Macroeconomics Week one
Macroeconomics Week one ECON 105
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ECON 105 001
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This 1 page Class Notes was uploaded by Jordan Anderson on Wednesday February 24, 2016. The Class Notes belongs to ECON 105 at University of New Mexico taught by Xiaoxue Li in Spring 2016. Since its upload, it has received 10 views. For similar materials see Introductory Macroeconomics in Economcs at University of New Mexico.
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Date Created: 02/24/16
A tax cut is needed to stimulate the economy (normative statement) An increase in item A will lead to a consumer demand increase in item B (positive, shows relationship) Income affects demand Inferior goods affect demand negatively Prices of related goods affect demand: Pizza and hamburgers: price of price goes up, demand for hamburgers goes up, and vice versa Two goods are substitutes if an increase in the price of one item causes an increase in demand for another. Two goods are complements if an increase in the price of one causes a fall in demand for the other Tastes: Ex: Breaking Bad: Tv show became popular, increase in demand for Heisenberg hat, shifted demand curve to the right If people expect their incomes to rise, their demand for meals at expensive places may increase If the economy sours and people worry about their future job security, demand for new cars will fall. Price cause movement along the D curve, # of buyers, price of related goods, taste, expectations, income Shifts the D curve left or right Supply the quantity supplied of any good is the amount that sellers are willing and able to sell Law of supply is the claim that The supply curve shows how price affects demand Supply curve factors: Input Prices, Expectations, Input prices describes cost to create product for example: wages, prices of raw materials. Fall in input prices makes production more profitable at each output price, so larger supply is offered, supply curve shifts. Gov purchases: Highways, national defense GDP deflator= 100xnominal GDP/real GDP Inflator= (current deflator-previous deflator ) / previous deflator Luxury fever The status Finding the connection between prosperity and happiness The spirit level What are the limitations of GDP CPI calculation: 100xCost of basket in current year/ cost of basket in base year Inflation rate= CPI this year - CPI last year/ CPI last year x 100% CPI= $125 Inflation=40% Whats in a CPI basket? Food and bev, housing, apparel, transportation, medical care, recreation, education and communication, Other goods and services. Contrasting the CPI and GDP deflator Imported consumer goods: included in CPI but excluded in GDP deflator Capitol goods: Excluded in CPI but included in GDP deflator (if produced domestically) The basket: CPI uses fixed basket but GDP deflator uses basket of currently produced goods & services The CPI overstates the cost of living Improvements in the quality if goods in the basket increase the value of each dollar. BLS misses some quality changes
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