Class Notes (808,703)
United States (313,202)
Economics (283)
ECON 1115 (133)

Macroeconomics Unit 2.docx

6 Pages
Unlock Document

Northeastern University
ECON 1115
Peter Simon

Macroeconomics Notes Unit 2 Gross Domestic Product Gross Domestic Product (GDP): calculates goods and services produced within borders Nominal GDP: current prices Real GDP: adjusted for inflation, NGDP/Price Index GDP deflator: Price index: dollar value of the basket of goods in the current year dollar value of the basket of goods in base year (Base year prices are currently calculated based on 2005) Gross National Product (GNP): used in the past; calculates goods and services of nationals; less accurate representation of standard of living (aka quality of life) because the only money that is brought back to U.S. is the profits of foreign companies run by Americans Three methods of calculating GDP Production calculation of GDP Expenditure calculation of GDP Income calculation of GDP Housing Market and Current Economic Situation The housing market is an important market, because when you buy a house, you increase GDP, and you don’t stop your spending there – you buy a new refrigerator and a new couch, etc. A better housing market improves the overall economy. An increase in housing prices means that demand has increased – so it’s a good thing. If the inventory of houses “tightens” there is starting to be a shortage in housing, and then contractors begin to increase their production of houses – workers are hired. Federal Reserve Bank (aka the Fed) Interest rates are currently really low Business spending is investment (plants and equipment aka capital goods) Consumer spending is consumption Government spending is Net exports RGDP / population = RGDP per capita Country RGDP/Population China $5,400 India $1,000 United States $48,000 Luxembourg $114,000 RGDP is simply dollars earned by the average citizen; not an accurate representation of quality of life. Short-comings of RGDP per capita: Non-market activities (if it doesn’t go through a market it isn’t counted) Mowing your own lawn and caring for your own kids Leisure time Countries where you enjoy more leisure time may be better places to live Quality of life Life expectancy, crime rate, access to healthcare and education Underground economy 8% Black market (drugs, etc.) Any money kept from the IRS (ex. tips) Bartering/trading without currency Genuine Progress Indicator: Takes into account many of the shortcomings of RGDP per capita listed above. Also considers resource depletion, distribution of income, etc. Happy Planet Index (HPI): Three indicators: life expectancy, experienced well-being and ecological footprint Human Development Index (HDI): Calculated by the United Nations Three indicators: life expectancy, education, and healthcare Basic Human Needs (BHN) Approach: Three indicators: food and water, education, healthcare The Business Cycle Fluctuations in RGDP over time (aka boom and bust cycle) Measure RGDP on vertical axis and time on the horizontal axis The blue dotted line is the “seasonally adjusted line,” which is a type of trend line You can see that it is straight and upward sloping Simon is not going to cover National Income Accounting (not going to be tested on it) Economic Growth TED Talk from Hans Rosling: Economic growth refers to the “size of the pie” – RGDP per person Genuine Progress Indicator Population Growth The U.S. is growing at a little less than 2% per year. China is growing much faster at about 9% per year. India is growing at about 7% per yea
More Less

Related notes for ECON 1115

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.