Macroeconomics

Marginal Propensity

Proportion of an extra unit of income spends on/consume/save/import

What are the macroeconomic goals?

• Economic Growth

• Low Unemployment

• Balanced Payments (tax = gov spending)

• Balanced Budgets (imports = exports)

• Environmental Sustainability

• Equality

• Price Stability Inflation 2% ± 1

GDP

The total value of goods and services produced by an economy over a period of time

Real GDP

GDP taking into account inflation

Real …

Means that it takes inflation into account

Economic Growth

Is an increase in real output over time, measured by an increase in real GDP

Key Dates:

2008

2019/20

2022

2008: The global financial crisis

2019/2020: The global health pandemic/crisis

2022: Global lockdowns ended

Nominal value

The current monetary values of goods, services or incomes unadjusted for inflation

Real National Output (RNO)

Nominal National Outputs/Average Price Levels

Volume of a good/service

Value of a good/service

Volume looks at the quantity of goods and services produced in a country

Value looks at their monetary worth

Gross National Product (GNP)

The value of all goods and services produced by domestic businesses (businesses from a country - British banks in Singapore, but not Toyota (Japan’s) factories in Britain - if we are looking at it a Britain) both at home and abroad (so it includes overseas assets) over a period of time

Simply: Production measure of country’s citizens both abroad and at home

Gross National Income (GNI)

The value to all goods and services produced by a country’s residences regardless of their current location (domestic or abroad) over a period of time

(GDP is only within a country’s boarders)

Simply: Income measure of country’s citizen both abroad and at home

Total National Income

The same a GNI but also include net transfers (remittances, foreign aid, EU payments)

What is the circular flow of income?

Purchasing Power Parity (PPP)

It is a way to compare purchasing power of different countries by measuring how much of each currency is needed to buy the same basket of goods and services in different countries

Inflation

The sustained rate of change in the general price level over a period of time (measured on the Consumer Price Index - CPI - by the Office of National Statistics - ONS)

What are alternative measures than using GDP to discuss the QoL/standard of living/cost of living?

The Human Development Index (HDI)

• Life expectancy at birth

• GDP per capita

• Mean years of schooling

What is demand-pull inflation?

When demand increases on the SRAS, creating an extension of the SRAS which forces prices to go up creating Demand-Pull Inflationary Pressure

What is Cost-Push Inflation?

When the cost of production shifts the SRAS inwards, creating a rise in prices at the new equilibrium