This is about the lecture of Macroeconomics.
- 1. 1 ©The McGraw-Hill Companies, 2002 Macroeconomics is ... • the study of the economy as a whole • it deals with broad aggregates • but uses the same style of thinking about economic issues as in microeconomics.
- 2. 2 ©The McGraw-Hill Companies, 2002 Some key issues in macroeconomics • Inflation – the rate of change of the general price level • Unemployment – a measure of the number of people looking for work, but who are without jobs • Output – real gross national product (GNP) measures total income of an economy • it is closely related to the economy's total output
- 3. 3 ©The McGraw-Hill Companies, 2002 More key issues in macroeconomics • Economic growth – increases in real GNP, an indication of the expansion of the economy’s total output • Macroeconomic policy – a variety of policy measures used by the government to affect the overall performance of the economy
- 4. 4 ©The McGraw-Hill Companies, 2002 Inflation in the UK, 1950-2000 0 5 10 15 20 25 30 1950 1960 1970 1980 1990 2000 % p.a. Source: Economic Trends Annual Supplement, Labour Market Trends
- 5. 5 ©The McGraw-Hill Companies, 2002 Inflation in UK, USA and Germany 1960 - 2001 0 2 4 6 8 10 12 14 16 Annual % 1960-73 1973-81 1981-90 1990-01 UK USA Germany
- 6. 6 ©The McGraw-Hill Companies, 2002 Unemployment in the UK 1950-2000 0 2 4 6 8 10 12 14 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 % p.a. Source: Economic Trends Annual Supplement, Labour Market Trends
- 7. 7 ©The McGraw-Hill Companies, 2002 Unemployment in UK, USA and Germany 0 2 4 6 8 10 % p.a. 1960-73 1973-81 1981-90 1990-01 UK USA Germany
- 8. 8 ©The McGraw-Hill Companies, 2002 Economic growth in UK, USA and Germany 0 1 2 3 4 5 % p.a. 1960-73 1973-81 1981-90 1990-01 UK USA Germany
- 9. 9 ©The McGraw-Hill Companies, 2002 The circular flow of income, expenditure and output Y Households Firms C + I I C S
- 10. 10 ©The McGraw-Hill Companies, 2002 Government in the circular flow Y C + I + G I C S Households Firms Government C + I + G - Te Te G B - Td Y + B - Td
- 11. 11 ©The McGraw-Hill Companies, 2002 Adding the foreign sector • To incorporate the foreign sector into the circular flow • we must recognise that residents of a country will buy imports from abroad • and that domestic firms will sell (export) goods and services abroad.
- 12. 12 ©The McGraw-Hill Companies, 2002 GDP and GNP • Gross domestic product (GDP) – measures the output produced by factors of production located in the domestic economy • Gross national product (GNP) – measures the total income earned by domestic citizens • GNP = GDP + net income from abroad
- 13. 13 ©The McGraw-Hill Companies, 2002 Three measures of national output • Expenditure – the sum of expenditures in the economy – Y = C + I + G + X - Z • Income – the sum of incomes paid for factor services – wages, profits, etc. • Output – the sum of output (value added) produced in the economy
- 14. 14 ©The McGraw-Hill Companies, 2002 National income accounting: a summary GNP (and GNI) at market prices GDP at market prices NYA C NX I NYA G NNP at basic prices Deprec'n National income Indirect taxes Wages and salaries Self- employment Profits, rents
- 15. 15 ©The McGraw-Hill Companies, 2002 What GNP does and does not measure • Some care is needed: – to distinguish between real and nominal measurements – to take account of population changes – to remember that GNP is not a comprehensive measure of everything that contributes to economic welfare
Editor's Notes
- #1: See the introduction to chapter 19 in the main text.
- #2: See Section 19-1 in the main text.
- #3: See Section 19-1 in the main text.
- #4: See Section 19-2 in the main text, and Figure 19-1. This version shows a longer period.
- #5: See data from Table 19-1 in Section 19.2 of the main text.
- #6: Data relate to the claimant count.
- #7: See data from Table 19-1 in Section 19.2 of the main text.
- #8: See data from Table 19-1 in Section 19.2 of the main text.
- #9: Animation sequence for the circular flow with no government and no international trade.: 1 begin with two sets of agents, Households and Firms 2 Firms produce output 3 which flows as income to households 4 who allocate their income partly to Consumption and partly to Saving 5 Household C is augmented by Firms' investment, to create total expenditure (C + I). … so we have the circular flow This is discussed in Section 19-4 of the main text.
- #10: No build-up this time, the whole Figure will spiral in to cue, adding the government into the circular flow. This is also in Section 19-4.
- #11: See Section 19-4 in the main text.
- #12: See Section 19-4 of the main text. Income from abroad tends to be relatively small for the UK, but may be substantial for countries such as Egypt or the Philippines where there are large flows of repatriated income from workers abroad.
- #13: See Section 19-4 in the main text. We use Z for imports because we have used I for investment, and will sue M for money...
- #14: See Figure 19-5 in the main text. Animation provides one block at a time from the left.
- #15: See Section 19-5 of the main text.