UBC Faculty Research and Publications

Macroeconomics on One Page Head, Keith Sep 1, 2011

Your browser doesn't seem to have a PDF viewer, please download the PDF to view this item.

Item Metadata


52383-macro_1page.pdf [ 150.2kB ]
JSON: 52383-1.0102485.json
JSON-LD: 52383-1.0102485-ld.json
RDF/XML (Pretty): 52383-1.0102485-rdf.xml
RDF/JSON: 52383-1.0102485-rdf.json
Turtle: 52383-1.0102485-turtle.txt
N-Triples: 52383-1.0102485-rdf-ntriples.txt
Original Record: 52383-1.0102485-source.json
Full Text

Full Text

Macroeconomics on One Page  2  Macro relationships  Composition of nominal GDP Macroeconomics seeks to explain & predict the behaviour of the economy “as a whole.” Managers need Y = C + I + G + (X − M ) macro knowledge to interpret news & form reasoned C = personal consumption of durable & non-durable views of the likely impact of policy changes. goods + services I = private investment in structures (inc. residential) & equipment + change in inventories 1 Four macro “markets” G = gov’t consumption (GC ) +investment (GI ) Focus on five key variables (& their “relatives”): X − M = exports minus imports (trade balance) GDP, unemployment, interest rates, inflation rates, & exchange rates. Many macro variables have “real” Aggregate Production Function versions that adjust raw (“nominal”) data to take Q = Af (K, L) into account price variation. While interdependent, each variable can be thought of as determined within Real GDP↑ ⇐= tech. progress (A ↑), capital aca particular market. cumulation (K ↑), labour supply growth (L ↑). Money supply & inflation All goods & services markets: GDP (Y ), GNI, Money base, B, is currency + reserves, money supnet vs gross, price level (CPI & GDP deflator: ply M is currency + deposits. Money multiplier, due P ), inflation (π = ∆P/P ).1 Potential GDP to reserve ratios, = ∆M/∆B > 1. (Y¯ ), real GDP (Q = Y /P ). GDP measured by “Quantity Theory of Money”: Holding V and Q summing final expenditure categories, industry constant in M V = P Q implies inflation (π = (Pt+1 − value-addeds, or factor incomes (wL + rK). Pt )/Pt ) = money supply growth: (Mt+1 − Mt )/Mt . Labour markets: employment rate (L/N ), job gains/losses (∆L), unemployment rate (u = U/L), vacancies (V ), hours, wages (w, real: w/P ). Under -employment: involuntary parttime. Unemployment causes: job search (extended by high U benefits), mis-match, minimum wages, sticky wages, seasonal & cyclical demand changes. u cannot fall below the natural rate, u (NAIRU), w/o accelerating inflation.  Recessions Reductions in GDP, accompanied by extended periods of high u, low V /L, declining L, π, followed by recoveries (Y → Y¯ ). Accumulation of Capital & Debt Kt+1 = (1 − δ)Kt + It + GIt Debtt+1 = (1 + r)Debtt + PBDt  I Primary budget deficit = (GC t + Gt + St ) − Tt Financial markets: interest rates, nominal, r, & Structural budget deficit = PBD(Y¯ ) +rDebt . t t real, r − π. Normal yield curve: higher r for Trade deficit = M − X → increase in foreign claims longer term bonds. Central banks lower r via bank rate cuts and buying bonds (to increase reserves). Credit crunches =⇒ TED spread ↑. 3 Macro Controversies  Keynesians attribute recessions (Y ↓) to insufficient demand and advocate raising C and I by r ↓ and T ↓. Spending multiplier: G ↑=⇒ ∆Y > ∆G. Chicago school argues budget deficits reduce C (savings to pay future taxes) I (public borrowing “crowds out” private borrowing), leaving ∆Y ≈ 0. 1 ∆P means the year-on-year change in the price level. DiSupply-siders advocate reduced marginal tax rates vide by inital price level to make it a rate of change. (MTR) to increase I & L, =⇒ Y ↑. Laffer-curve 2 H F P & P are price levels in home (H) & foreign (F) curclaim: MTR ↓ =⇒ T ↑. rency units (CU), e in FCU/HCU.  Currency markets: exchange rates, nominal, e, & real, e[P H /P F ] = relative price of domestic goods.2 Real depreciation increases X, lowers M . Purchasing power parity for Y comparisons and e predictions. Fixed vs. floating e.  


Citation Scheme:


Citations by CSL (citeproc-js)

Usage Statistics



Customize your widget with the following options, then copy and paste the code below into the HTML of your page to embed this item in your website.
                            <div id="ubcOpenCollectionsWidgetDisplay">
                            <script id="ubcOpenCollectionsWidget"
                            async >
IIIF logo Our image viewer uses the IIIF 2.0 standard. To load this item in other compatible viewers, use this url:


Related Items