19.1 Overview of Macroeconomics
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Transcript of 19.1 Overview of Macroeconomics
8/3/2019 19.1 Overview of Macroeconomics
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Economics II
January – June 2011
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Mid term
Overview Macroeconomics Measuring Economic Activity
Consum tion and Investment
Business Fluctuations and theTheory of Aggregate Demand
Financial Markets and the SpecialCase of Money
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Final exam
Central Banking and Monetary Policy Unemployment and the Foundations
of Aggregate Supply
Ensuring Price Stability
Policies for Growth and Stability
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Macroeconomics
What is Macroeconomics? Is thestudy of the behavior of the economyas a whole. It examines the forces
t at a ect rms, consumers, anworkers in the aggregate.
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Macroeconomics
Two central themes will run throughour survey of macroeconomics:
The short-term fluctuations in output,
employment, financial conditions, andprices that we call the business cycle.
The longer-term trends in output and
living standards known as economic growth.
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Objectives inMacroeconomics
Output: High level and rapid growth of output
Em lo ment:
High level of employment with lowinvoluntary unemployment
Stable prices:
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Macroeconomicsinstruments
Monetary policy: Buying and selling bonds, regulating
financial institutions
Fiscal policy: Government expenditures
Taxation
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Measuring EconomicSuccess
Output: the ultimate objective ofeconomic activity is to provide thegoods and services that the
popu at on es res. The most comprehensive measure of
the total output in an economy is the
gross domestic product (GDP)Producto Interno Bruto (PIB)
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Measuring EconomicSuccess
GDP is the measure of the market value ofall final goods and services produced in acountry during a year.
Nominal GDP is measured in actual market
prices. Real GDP is calculated in constant or
invariant prices.
Potential GDP represents the maximumsustainable level of output that the economycan produce.
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Real GDP
GDP in 2006 was $ 11,294.8 billion GDP in 2007 was $ 11,523.9 billion
2000 rices for both amounts
What was the real growth?
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High Employment
The unemployment rate is thepercentage of the labor force that isunemployed.
The labor force includes all employedpersons and those unemployed
individuals who are seeking jobs.
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Price stability
Price indexes: are measures of theoverall price level; e.g. consumerprice index (CPI) (Indice de precios al
consum or , otro pue e ser e IPC de la bolsa de valores Indice de precios y cotizaciones).
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Price stability
Economists measure rice stabilit b
looking at the inflation or inflation rate.
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Goals of macroeconomicpolicy:
A high level and growing level ofnational output.
High employment with low
unemployment. A stable or gently rising price level.
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Tools of Macroeconomicpolicy
Fiscal Policy: denotes the use of taxes andgovernment expenditures.
Government expenditures can be of two
Government transfer payments. Taxation, which affects the overall economy
in two ways: taxes affect people’s income;
and taxes affect the prices of goods andfactors of production and thereby affectincentives and behavior.
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Tools of Macroeconomicpolicy
Monetary policy: The governmentconducts it through managing thenation’s money, credit, and banking
system. n ex co s an e y t eBanco de Mexico (BM) in the U.S. bythe Federal Reserve Bank (Fed).
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Aggregate Supply andDemand
Aggregate Supply refers to the totalquantity of goods and services thatthe nation’s business willingly produce
an se n a g ven per o . t epen supon the price level, the productivecapacity of the economy, and the level
of costs.
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Aggregate Supply andDemand
Aggregate demand refers to the totalamount that different sectors in theeconomy willingly spend in a given
per o . ggregate eman equa stotal spending on goods and services.It depends on the level of prices, as
well as on monetary policy, fiscalpolicy, and other factors.