Macroeconomics

• Macroeconomics - is the study of the large economy as a whole. It is the study of the big picture.
• National Income Accounting - is used to determine the level of economic activity of a country.
• Gross Domestic Product (GDP)- is the market value of all final goods and services produced

  within a country’s borders in

  one year.
• Not included in GDP -

  Intermediate goods

  Nonproduction transaction

  Non-market
• Expenditures Approach - Add up all the spending on final goods and services produced in a given year
• Income Approach - Add up all the income that resulted from selling all final goods and services produced in a given year.
• Four components of GDP :

  Consumer Spending Ex: P150 Caesar's Pizza Investments -When businesses put money back into their own business. Ex: Machinery or tools Government Spending Ex: Bombs or tanks, NOT social security Net Exports -Exports (X) – Imports (M) Ex: Value of 3 Ford Focuses minus 2 Hondas.
• Nominal GDP - is GDP measured in current prices. It does not account for inflation from year to year.
• Real GDP - is GDP expressed in constant, or unchanging, peso.
• Real GDP per capita - is real GDP divided by the total population. It identifies on average how many products each person makes.

  Its is the best measure of a nation’s standard of living
• Gross National Income (GNI/ GDP)- is the sum total of all final goods and services

  produced by a people of one

  country in one year.
• Per Capita Income - is the average income of the people of a country in a particular year.
• Personal income - is the total income received by the individuals of a country from all sources before direct taxes in one year
• Personal disposable income - Is the income that can be spent on consumption by individuals and families.
• Cost-of-Living-Adjustment (COLA) - Some works have salaries that mirror inflation. They negotiated wages that rise with inflation
• Consumer Price Index - The most commonly used measurement inflation for consumers.
• GDP deflator - measures the prices of all goods produced,
• CPI - measures prices of only the goods and services bought by consumers
• GDP deflator - includes only those goods and services produced domestically.
• DEMAND PULLS UP PRICES • Demand increases but supply stays the same. What is the result? • A Shortage driving prices up • An overheated economy with excessive spending but same amount of goods.
• COST-PUSH INFLATION Higher production costs increase prices A negative supply shock increases the costs of production and forces producers to increase prices.
• Hyperinflation: prices increase at such a speed that the value of money erodes drastically.
• Stagflation: a typical situation when stagnation and inflation coexist.
• Disinflation: a process of keeping a check on price rise by deliberate attempts.
• Deflation: a state when prices fall persistently; just opposite to inflation .
• Inflationary Gap (Keynes): Excess of anticipated expenditure over available output at the base price –When money income exceeds the supply of goods and services, a gap is created between demand and supply resulting in inflation.
• Macroeconomics - measures these fluctuations and guides policies to keep the economy stable.
• The Unemployment rate - The percent of people in the labor force who want a job but are not working.
• Frictional Unemployment - “Temporarily unemployed” or being between jobs. - Individuals are qualified workers with transferable skills but they aren’t working.
• Seasonal Unemployment - This is a specific type of frictional unemployment which is due to time of year and the nature of the job.
• Structural Unemployment - •Changes in the structure of the labor force make some skills obsolete.
• Cyclical Unemployment - Unemployment that results from economic downturns (recessions).
• Cyclical Unemployment - As demand for goods and services falls,

  demand for labor falls and workers aref fired.
• Imports: Outflow
• Exports: Inflow
• Money : commodity
• Commodity Money: Under This, the people used commodities or animals as money.
• Metallic Money:  It was introduced to meet the difficulties of commodity money. Different metals, such as iron, gold, brass, silver, copper, etc. were used to make coins.
• Paper Money: In past traders, used to deposit their metallic money with money lenders and obtain certificate of deposit. These certificates were used as money. Thus, this led to the origin of paper money.
• Near Money:  Near money refers to those promissory notes which can be easily converted into money, but can not be used as money to buy goods and services.