MACROECONOMICS KEY CONCEPTS
BUSINESS GUIDES MACROECONOMICS KE Y CONCEPTS
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Contents
Index
Macroeconomics
1
Balance of Payments
5
Output
1
Business Cycles
3
Measures of Output
1
Comparative Advantage
5
Purchasing Power Parity
2
Current Account Balance
6
GDP Accounting
2
Deflation
9
Output Demand
3
Exchange Rates
10
Output Supply
3
Expectations
12
Productivity
3
Fiscal Policy
11
Business Cycles
3
GDP Accounting
2
Output Growth
4
Inflation
9
International Trade
5
Interest Rates
9
Comparative Advantage
5
International Trade
5
Balance of Payments
5
Macroeconomics
1
Current Account Balance
6
Measures of Output
1
Trade Balance
6
Monetary Policy
8
Savings & Investment
7
Money
7
Money
7
Money Demand
8
Money Supply
7
Money Supply
7
Money Demand
8
Output
1
Monetary Policy
8
Output Demand
3
Inflation
9
Output Growth
4
Deflation
9
Output Supply
3
Interest Rates
9
Productivity
3 2
Real Interest Rates
10
Purchasing Power Parity
Exchange Rates
10
Real Exchange Rates
11
Real Exchange Rates
11
Real Interest Rates
10
Fiscal Policy
11
Resources
12
Expectations
12
Savings & Investment
7
Unemployment
12
Trade Balance
6
Resources
12
Unemployment
12
Macroeconomics Macroeconomics studies the performance of an economy on an aggregate level. The key topics in Macroeconomics are output (measuring output, growth, business cycles), money (inflation/deflation, exchange rates, interest rates) and expectations, all of which are intertwined. Macroeconomics is not an exact science and the economic relationships described in this application serve as a starting point for explaining economic events.
Output
produced in a country in a period of time. Total output is both equal to the total value of goods and services produced in a country as well as to the total amount of income that is paid out in a country. A country can temporarily use more output than it produces by importing more than it is exporting. In order to pay for the net imports, it has to sell assets to foreigners or borrow money from foreigners. However, in the long-run, how much output a country can use depends only on how much output it can produce.
Measures of Output Measures of output include: • • • •
Capital stock (buildings, land, equipment) and labor are combined to create goods and services (output). People own capital stock and supply labor. In return, they receive income (wages, rent, dividends, interest, royalties). People use this income to purchase goods and services (consumption), to pay taxes and to save for the future. The more output we produce per person, the more output we can use and hence the more prosperous we are (the higher our standard of living). Aggregate or national output is the total amount of goods and services that is
Gross Domestic Product (GDP) Real GDP Net Domestic Product (NDP) Gross National Product (GNP), also called Gross National Income (GNI)
Gross Domestic Product (GDP) GDP is the total market value of all final goods and services newly produced in a country in a period of time. Also equal to the total income earned in a country in a period of time. Real GDP is GDP adjusted for inflation. Net Domestic Product (NDP) NDP is GDP minus depreciation. This measure takes depreciation (wear and tear of capital stock) as an input for output production. Gross National Product or Income (GNP or GNI) GNP is the total output produced by a country’s citizens and firms, wherever they produce this output (inside or outside their home country).
MACROECONOMICS KE Y CONCEPTS
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