Macro Unit 2 Lesson 1
Macro Unit 2 Lesson 1:
What is the difference between macro and micro?
Federal Debt graph: http://research.stlouisfed.org/fred2/series/GFDEBTN In the circular flow the seller receives exactly the same amount that the buyer buys (exclude tax)
In the circular flow diagram, how do we account for profits?
What happens if there is a disruption in the circular flow diagram?
Individuals are concerned with income distribution. (wages)
1
Households C as spenders must consider the following:
1. Personal taxes: Government in the middle
2. Savings: (bank accounts, savings, insurance...) Reasons: security or speculation
Saving is correlated to income.
3. Consumption:
Durables: live expected over year (cars, appliances...)
Non-durables: …show more content…
2) intermediate goods: (goods and services are used for further processing and manufacturing or resale) are used in production and are not counted in GDP.
5
You can only count the final goods: goods and services being purchased for final use and not for resale or further processing or manufacturing.
This process avoids double counting goods and therefore over exaggerating the GDP.
3) GDP excludes non-production transactions such as
a) Financial Transactions: ex: Public transfer payments: social security, welfare... ex: private transfer payments: gifts of money from relatives... ex: security transactions: buying and selling of stocks and bonds (this is just an exchange of paper assets) b) secondhand sales: there is no current production. These goods have already been counted in a previous GDP.
Problems with GDP:
Does not measure underground economy.
Does not measure goods bartered
Does not measure goods produced and sold at home unless this is reported.
Fails to take externalities into consideration.
Cool GDP Websites http://research.stlouisfed.org/fred2/series/BOPGSTB?cid=125 Map of world based on estimated wealth in …show more content…
PI = price of market basket in a given year price of same basket in the base year
X 100
* Notice that in the base year the index will always be 100
Consumer Price Index: Best known indicator. It measures the prizes of a fixed market basket of around 300 Goods and services. Measures the prices of goods and services purchased by wage earners.
Current CPI Numbers: http://www.bls.gov/cpi/tables.htm
Producer Price Index: measures the price level of goods and services that firms purchase from other firms. GDP Deflator: reflects the price of goods and services but not the quantities. In other words, it will show how much prices have changed without worrying about changes in quantity.
It is the current level of prices relative to the level of prices in the base year.
GDP deflator = Nominal GDP/Real GDP x 100
Example: if Nomial GDP is $600 and Real GDP is $350 you get
600/350 x 100 = 171 That means prices have increased 71 percent.
When you look at GDP it is important to realize that inflation may have occurred. Does the
What is the difference between macro and micro?
Federal Debt graph: http://research.stlouisfed.org/fred2/series/GFDEBTN In the circular flow the seller receives exactly the same amount that the buyer buys (exclude tax)
In the circular flow diagram, how do we account for profits?
What happens if there is a disruption in the circular flow diagram?
Individuals are concerned with income distribution. (wages)
1
Households C as spenders must consider the following:
1. Personal taxes: Government in the middle
2. Savings: (bank accounts, savings, insurance...) Reasons: security or speculation
Saving is correlated to income.
3. Consumption:
Durables: live expected over year (cars, appliances...)
Non-durables: …show more content…
2) intermediate goods: (goods and services are used for further processing and manufacturing or resale) are used in production and are not counted in GDP.
5
You can only count the final goods: goods and services being purchased for final use and not for resale or further processing or manufacturing.
This process avoids double counting goods and therefore over exaggerating the GDP.
3) GDP excludes non-production transactions such as
a) Financial Transactions: ex: Public transfer payments: social security, welfare... ex: private transfer payments: gifts of money from relatives... ex: security transactions: buying and selling of stocks and bonds (this is just an exchange of paper assets) b) secondhand sales: there is no current production. These goods have already been counted in a previous GDP.
Problems with GDP:
Does not measure underground economy.
Does not measure goods bartered
Does not measure goods produced and sold at home unless this is reported.
Fails to take externalities into consideration.
Cool GDP Websites http://research.stlouisfed.org/fred2/series/BOPGSTB?cid=125 Map of world based on estimated wealth in …show more content…
PI = price of market basket in a given year price of same basket in the base year
X 100
* Notice that in the base year the index will always be 100
Consumer Price Index: Best known indicator. It measures the prizes of a fixed market basket of around 300 Goods and services. Measures the prices of goods and services purchased by wage earners.
Current CPI Numbers: http://www.bls.gov/cpi/tables.htm
Producer Price Index: measures the price level of goods and services that firms purchase from other firms. GDP Deflator: reflects the price of goods and services but not the quantities. In other words, it will show how much prices have changed without worrying about changes in quantity.
It is the current level of prices relative to the level of prices in the base year.
GDP deflator = Nominal GDP/Real GDP x 100
Example: if Nomial GDP is $600 and Real GDP is $350 you get
600/350 x 100 = 171 That means prices have increased 71 percent.
When you look at GDP it is important to realize that inflation may have occurred. Does the