ECON CHAPTER 1 lecture and Recitation notes
ECON CHAPTER 1 lecture and Recitation notes ECON 204
Popular in Principles of Macroeconomics (GT-SS1)
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This 7 page Class Notes was uploaded by Lyric Jamerson on Tuesday September 6, 2016. The Class Notes belongs to ECON 204 at Colorado State University taught by Steven J Shulman in Fall 2016. Since its upload, it has received 3 views.
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Date Created: 09/06/16
Thurs. 8/25/16 Thursday, August 25, 2016 12:56 PM What Is Macroeconomics? Microeconomics: the study of individual markets & individual economic behavior Macroeconomics: the study of all markets taken together & aggregate economic behavior Measurement & analysis of the national economy Explanation of economic growth Analysis of inflation & unemployment Debates about economic policies o Fiscal policies o Monetary policies o Trade policies Macroeconomic Models Theoretical economics – formal expression of economic ideas Expressed mathematically as relationships among variables o Just functions, algebra & graphs for our purposes o Precise & logical o Necessarily simplified Example: consumer spending = f(disposable income) Empirical economics – test of economic theories Factual o Can look up and observe them Can every single point be right on the line No The points go on either side of the line but correspond to the line Need Data to test the theory Cant conduct controlled experiments Big stew with everything cooking at the same time Data Statistical models Why economists disagree A lot of grey area A lot of debate Cant open up a persons mind and see what they are going to do Inability to conduct controlled experiments in social sciences Different theoretical models, data sets & statistical models Different values & politics o About government policy to control economic growth Government = politics Macroeconomics & Politics Macroeconomics always involves questions of the role of government In particular, what are the right policies to pursue? In general, what is the right size for government? ConservativLiberal e Economics Economics (the (the “Keynesia “classical n model”) model”) Markets Usually Frequent efficient & market equitable failures Governme Best if small Best if large nt & passive & active Primary Individual Social well- Value freedom being These debates persist because the evidence is complicated. Both sides can tell a convincing story. It’s possible & even likely to have conservative views of some issues & liberal views of other issues You have to think through your own opinion! GDP Definition & measurement of GDP Is not a thing. It's an activity How much it takes a year GDP as a simple circular flow Per capita GDP & living standards Income distribution Productivity growth Gross domestic product (GDP) is the total market value of all final goods & services produced within a nation’s borders in a given time period. All of it taken together Total market value Add everything up with dollars Environmental problems Want to look at both sides of the picture Want net measurements Like economic statistics Have a lot of debate on how accurate the measurements are. Final goods are not used in the production of other goods (called intermediate goods). They have reached their final destination. Double count if needed for intermediate goods Not just physical things 4/5ths is services for jobs in the united states Manufacturing 1/5th Our people Things in other countries do not count even though they started in the US Only US things count Three equivalent measurements of GDP All transactions Commodity Has to be equal to both spending and income The price that it got sold at Total production What's their value What they got sold for. Total spending buying Total income selling GDP makes it possible to compare the size of different national economies. 2014 GDP, Top Ten Countries Actually not that long ago that japan and Germany were obliterated US is more than China They are in top ten but way way way smaller GDP as a Simple Circular Flow No bank No government Households and a business sector Markets connect them From household to firms o Factor markets Land Labor o Firms Prodice goods and services Then go to the markets for goods and services Buy back the goods and services Green arrow Income (right side) Spending (left side) Goods and services (yellow arrow) o production Simple circular flow ignores government, finance & other countries. GDP as a flow of dollars (outer loop) Dollars into households are income (wages, rent, profits, interest) Dollars out of households are expenditures (consumption) o Income and spending feed each other GDP as a flow of goods & services (inner loop) Households receive income from firms in return for producing output Value of output = expenditures = income Underlying principle of the circular flow: dollar inflows into each sector must equal dollar outflows from each sector. Spending & income depend upon each other ∆spending _ ∆income _ ∆spending _ ∆income … What is Left Out of GDP Intermediate goods & services (inputs) Used goods Financial assets Foreign produced goods & services Services that are not priced, e.g., housework Illegal goods & services Friday 8/26/2016 Recitation: Friday, August 26, 2016 12:57 PM Office hours: Tuesday 10-11 Friday 10-11 and 1:50-2:50 Clark c301 Email: email@example.com 1. 3 points for every question answered GDP: o Total Market-value of goods and services within a nation's border, during a given period of time Total A number Market value Goods and services Real goods and service Nations border No imported goods or services Actually subtract them During a given period Only during a certain time frame Monthly Quarterly Annually GDP per capita o GDP/ population Standard of living for a country Only if Income distribution is equal Income Distribution o 20% , in order o Five 20% of the population (higher, lower, middle and in between) Us richest 20% 51 2nd 20% 23 3rd 20% 14.4 4th 20% 8.4 Lowest 20% 3.2
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