# Macro Summary Notes

Topics: Unemployment, Economics, Inflation Pages: 44 (14024 words) Published: May 9, 2012
Disclaimer- The ASB Economics Faculty accepts no responsibility for the content of these pages. These notes were created by a past student for their personal revision purposes and as such may contain errors, typos, outdated statistics etc. Students are advised to read all material critically and for best results, to make their own notes based on official ECON lecture slides and notes and the BOF textbook.

ECON1102 Macroeconomics Summary otes

What is Macroeconomics?
Macroeconomics is concerned either with the economy as a whole or with the basic subdivisions or aggregates that make up the economy. Microeconomics is the study of individual choices and group behaviour in individual markets, analysing how choices inform market forces and price signals. LN1 Measuring Macroeconomic Performance: Output and Prices Ch3: The main indicators of macroeconomic performance include: Rising living standards • Measured by GDP o GDP= the market value of final G&S produced in a country during a given period. o GDP is a measure of aggregate production or output. o GDP uses market prices to value the quantities of G&S produced. • GDP is measured in 3 ways: o Production method→ Y= O o Expenditure method→ GDP= Expenditure: Y= C + I + G + (X-M) o Income method→ GDP= Labour Income + Capital Income : GDP= L+K • The level of output (i.e. quantity and quality of G&S) tends to ↑ over time. Stable business cycle • Aim is for low volatility in fluctuations of actual output around its trend or potential output. Relatively stable price level • Measured by CPI o For a given period measures the cost in that period of a given basket of G&S relative to their cost in the base year. o The base yr changes every 5yrs. o H= { {

o An inflation rate of 0→ implies prices are constant so no inflation o Inflation rate < 0 → implies prices are falling i.e. deflation. Inflation = Current CPI – Previous CPI Previous CPI x 100

o o CPI tends to overstate the level of inflation. • Stable price level is technically 0, BUT such a rate is highly unlikely so the objective is instead to target a low (positive) rate of inflation. The RBA currently sets inflation targeting at between 2-3%. Sustainable levels of public and national debt • Public debt→ influenced by gov. borrowing requirements→ borrowing by gov. from the private sector. Public debt went from \$96bn in 1996 to net debt in 2002. • National debt→ influenced by our CAD or CAS→ borrowing requirements of domestic residents from foreign countries.

Nithilla

1

ECON1102 PASS Notes

Disclaimer- The ASB Economics Faculty accepts no responsibility for the content of these pages. These notes were created by a past student for their personal revision purposes and as such may contain errors, typos, outdated statistics etc. Students are advised to read all material critically and for best results, to make their own notes based on official ECON lecture slides and notes and the BOF textbook.

Balance between current and future consumption • Excess consumption at present results in low levels of savings, thus ↓ levels of capital for investment→ ↓ levels of investment→ ↓ opportunities for consumption in the future. Full employment • Provision of employment for all individuals seeking work. 1. What does gross domestic product (GDP) mean? • Two of the criteria used to gauge a country’s macroeconomic performance include the measurement of: o Aggregate output o Average level of prices • Output is measured using the concept of gross domestic product (GDP). • GDP refers to the market value of the final goods and services produced in a country during a given period. • GDP= the market value of final G&S produced in a country during a given period. • Flow variable→ measured over a period of time, usually quarters, March, June, September and December. • For yearly GDP, add up the GDP over the 4 quarters. • GDP is a measure of aggregate production or output. • GDP uses market prices to value the quantities of G&S produced....