Macro Class Notes Sept. 4th, 2016 through Sept. 9th, 2016
Macro Class Notes Sept. 4th, 2016 through Sept. 9th, 2016 ECON 2013
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This 6 page Class Notes was uploaded by Winston on Thursday September 8, 2016. The Class Notes belongs to ECON 2013 at University of Arkansas taught by Stapp in Fall 2016. Since its upload, it has received 8 views. For similar materials see Macroeconomics in Economics at University of Arkansas.
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Date Created: 09/08/16
1) Plus1 a) Don’t just give your customer what they’re looking for, give them more i) Give more than what the professor asks 2) U.S. economy created 150k jobs in August, well short of 187k expected a) Prior 3 months averaged 231k 3) Unemployment was 4.9% instead of 4.8% expected 4) Private sector a) Nongovernment i) C + I 5) August numbers a) Food and service industry: +34k b) Social assistance: +22k c) Professionals: +23k d) Mining: 6k e) Manufacturing: 6k f) construction: 6k 6) Labor Force Participation Rate a) Total participating (employed + unemployment rate) / total eligible b) ALL TIME LOW IN THE U.S. c) In reality will always be below 100% d) Not looking for work = not unemployed 7) U6 Unemployment Rate a) 9.7% i) More accurate (better) than regular unemployment rate(UR) 8) U.S. Trade deficit a) About $40.44B per month i) $485.25B per year 9) Notable countries trade balances measured in billions of U.S.D, 2015 https://en.wikipedia.org/wiki/List_of_countries_by_current_account_balance a) China largest surplus i) +293.200 b) Germany 2nd largest surplus i) +285.200 c) Japan 3rd largest surplus i) +137.500 d) Brazil 3rd largest deficit i) 58.910 e) United Kingdom 2nd largest deficit i) 123.500 f) United States largest deficit i) 484.100 10)Ig(capital i, not lowercase L) a) Gross Fixed Capital Formation Gross investment Y = cash purchases i (cursive lowercase i when written) = interest rate K = capital x = exports m = imports + (above a letter when written, to the right of letter in these notes) = positive relationship (above a letter when written, to the right of a letter in these notes) = negative relationship i) CCA = Capital Cost Allowance 11)GNP = C(Y+,i) + Ig(i) + (x(Y+) m(Y+)) + G a) C = Consumption i) Domestic goods(i) ii) Nondomestic goods and services(Y+) b) Ig i) K goods ii) CCA iii) Inventories iv) Housing (i) c) (x m) i) Exports(Y+) ii) Imports(Y+) d) G i) Public (government) spending i. C + I = private sector ii. C + I + G = domestic sector iii. x m = foreign market iv. G = public sector v. C = Y(+) + i() vi. Y(+) = ND G&S vii. i() = DG viii.C = ND G&S + DG ix. Ig = i() x. i() = K goods + CCA + Inventories + Housing(i) 12)NNP a) Net national product 13)NNP = GNP CCA 14)Transfer payments a) a payment made or income received in which no goods or services are being paid for i) Such as a benefit payment or subsidy b) Transfer payments are NOT included in GNP 15)“Actual numbers are nice but they don’t mean much” a) “18!” i) This number by itself means nothing (1) 18 down from 19 the year before and 20 two years ago (a) This is what matters (i) The combination makes it a trend 16)GNP doesn’t include foreign companies inside the U.S. 17)CCA is not really spending a) Doesn’t make sense to include this when measuring the economy 18)BOJ a) Bank of Japan i) Japan’s equivalent of the U.S. Federal Reserve System (Fed) (1) Both are “Central Banks” (a) National banks 19)Japan has the most expensive land on the planet 20)Aichi Prefecture a) Japanese Prefecture i) Prefecture (1) A district under the government of a prefect (a) a prefect's office or tenure (b) the official residence or headquarters of a prefect b) Manufacturing hub of the world i) Population 7.263M 21)U.S. has a lot of “I Owe You”s a) Fed sells U.S. treasury bonds on the market i) Also buys them (1) Constantly going on 22)After WWII the U.S. was the only solid economy a) Everything (gold, oil, etc.) became expressed (quoted, current price) in U.S.D. i) U.S.D. worth more = gold worth more ii) U.S.D. worth less = gold worth less (1) How do you keep the value of gold the same? (a) Keep the value of the U.S.D. the same (i) How? 1. Fixed exchange rate iii) Fixed Exchange Rate System (19481973) (1) Kept the exchange rates between currencies the same (2) 360 Yen = 1 U.S.D. (3) Requires both central banks work to maintain (a) Fed had to “defend” the dollar(U.S.D.) (i) Bought them off the Foreign Exchange Market (FOREX) to keep the U.S.D. value consistent (b) By defending the dollar, the Fed put tendencies of recession into the system (i) <<See #23<< (still in this section, shift for space) 23)By