyone in the economy
GDP = how much economic activity happens in a specific entity during a specific time period. Is the
market value of all final goods and services produced whitin an economy in a given time.
GDP is both the total expenditure and
the total income of the production.
GDP can also be computed by looking
at the value added; this equals the
value of the firm’s output less the
value of the intermediate goods and
services that the firm purchases.
GDP can only change if the prices or
quantities change.
Nominal GDP: using current prices.
Real GDP: using constant prices (with a base year updated every 5 years or so). CAN ONLY CHANGE
DUE TO CHANGES IN QUANTITIES.
GDP Deflator indicates the change in price since the base year: nominal GDP/real GDP.
Y = C + I + G + NX
Consumption
Consumption is the spending on goods and services:
- Non-durable goods
- Durable goods
- Semi-durable goods (clothing)
