ECO 1102 Chapter Notes - Chapter 2: Canadian Dollar, Prime Rate, Blood Sugar
Overview of Macroeconomics:
3 markets: (P ā Price, Q- Quantity; why are prices and quantities what they are;
primary quantity output market is GDP). These markets are linked; similar to an
ecosystem reprocuttions in every component of the system.
EG: US housing marke; mortgage crisis casing a meltdown in financial market;
causing a severe recession in the real economy.
1) Output markets for goods and service
ā¢ Part of the real economy; concrete, tangible goods and services
ā¢ Q.GDP; gross domestic product, the dollar value of all final goods and
services produced over a given interval.
ā¢ GDP is a value; intermediate goods such as col are not considered an
intermediate.
ā¢ Eg: haircut
ā¢ More economic activity takes place through services than goods.
ā¢ Money Economy
ā¢ Price is the composite price level; inflation rate measures the % change in
the price level over time.
ā¢ Stats Can shops Canadian shops and determines average price.
ā¢ GDP is the total market value of all Final goods and services produced
during a year.
ā¢ Growth rate = change in the level/level (always expressed as a% and a
ration quantity=level/level (units are crucial)
ā¢ Real GDP growth over time is used as an indicator of economic activity.
ā¢ Real GDP growth over tie is used as an indicator of economic activity;
when growth is negative, the economy is shrinking ā recession. When
GDP growth exceeds 2% unemployment should fall otherwise it will rise.
ā¢ Economists have scales and levels similar to checking blood sugar levels;
which is GDP levels.
ā¢ Real GDP levels are a measure of economic well-being or living standards.
ā¢ Currently economy is operating at about 4% below its estimated capacity.
2) Money Marks
ā¢ Not part of the real economy
ā¢ Money is a medium of exchange; means to end of producing and
consuming real goods and services.
ā¢ Quantity of money circulating in the macroeconoy; including
currency, deposits and credit.
ā¢ Price is the interest rate and the foreign exchange rate
ā¢ Price of money is the interest rate/ price of credit
ā¢ Money is mostly creditļ interest rate; the rest of the world the price
of money is a combination of interest rate and foreign exchange.
ā¢ The price variables are the interest rate and the exchange rate and the
exchange rate for the dollar; Bank of Canada target rate=0.5% In 2007
it was 4.25%.
-The prime rate (bank charges the most credit worthy) =2.7%
-Exhcnage rates-74.5 US cents on 19 Dec. 2016
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ECO 1102 Full Course Notes
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