defending the dollar, the Fed put tendencies of recession into the system a) THIS EXAMPLE ONLY USES JAPAN AND THE U.S. > SIMPLIFIED EXAMPLE > ACTUALLY MUCH MORE COMPLICATED b) The Fed made deals that people couldn’t refuse (offering $2100 for something worth $700) to get the other currency out there and get theirs off the market (increase value of theirs, less in circulation) c) Buying U.S.D d) Selling Yen (symbol for Yen = capital Y with two lines through the straight (bottom) line of the Y i) This caused: (1) Inflation in Japan (2) A trade deficit in the U.S. (to Japan) (3) A trade surplus in Japan (to the U.S.) (4) A lot of pressure for the U.S.D to fall (a) Would make everything cheap for other countries (b) <<See 24<< (still in this section, shift for space) 24)Japan doesn’t want U.S.D. a) Valued high now, but can fall, become worth less, worthless i) Because the U.S.D. was defended it had artificial value (1) “We want to be paid in gold” (a) Fed didn’t want to give up all the U.S. gold (i) Stopped defending the U.S.D. (ii) Japan stopped defending the U.S.D. 1. End of fixed exchange rate 1972 a. Value of U.S.D. dropped i. U.S. kept buying Japanese goods ii. Builds trade deficit iii. <<See #25<<(shift for space) 25)U.S. kept buying Japanese goods > deficit builds over the years (TREND) > 2016 a) Leads to jobs leaving the U.S. because of increased imports (instead of using own goods or exporting) i) U.S. tried to stop (1) Quotas (2) Tariffs (a) ^^Both of these cut off trade^^ (i) No free trade (ii) Imports require one of two things 1. Become more efficient > produce cheaper 2. Get out > find something else to do (b) Why are we buying imports? (i) We wanted them 1. No one forced us (ii) They were things we couldn’t produce b) “Floating Exchange Rates” i) Currencies constantly changing in value relative one another (1) Either (a) Appreciating (i) Gaining value relative another currency (b) Depreciating (i) Losing value relative another currency c) 1 U.S.D. = 120 Yen i) Everything is 66% cheaper in the U.S. than it used to be for Japanese companies > Japanese FDI in the U.S. (1) Foreign Direct Investment(FDI) (a) an investment in the form of a controlling ownership in a business enterprise in one country by an entity based in another country (i) Japan builds factories in the U.S. 1. Brings jobs back to the U.S. 2. <<See #26<< (same section, shift for space) 26)Japan builds factories in U.S. a) When America goes into a trade deficit with a country, those countries companies might want to relocate their production the U.S. because their currency appreciates relative the U.S.D. i) Everything in the U.S becomes cheaper for them than it used to be (1) Land (2) Labor (3) Avoid import tax (4) Shorter transportation (a) Toyota plants in Texas (b) MercedesBenz factory in Alabama (c) BMW factory in Carolina (i) ^^none of these would be counted in GNP^^ 1. they are FDI a. Why are they staying in the south? i. Northern labor is unionized ii. Much more expensive 27)Honda is pronounced “Honeda” a) Not “Hahnda” 28)Net Investment Income(NII) a) NII = income earned by U.S. firms overseas income earned by foreign firms in the U.S. 29)Stapp used to recruit for the Razorbacks (football) a) That’s where he saw the Alabama MercedesBenz factory 30)Gross Domestic Product(GDP) a) GDP = Gross National Product Net Investment Income i) GDP = GNP NII b) GDP = C + Ig + G + (x m) income earned by U.S. firms overseas + Income earned by foreign firms in the U.S. i) GDP = C + Ig + G + (x m) NII 31)Net investment a) Gross investment CCA b) Ig CCA i) Symbol = In ii) In = Net investment iii) In = Gross investment CCA (1) In = Ig CCA 32)Net Investment is COMPLETELY DIFFERENT from Net Investment Income 33)How many Japanese firms operate in Arkansas? a) About 15 34)How many Japanese firms operate in Texas? a) About 220 35)Why does Japan favor Texas? a) Population i) Cities b) People know where Texas is c) Possible illegal labor? d) Airports i) DFW ii) Houston (1) International airports e) Market i) Buyers f) Business hubs g) No income tax 36)San Antonio is the 7th largest city in the U.S. 37) CALCULATE ALL POSSIBLE CALCULATIONS AND EQUATIONS OVER THE WEEKEND U.S. Mexico X’s All to Mexico = 400 K good = 500 Durable Goods = 600 Transfer payments = 150 m’s all from Mexico = 300 Non Dur G&S = 100 Inc Earned by foreign in U.S. = 350 Housing = 700 Public Goods = 800 Inventories = 200 CCA = 100 Income earned by U.S. firms overseas = 250 Money supply = 450 i = 1% Calculate our every single thing you can Written the exact way he wrote it, in the order he wrote it, that’s all he wrote
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