ECN 211 Notes Week 4
ECN 211 Notes Week 4 Ecn 211
Popular in Macroeconomics
Popular in Economcs
This 3 page Class Notes was uploaded by Jonathan Gonzales on Tuesday February 16, 2016. The Class Notes belongs to Ecn 211 at Arizona State University taught by Stefan Ruediger in Spring 2016. Since its upload, it has received 18 views. For similar materials see Macroeconomics in Economcs at Arizona State University.
Reviews for ECN 211 Notes Week 4
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 02/16/16
Economics Notes Day 7 • What Macroeconomics Tries to Explain • Macroeconomic Goals • Economic growth (GDP) • Full employment, reduction of unemployment • Stable prices • Achieving these goals betters the lives of citizens • 3 topics on next exam: • Measuring GDP and economic growth • Measuring unemployment • Measuring inflation • These are fairly straightforward topics, no models • All information comes from these sources, which can be found on Blackboard • Bureau of Labor Statistics • BEA • NBER • Fred • Government Census • Economic Growth • Increase production of goods and services • Longrun Growth: Growth over long periods of time • “In the long run we’re all dead” John Maynard Keynes • In spite of what people say, economics is very concerned with the long term • Real GDP: Total quantity of goods and services produced in a country over a year • Real GDP per Capita: Output per person • As opposed to nominal GDP, which will be explained later • Equation for Revenue: Price x Quantity • GDP is the same, but accounts for all goods and services produced in one year in one country • If the price goes up, this increases GDP, but it is a false increase because no more goods and services are being produced • As such, price is fixed at 2009 dollars so that price is unwavering • Business Cycle • Recession: Two consecutive quarters of negative Real GDP growth • Employment • It’s good that an increased number of people have quit their jobs, because it means they’re searching for something better, easy to find something new • Unemployment affects the distribution of economic wellbeing among citizens • Also sign that the economy is not achieving its full economic potential • People unemployed for a long time lose human capital (skills deteriorate) • Only people who wish to work are counted when unemployment is calculated • Thus people who do not desire work, children, the retired, prisoners, etc. are not considered when measuring unemployment • Donald Trump counts as unemployed, apparently • Unemployment rate is never zero • Some unemployment is necessary for the economy, as absolute job security does not encourage productivity • People in between jobs count as unemployed • 5.5% unemployment is considered full employment in the United States, but now economists are rethinking that (Perhaps 4.5%) • Current 4.9% unemployment • Wages didn’t change at 5.5%, and wage growth is the indicator of full employment, because it shows a shortage of workers • Wage growth has picked up a little bit, but it’s not as high as economists would like to declare “full employment” • We currently have the largest amount of payroll employment we’ve ever had in the United States, but we have had lower unemployment in the past • Is there an ideal number of unemployment? • No • In a perfect world, everyone who wants a job would have one, but measurement and realities mentioned above prevent this • No fixed level of unemployment, but generally “as high as possible” is aimed for • Stable Prices • Inflation Rate: Percentage increase in the average level of prices • 2% inflation is defined as price stability, will be explained better in the future • Some inflation is preferable for some reasons • Importance of loans to the economy • As price goes up, loans become cheaper because interests rates are based on original loan • If one knows that prices will increase in the future, one will buy now • Thus inflation encourages consumption, which is good, rather than how deflation encourages people to wait • Hyperinflation: Prices double daily • Weimar Republic era Germany, modern Zimbabwe • Prices have been relatively stable in the United States since the mid 1990s • To achieve all these goals, macroeconomics attempts to reduce the impact of the business cycle, less extreme highs and lows • Impossible to extirp it quite • Long run increase, so that highs and lows are small parts of longrun upward trend • Depression: An unusually severe recession • The state of the economy when one enters the job market will impact one’s salary for the rest of one’s life • Measuring a Nation’s Income • Gross Domestic Product (GDP) • Total value of all goods and services produced for the marketplace during a given year within the nation’s borders • Even if a company is foreign to the United States, any work they do to produce final goods and services for the marketplace within the United States counts towards American GDP • Measured in dollars, which isn’t ideal but it’s all we’ve got • Why this is not ideal will be explained later • Only final goods and services count towards GDP • Steel used to create a car does not count towards GDP, but the car does • Intermediate good: good used to make a final good (steel, in the above example) • Final good: Intended for their end user (the car, in the above example) • Things that do not have a market value (housework) for example, does not count towards GDP • Shadow Economy: stuff going on that does not contribute to GDP • Services make up largest portion of American GDP • Only goods and services produced this year count • Things produced in previous years but sold this year will be addressed later, as with many things, apparently • Quarterly updates about United States GDP • Used goods do not count, because they’ve already been counted • Does eBay count? And if so how? • There is a payment to list something on eBay, which does count even if the used goods sold there do not get counted
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'