Fourth Week of Notes
Fourth Week of Notes ECON2020
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This 3 page Class Notes was uploaded by Morgan Genelin on Monday February 29, 2016. The Class Notes belongs to ECON2020 at University of Colorado taught by Murat Iyugan in Winter 2016. Since its upload, it has received 44 views. For similar materials see Principles of Macroeconomics in Economcs at University of Colorado.
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Date Created: 02/29/16
February 9, 2016 Concepts and Definitions 1. Stocks and flow variable a. Stocks: amount total inside something i. Given point in time you can measure ii. Wealth iii. National debt b. Flow: can’t just take a photo to measure i. Must measure over time ii. Income iii. Spending/borrowing 2. Exogenous and endogenous variables a. EX: outside the model i. The variables needed for the model are not in it ii. They are not explained they are given b. EN: internal to the model i. An variable the model will explain 3. Positive and Normative analysis a. Positive: factual explains how it is b. Normative: Hypothetical explains how things should be. Measuring incomes 1. Nominal Gross Domestic Product a. The sum of all final goods and services produced within an economy over a given period of time i. Measured in CURRENT prices b. Not a sum of everything, just of the final goods c. Flow variable d. Current prices don’t account for price changes i. Don’t show the effect of inflation ii. Avoids double counting 1. Intermediate goods and final price e. 3 ways to find i. Add up the final prices ii. Keep track of the value added iii. Add factors of production cost f. P x Y price of goods produced 2. Real Gross Domestic Product a. Sum of all final goods and services produced within an economy over a given period of time i. Measured in CONSTANT prices b. Takes base price and multiplies by how much stuff was produced i. Gets rid of the effect of inflation and deflation c. Tells you the base year i. When did you take prices from d. In BASE year, NGDP=RGDP 3. GDP Deflator a. An overall price measure in the economy b. NGDP/RGDP x 100 first year (base year) GDPD=100 February 11, 2016 4. Nominal GNP a. The sum of all final goods and services produced by the national of a country over a period of time using CURRENT prices b. Flow variable c. Current prices means nominal d. Nationals only local companies (can be an MNC, but no foreign in our country) e. IF GNP>GDP then IMPORTS>EXPORTS and INVESTMENTMAKING>CAPITAL INVESTMENT 5. Real GNP a. Sum of all final goods and services produced by the nationals of a country over a period of time using CONSTANT prices 6. Components of Y a. Household consumption (C) i. All services and goods where the final payer or buyer is a household ii. 70% (not new home construction) b. Investment (I) i. 1520% ii. “i” business fixed I 1. Investment taken by firms to produce stuff a. Coming to a place and make another branch b. Equipment, factories, transport iii. “ii” new housing construction 1. Built in the new year (as long as it wasn’t bought) a. If bought it shows up under Consumption, if not then no iv. “iii” changes in inventories 1. Products produced that year and not bought a. Once bought it goes into “C” 2. A large number = a weak economy c. EQUATION: i. Y = C + I + G ( government spending) IN A CLOSED ECONOMY ii. Y = C + I + G + NX(exportsimports) OPEN ECONOMY
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