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Macroeconomics+
ECON+321+
Economics+
• 10+Principles+of+Economics+
GDP:+Total+Produc?on+
GDP:+Final+Goods+
GDP:+And+Final+Services+
GDP:+In+a+Period+of+Time+
GDP:+Within+Borders+
REAL+VS+NOMINAL+
YEAR $&LALALOOPSY&DOLLS
#&LALALOOPSY&DOLLS
$&RED&RYDER&BB&GUNS
#&RED&RYDER&BB&GUNS NOMINAL&GDP REAL&GDP&2009
2009 $10+ 100 $20+ 50 $2,000+ $2,000+
2010 $15+ 200 $30+ 100 $6,000+ $4,000+
2011 $20+ 300 $40+ 150 $12,000+ $6,000+
PROBLEM+WITH+REAL+GDP+
YEAR $ XBOX # XBOX $ PS3 # PS3
LASPEYERS INDEX
(INITIAL AS BASE)
PAASCHE INDEX
(FINAL AS BASE)
2010 $200 50 $100 49 $14,900 $14,390
2011 $180 50 $110 63 $16,300 $15,930
GROWTH RATE: (Y'-Y)/Y 9.40% 10.70%
Soooo….Chain+Weight+gchain+weighted=(gLespeyers*gPaasche)^(1/2)+
YEAR $ XBOX # XBOX $ PS3 # PS3
LASPEYERS INDEX
(INITIAL AS BASE)
PAASCHE INDEX
(FINAL AS BASE)
2010 $200 50 $100 49 $14,900 $14,390
2011 $180 50 $110 63 $16,300 $15,930
GROWTH RATE:
(Y'-Y)/Y 9.40% 10.70%
Geometric Average 10.03%
REAL GDP 2010 $14,900
REAL GDP 2011 $16,394
INCOME]EXPENDITURE+IDENTITY+
Y=C+I+G+NX+
– Consump?on:+purchase+of+final+goods+and+services+by+households.+
– Invest:+purchase+of+final+goods+and+services+by+firms…+"a"few"other"things"like"new"homes."
INCOME]EXPENDITURE+IDENTITY+
Y=C+I+G+NX+
– Government+Expenditure:+purchase+of+final+goods+and+services+by+Gov’t…Not"Transfers"like"Welfare,"Social"Security,"Medicaid"and"Medicare."
– Net+Exports:+Exports]Imports…imports"show"up"in"consump>on"but"must"be"subtracted"because"it"wasn’t"produced"within"the"borders.&
Math+Review+
• First+Commandment+of+Economics:+MARGINAL(BENEFIT(=(MARGINAL(COST(
MaxQ+π+=+(10+]+Q)Q+–+2Q+
Price++=+10+–+Q+
Total+Cost+=+2Q++
Math+Review+
• First+Commandment+of+Economics:+MARGINAL(BENEFIT(=(MARGINAL(COST(
dπ/dQ+=+10+–+2Q+–+2+=+0+
Marginal+Revenue++=+10+–+2Q+
Marginal+Cost+=+2+
Sooo……Q*+=+4+
Maximiza?on+
DERIVATIVES:+Know+How+to+Do+Them+
LOGS+and+Exponents:+Rules+
Exponen?al+and+Growth+
Natural+Log+and+Diminishing+Returns+
Also+Both+are+Convenient+
• Exponen?al+
• Log+
€
Y = ex
dYdX
= Slope of Y = ex
Example : Y = e2x+1; dYdX
= 2e2x+1
€
Y = ln( f (x))dYdx
= Slope of Y =1f (x)
( f '(x))
Example : Y = ln(4x + x 2); dYdx
=(4 + 2x)(4x + x 2)
Growth+
Growth+Example+
yt" +=+GDP+per+capita+
y0 +=+Ini?al+GDP+per+capita++++g+ +=+growth+rate+or+average+rate+per+period+
+++t+ +=+?me+
"" """
"" """
€
yt = y 0egt
€
dydt
= gy 0egt
ln(yt) = ln(y 0) + ln(egt ) = ln(y 0) + gtd ln(yt)dt
= g
Par?al+Deriva?ves+