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Macro

1) The document discusses key macroeconomic indicators such as aggregate output, employment, prices, and the tools of fiscal and monetary policy. 2) It provides data on inflation and GDP growth rates in the U.S. from 1929-2010 and unemployment rates from 1948-2010. 3) Common measures of inflation, output, and unemployment are explained including the Consumer Price Index (CPI), Producer Price Index (PPI), Gross Domestic Product (GDP), and unemployment rate.

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49 views

Macro

1) The document discusses key macroeconomic indicators such as aggregate output, employment, prices, and the tools of fiscal and monetary policy. 2) It provides data on inflation and GDP growth rates in the U.S. from 1929-2010 and unemployment rates from 1948-2010. 3) Common measures of inflation, output, and unemployment are explained including the Consumer Price Index (CPI), Producer Price Index (PPI), Gross Domestic Product (GDP), and unemployment rate.

Uploaded by

thareenda
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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MACROECONOMICS

Aggregate Output
Employment
General Price Level

Government Tools

Fiscal Policy
Taxes
Government Spending
Monetary Policy
Interest rates

7
Consumer Price Index
CPI gives cost of market bundle in each
year relative to the base year.
Example:
Base year is 1983.
Cost of market bundle in 1994: $2568.
Cost of market bundle in 1983: $1733.
CPI (1994) = 2568/1733 x 100
= 1.482 x 100
= 148.2
12

CPI with base of 1983


1992 140.3

1993 144.5

1994 148.2

1995 152.4

1996 156.9

1997 160.5

1998 163.0

1999 166.6

2000 172.2

2001 177.1

2002 179.9

2003 184.0

2004 188.9

2005 195.3

2006 201.6

2007 207.3

2008 215.3

2009 214.5

2010 218.1

13
Inflation = Change in CPI
Inflation from 2005 to 2006:

201.6 – 195.3 6.3


= = 0.032
195.3 195.3
= 3.2% inflation

14

1. CPI in base year is 100.


2. Choice of base year doesn’t
matter.
3. CPI overstates effects of
price changes by holding
market bundle constant.

17
Inflation rate 1913-2010
20

15

10

0
1910

1915
1920

1925

1930

1935

1940

1945
1950

1955

1960

1965

1970
1975

1980
1985

1990
1995

2000

2005

2010
-5

-10

-15

18

Producer Price Index

Same as CPI but calculated for a market


bundle of inputs to producers.

19
Measures of Aggregate Output

Gross Domestic Product:


Value of all final goods and
services produced domestically.
GDP in 2008: $14.7 trillion

21

Nominal GDP:
GDP in prices for that year.
Real GDP:
Nominal GDP / GDP price index

23
GDP Price Index

Like CPI but for all goods produced in


year rather than a typical bundle.

24

Change in nominal GDP consists of


Change in prices
Change in real GDP
Example: 2006-2007
Nominal GDP rose 4.8%
Prices rose 2.7%
Real GDP rose 2.0%

26
Real GDP in 2005 dollars: 1929-2010

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0
1925

1930

1935

1940

1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010
27

Growth rate in Real GDP

20.00

15.00

10.00

5.00

0.00
1930

1935

1940

1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

-5.00

-10.00

-15.00

28
29

Gross National Product


Value of all final goods and services
produced by factors of production
owned by US citizens.
For US, GNP and GDP are nearly the
same.

31
Unemployment Rate
Unemployed =
people currently looking for work
Employed =
people with paid jobs
Labor force =
employed + unemployed
Unemployment rate = Unemployed
Labor force
35

Unemployment rate: 1948-2010

12

10

0
1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

36
37

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