Download Macroeconomics: Relating to the economy as a whole rather than

Macroeconomics: Relating to the economy as a whole rather than
emphasizing its individual parts.
Three Basic goals of Macroeconomics
A. Growth
B. Jobs
C. Stable prices
Organizing Topics:
1. Growth, Employment, and Inflation
2. Business Cycles
3. Policy Alternatives
Growth
Federal Reserve seeks to stimulate growth in the economy by:
1. Interest Rates
2. Controlling the flow of money
A. Discount Rates – rate of interest banks receive from the Fed.
B. Federal Requirements (80% rule)
Business increases their factor of production.
Measuring Growth
Simon Kuznets –In 1932 developed the framework for the statistic known as
Gross National Product (GNP) referred to now as Gross Domestic
Product (GDP)
Components of GDP
1. Gross investment
2. Government purchases
3. Consumption expenses
4. Net result of international transaction (Net Exports)
 Reflect fully what our nation’s businesses have produced
GDP not sole figure for calculating annual production.
Net National Product (NNP) A national accounting aggregate equal to the
GDP less depreciation. The NNP thus reflects not only new goods and
services produced but also the extent to which existing capital has worn out.
Depreciation: A money value that represents the extent to which a capital
good has become less efficient because of age.
E.g. Freezer at the supermarket can no longer keep the cool temperature it
once did---depreciation tells us how much this freezer has depreciated in
price.
Capital consumption allowance: Depreciation (difference between GDP
and NNP)
National Income (NI): A national accounting aggregate equal to the amount
of money individuals and businesses receive for productive factors provided.
It comprises wages, salaries, rent, interest, profits from corporations, profits
from unincorporated businesses. The difference between the national
income and the net national product is indirect business taxes.