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W01 Introduction to Macro (GDP (Gap (GDP gap (output gap)% difference b/w…

- - - - aggregate total amount of an economic magnitude for the econ as a whole
- - - - unemployment level at which inflation rate is constant
- - - - Monetary policies
        control of money supply and interest rates
      - Fiscal policies
        changes in gov expenditures and tax rates
      - Miscellaneous group
        equip workers with skills to qualify for jobs
      - Goal: influence level of AD
    - - Associated with expansion (recovery) and contraction (recession)
      - Pro-cyclical variables rise with expansionary business acti (e.g. output, employment, interest rates, money supply)
        
        Procyclical: quantity tends to increase in expansion & decrease in recession
      - Countercyclical variables (inventories, unemployment rate, bankruptcies) move in opposite direction to business acti
      - Impulse - propagation model
        
        explain
        
        how shocks (impulses) disturb the econ
        
        how this leads to effects that last (propagate) over time
        
        Shock types
        
        Supply shocks: affect production & price-setting (e.g. technology advances, changes in oil prices)
        
        Private sector shocks: affect aggregate demand (e.g changes in private investment)
        
        Policy shocks: affect fiscal expenditure & IR (e.g. fiscal & monetary policies
      - Indicators
        
        Leading indicators
        
        Lagging indicators
      - Types
        
        Classical cycle considers actual levels => fall in GDP describes negative growth
        
        Growth cycle considers fluctuations in growth rates of the economy around the trend growth rate
  - - - Assmp: fixed productive capacity
    - - development of new technology
      - accumulation of physical & human capital
      - appropriate provision of infrastructure
      - higher rates of domestic saving
- - - - economic agents optimise
      - decision are made rationally using all available info
      - markets are clear (supply = demand)
      - => no involuntary unemployment & markets are continuously in equilibrium
  - - - incomplete info
      - institutions affect the workings of markets
      - costs of changing wages & prices
        => price regidities