Introduction to Macro

• The 7 main Macroeconomic objectives are: Economic growth, controlling inflation, reducing unemployment, restoring equilibrium to the balance of payments, improving equality, protecting the environment and improving the budget balance.
• GDP is the monetary value of all goods and services produced within an economy in a given time period.
• Real GDP is GDP adjusted for inflation.
• Economic growth is the percentage rate of increase of real GDP
• Inflation is the annual percentage rate of change of the general price level.
• GNP - Gross National Product is the value of all goods and services owned by the country.
• GNI - Gross National Income is the GDP plus the income paid into the country
• National Income - the total amount of good and services produced within an economy over a period of time.
• Green GDP accounts for environmental costs of production.
• Purchasing Power Parity -  is a measure of the price of specific goods in different countries and is used to compare the absolute purchasing power of currencies
• What are the limitations of using GDP to compare living standards?

  1 - It ignores income distribution and inequality

  2 - Calculation of GDP may be inaccurate

  3 - Cannot calculate the hidden economy such as unpaid or illegal work

  4 - Ignores externalities
• Happiness levels are based on: Family relationships, financial situations, job security, community and friends, health, personal freedom and values such as politics, religion and hobbies.
• Real GDP = Nominal GDP x 100/price index
• Aggregate Demand = Consumption + Investments + Government Spending + (Exports - Imports)
• What Influences Consumption?

  Disposable income and distribution of income
• What influences investment?

  Changes in income, interest rates and profit levels
• What influences government spending?

  Market failures, state of the economy
• What influences net exports?

  Exchange rates, foreign income, income