ECON 1115 Lecture Notes - Lecture 17: Unemployment Benefits, Money Multiplier, Fractional-Reserve Banking

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ECON 1115: Principles of Macroeconomics- Lecture 17: Inflation and Review for Test
Inflation:
Inflation: general rise in price (purchasing power)
Hurt by inflation:
fixed income receivers
○ saves
lenders (creditors)
Helped by inflation:
○ borrowers
flexible income receivers
Core Inflation: measure the price of goods and services that excludes certain items like
food and energy
Overall Inflation: measure the price of goods and services that includes food and energy
Review:
modern economic growth started in late 1700s initiated by industrial revolution
since then the output grew faster than population so economy grew faster
industrial revolution promote economic growth
save more= invest more/ economy is growing faster overtime
financial investment: bonds, stocks, securities
economic investment: spending on capital goods (goods that can help produce more
goods and services like machinery, factories, etc.)
well functioning financial institutions can promote economic growth.
measuring gdp
GDP: market value of all goods and services produced within a country in a
specific period of time.
3 ways to measure GDP
output produced
income approach (total income= total expenditure)
expenditure approach
gdp deflator= 100 x nominal GDP
real GDP
Nominal GDP
values output using current prices not corrected for inflation
Real GDP
values output using the prices of a base year is corrected for inflation
CPI: measure overall cost of goods and services bought by a typical consumer
How to calculate CPI
Fix a basket
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Document Summary

Econ 1115: principles of macroeconomics- lecture 17: inflation and review for test. Inflation: general rise in price (purchasing power) Core inflation: measure the price of goods and services that excludes certain items like food and energy. Overall inflation: measure the price of goods and services that includes food and energy. Modern economic growth started in late 1700s initiated by industrial revolution. Since then the output grew faster than population so economy grew faster. Save more= invest more/ economy is growing faster overtime. Economic investment: spending on capital goods (goods that can help produce more goods and services like machinery, factories, etc. ) Well functioning financial institutions can promote economic growth. Gdp: market value of all goods and services produced within a country in a specific period of time. Gdp deflator= 100 x nominal gdp real gdp. Values output using current prices not corrected for inflation. Values output using the prices of a base year is corrected for inflation.

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