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MacroEconomics Formulas - Coggle Diagram

- - - - E = 0.90 € / $
        
        2 euro * 0.90 = 1.80$
  - - - :pencil2: the Big Mac index
  - - - Openness index = (Ex + Im) / GDP · 100.
        
        :black_flag:Is always positive
      - Y = Consumption + Import (includes investment) + public spending
    - - Keeps trak of goods and services
      - Balance of payments = Current account + Financial account.
- - - - Real GDP / Population
        
        Is very useful for comparisons between country because the number is relative and real
      - Change in Real GDPpc (%) = Change in Real GDP (%) - Change in population (%)
      - Compare two countries
        
        Usually refer to US
- - - - Household
      - Market
      - State :question:
      - Firms
      - 'Factor Markets'
        
        Firms pay households for the use of factors of production
    - - Deals with the aggregate behavior of a Nation's Economy
      - Important factors
        
        Unemployment Rate
        
        Gross Domestic Product
        
        Consumer Price Index
      - Try to be as objective as scientists
- - - - Natural + Cyclical
    - - Associated with recessions or temporary fluctations in the business cycle
    - - Structural
        
        When demand in skills and supply in workers don't align
      - Frictional
        
        The time it takes to find a new job
  - - - GDP - Potential GDP
    - - P = Price level
        
        𝑊
        
        W = Wages
        
        𝑅
        
        R = Resource prices
        
        𝐴
        
        A = Availability of factors of production (e.g., labor, capital)
        
        𝑇
        
        T = Technology
      - Long run aggregate supply
        
        In the long run, aggregate supply is assumed to be vertical, indicating that it is not affected by the price level. Instead, long-run aggregate supply is determined by the economy's productive capacity, which depends on factors like technology, resources, and institutional structures.
        
        Only price increases with time :!?:
      - Factors Affecting Aggregate Supply
        
        Labor: Changes in the labor force size or productivity.
        
        Capital: Changes in the capital stock, such as machinery, buildings, and infrastructure.
        
        Technology: Innovations and improvements in technology.
        
        Natural Resources: Availability and exploitation of natural resources.
        
        Government Policies: Taxes, regulations, subsidies, and other policies can influence production costs and incentives.
      - Short run aggregate supply
        
        Is upward sloping :black_flag:
        
        If the price increases, production increases
      - Change in production costs
        
        The largest source of inflexible production costs is wages. In the short run there are ’sticky’ wages (nominal wages that are slow to change)
        
        In the long-run all prices are flexible, so wages have time to adjust
    - - Why does it slope downwards?
        
        The more that is being produced, the less people are willing to pay for it
        
        :black_flag: The economy behaves in a certain way, this explains the inverse relation between price level and GDP demanded
        
        3 real reasons
        
        Consumers
        
        Investors and borrowers
        
        International trade
      - The line always maintains the same angle, however it may shifts to the right or the left
  - - - Consumption is steady because people always need essentials and try to keep their spending level over time.
        .
      - Investment is more erratic because it depends heavily on economic expectations and interest rates, leading to bigger fluctuations