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Macro Side1 Essay

1960 words - 8 pages

Chapter 1:
An Introduction to Macroeconomics
McConnell, C.R., and Brue, S.L. (2009). Economics: Principles, Problems and Policies, 18th Edition, Irwin McGraw-Hill. Ooi Soon Beng

After studying this chapter, you should be able to understand:
 Key Macroeconomic Goals and Measurements  Gross Domestic Product  Business Cycles  Financial Investment versus Economic Investment  Employment and Unemployment  General Price Level (Inflation)

 Balance of Payments and Exchange Rates
 Macroeconomic Policies of Growth

The first modern work of economics began with the publication of _____________ .

____________ (1723-1790)

But, modern ...view middle of the document...

In Year 2, the economy produces the same 1000 units of output, and sells it for $110 a unit, on average. What happened to real GDP between Year 1 and Year 2? Why?


Year 2009 2010
2009 2010

Nominal GDP $150 +20% $180
$150 $180 +20%

Price Index 100 +10% 110
100 120 +20%

Real GDP $150 +9.3% $164
$150 $150 +0%
 8%

2009 2010

$150 $180


100 130


$150 $138

Real GDP = Nominal GDP / Price Index Real GDP falls more, the higher the increase in price index (inflation).

Real GDP is preferred to nominal GDP as a measure of economic performance because: A. nominal GDP uses current prices and thus may overor understate true changes in output. B. nominal GDP only includes goods and excludes services. C. nominal GDP is not adjusted for population changes. D. real GDP accounts for changes in the quality of goods and services produced.

Real GDP is the appropriate measure to calculate the economic growth rate.
The economic growth rate is the percentage change in the quantity of goods and services produced from one year to the next. [(Real GDP t  Real GDP t-1)  Real GDP t-1]  100.

[ ($188,061 – $180,714) / $180,714 ] x 100 = 4.1%
Negative growth means the economy is shrinking.

Positive growth means the economy is expanding.

GDP can be measured in three ways.

Aggregate output which is the value of the output of final goods and services.
Aggregate expenditure which is the total expenditure on final goods and services, C + I + G + (X – M). Aggregate income which is the income paid out for the use of resources, wages, interest, rent, and profit.


1) United States 2) China 3) Japan 4) India 5) Germany

15,075,6752 11,299,9873 4,444,1394 4,420,5635 3,113,9276

11) Mexico 13) Spain 14) Canada 15) Indonesia

1,666,53112 1,405,78714 1,395,37415 1,124,63116

12) South Korea 1,554,12413

6) Russia
7) Brazil


16) Turkey
17) Iran 18) Australia

990,77118 915,09819

8) United Kingdom 2,287,8659

9) France
10) Italy Source: IMF


19) Taiwan
20) Poland


1) Qatar 2) Luxembourg 3) Singapore 4) Norway 5) Brunei 6) Hong Kong 7) United States 8) UAE 9) Switzerland 10) San Marino 11) Netherlands

98,948 80,559 59,710 53,396 49,536 49,4172 48,3282 47,729 44,4522 43,090 42,023

12) 13) 14) 15) 16) 17) 18) 19) 20) 21)

Kuwait Austria Australia Ireland Sweden Canada Germany Iceland Belgium Taiwan

41,701 41,556 40,847 40,838 40,705 40,519 38,077 38,060 37,781 37,716

Source: IMF

A business cycle is the periodic, but irregular up-anddown movement in economic activity measured by fluctuations in real GDP. Every business cycle has two phases: 1. A contraction 2. An expansion and two turning points: 3. A peak 4. A trough


A peak is the upper...

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