Macroeconomics textbook notes
Macroeconomics textbook notes
Chapter 2: A Tour of the Book
2.1 Aggregate Output
Aggregate: means “total”
The measure of aggregate output in the national income accounts is gross domestic product (GDP)
3 ways of thinking about an economy’s GDP
GDP is the value of the final goods and services produced in the economy during a given period
Intermediate good is a good used in the production of the final goods and is not counted toward GDP
GDP is the sum of value added in the Economy during a given period
Sum of the value added by all the firms along the chain of production of those final goods
GDP is the Sum of Incomes in the Economy during a Given Period
Revenues collected by governments in the form of taxes on sales is indirect taxes
Revenue to pay workers = Labor income
Revenue used for the firm = Capital income
Value added is the sum of indirect taxes, labor income, and capital income
Nominal GDP is the sum of the quantities of final goods produced times their current price
Real GDP is constructed as the sum of the quantities of final goods times constant (rather than current) prices
Real GDP in chained (2002) dollars is when real GDP is equal to nominal GDP
Periods of positive GDP growth are called expansions
Periods of negative GDP growth are called recessions
2.2 The Other Major Macroeconomic Variables
The unemployment rate is defined from the ratio of the number of unemployed to the labor force and then expressed as a percentage
U rate = U/L x 100
The labour force is defined as the sum of those employed and those unemployed
Labor force = unemployed (U) + employed (N)
Those looking for work are counted as unemployed
Those not working and not looking for work are counted as not in the labor force
People who give up on looking for jobs because of the high unemployment and therefore are no longer counted as unemployed are known as discouraged workers
Participation rate is the ratio of the labor force to the total population of working age persons
Chapter 2: A Tour of the Book
2.1 Aggregate Output
Aggregate: means “total”
The measure of aggregate output in the national income accounts is gross domestic product (GDP)
3 ways of thinking about an economy’s GDP
GDP is the value of the final goods and services produced in the economy during a given period
Intermediate good is a good used in the production of the final goods and is not counted toward GDP
GDP is the sum of value added in the Economy during a given period
Sum of the value added by all the firms along the chain of production of those final goods
GDP is the Sum of Incomes in the Economy during a Given Period
Revenues collected by governments in the form of taxes on sales is indirect taxes
Revenue to pay workers = Labor income
Revenue used for the firm = Capital income
Value added is the sum of indirect taxes, labor income, and capital income
Nominal GDP is the sum of the quantities of final goods produced times their current price
Real GDP is constructed as the sum of the quantities of final goods times constant (rather than current) prices
Real GDP in chained (2002) dollars is when real GDP is equal to nominal GDP
Periods of positive GDP growth are called expansions
Periods of negative GDP growth are called recessions
2.2 The Other Major Macroeconomic Variables
The unemployment rate is defined from the ratio of the number of unemployed to the labor force and then expressed as a percentage
U rate = U/L x 100
The labour force is defined as the sum of those employed and those unemployed
Labor force = unemployed (U) + employed (N)
Those looking for work are counted as unemployed
Those not working and not looking for work are counted as not in the labor force
People who give up on looking for jobs because of the high unemployment and therefore are no longer counted as unemployed are known as discouraged workers
Participation rate is the ratio of the labor force to the total population of working age persons