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Introductory of Macroeconomics

Introductory of Macroeconomics. PPIE, August 10, 2009. Pre-test Questions. Why do growth rates differ so much across countries? What kind of fiscal or monetary policy that you can propose to prevent a recession?. To answer, do understand first…. What is growth?

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Introductory of Macroeconomics

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  1. Introductory of Macroeconomics PPIE, August 10, 2009

  2. Pre-test Questions • Why do growth rates differ so much across countries? • What kind of fiscal or monetary policy that you can propose to prevent a recession?

  3. To answer, do understand first… • What is growth? • What factors determine growth? • What is fiscal policy? • What is monetary policy? • What is recession? • Are we talk about short run, medium run, or long run economy?

  4. What is macroeconomics? the economics variable? • Output: the level of production of the economy as a whole • Unemployment rate: the proportions of workers in the economy who are not employed and are looking for a job • The inflation rate: the rate at which the average price of the goods in the economy is increasing over time

  5. The Measurement of Aggregate OutputGrowth Domestic Product (GDP) • Production side • GDP  value of final goods and services produced in the economy during a given period • GDP  sum of value added in the economy during a given period B. Income side GDP  sum of incomes in the economy during a given period

  6. Example.. • Assumptions: • There are only 2 industries in the economy • There is only 1 company in each industry: steel company & car company • Output produced by steel company is used as input for car company (steel is intermediate good)

  7. Nominal and Real GDP • Nominal GDP: Σ PiQi, i=goods1,2,..n It changes because change in price and change in quantity • Real GDP  measure production and its change over time  at constant price (=base year) • By using another base year, Real GDP in each year would be different, but its rate of change would be the same as above

  8. Unemployment Rate • L = N + U Labor force employed unemployed • u = U/L • Ratio of number of people who are unemployed to the number of people in the labor force • Unemployment: looking for a job, but has no job • Participation rate: ratio of labor force to the total population of working age

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