# Macro Economics

Submitted By klkk
Words 382
Pages 2
Mid-term Review
All calculation and example in class is important.
Chapter 2
3 Macroeconomic goals
Price stability * Inflation rate: 1. GDP deflator Pt=\$Yt/Yt 2. CPI: cost of living * Full employment * Growth rate
Ways to measure GDP * Final goods * Value added * Income
e.g., New tier replace old tier of a used car – final goods
GDF count or not?
Not count in GDP: Happiness, government transfer, black market transaction, 2nd hand transaction etc.
Nominal VS Real GDP (calculation)
\$Yt=sum PtQt ; Yt=sum P(exogenous)Qt
Inflation calculation
Pt-Pt-1/Pt-1
CPI VS GDP deflator
Y=C+I+G+NX all terms would affect GDP, but only C would affect CPI
Unemployment rate
U/U+N, where U+N=Labour force
Participation rate: L/POP
Discouraged labour=out of labour force

Chapter3
Two big concept in this chapter
Y=Z
I=savings
Y=Z=C+I+G
* C=C0+C1 (Y-T), where C0 is autonomous consumption (>0), C1 is propensity to consume (between 1 and 0) * G and T are exogenous * I has residential and non-residential investments
Savings
I=savings Private savings + government savings =S + (T-G)
S=YD-C=-C0+(1-C1)(Y-T)

Chapter 4
Two assets
Money
Md=\$YL(i)
Ms (decision of the central bank): a vertical line
Bond: affect by interest rate
I=(Today price-PB)/PB
Thus, PB= today price/(1+i)
e.g., Md = Y (0.25-i), Y=100, Ms=20
a. what is i? answer: because Ms =Md, so substitute all the numbers in the eqn, i=15%
b. if Y is fixed, whis is Ms? Answer: 10
Graph: LM curve shifts up

Chapter 5
IS Curve
I vs Y=IS curve (downward sloping curve)
I doesn’t depend on (i), IS is vertical line
I isn’t sensitive to (i), steep IS
I sensitive to (i), flat IS
Policies
IS shifts to right
G increase, T decrease, C increase
IS shifts to left
G decrease, T increase, C decrease
LM up
Ms decrease
LM down
Ms increase
IS-LM (policy mix)
e.g., Ms increase, how to increase Y, while maintain (i)?
Graph: LM down,…...

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