Questions tagged [macroeconomics]

Macroeconomics is a branch of economics dealing with the aggregate economy as a whole, rather than individual markets.

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macro economics [closed]

Use the IS-LM diagram to show how income and the interest rate change when there is an increase in government spending. (b) Explain the result intuitively. (c) Use the diagram to illustrate crowding ...
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Why does a higher risk aversion leads to a lower intertemporal elasticity of substitution?

Mathematically, a higher risk aversion leads to a lower intertemporal elasticity of substitution (there is an inverse relationship). But why? If I become more risk-averse, I would like to smooth my ...
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A differentiation step in a economic growth model

I started studying Olivier Blanchard and Stanley Fischer's Lectures on Macroeconomics, but I couldn't follow the reasoning behind a differentiation step (at least I think it is something involving ...
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Are these two different cases when it comes to Forex Reserves?

In a forex reserve, what is the difference between "Buying US Dollars to pile up reserves" and "Using FPIs, remittances or exports to build up reserves" ? How differently do they ...
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Derive the Demographic Structure in the Steady State

I am reading a paper with following description on the demographics in their model: "... each (representative) agent lives for $T$ periods ... We assume that each individual has $e^{f}$ children ...
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In the Solow growth model, assume all the standard assumptions hold, except now population is constant and depreciation rate of capital is zero [closed]

a. There are two steady states b. Capital and capital per worker grow at the same rate c. In the steady state, investment is equal to the depreciation rate d. Aggregate savings are larger than ...
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Assume the economy exists for two periods and works as in the monetary intertemporal model. Prices are fully flexible [closed]

If the intertemporal substitution of leisure were absent: a. output demand will be fully elastic b. output supply will be fully elastic c. labour supply will be fully inelastic d. output supply will ...
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The Central Economic Problem [closed]

I have been told that the 4 central economic problems are : What to produce? How to produce? For whom to produce? What provision should be made for economic growth? My question is why don't "...
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Cournot Duopoly Question [closed]

Consider a duopoly with a demand curve given by P = a –bQ, where a and b are positive constants and Q is the total production by the two firms. Firms sell identical goods and have an identical ...
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What is the meaning of the definition of RBI from its preamble? [closed]

Please explain the meaning of this statement, "generally to operate the currency and credit system of the country to its advantage".
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External Commercial Borrowings in Indian Context

I was trying to understand ECB recently and while browsing through the RBI official page I have found that ECBs cannot be used for a) Real estate activities. b) Investment in capital market. c) Equity ...
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1answer
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Non-trivial steady state

Consider the growth model with inelastic labor supply, full depreciation, log utility and CRS technology with the Bellman equation be defined as follows: $$V(k)=\max(log(k^\alpha-k')+\beta V(k'))$$ st ...
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What are the justification of using 1990 or 2010 as benchmark in studies?

Normally, many international studies and documents using multiple-of-10 years (for example 1990, 2010) as the benchmark year. For example: Dong,2019, p.899 used 1990 as the benchmark to calculate the ...
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FOC for stochastic Ak Model

(Note: the other posts do not cover this part of the derivation) I have tried to compute the FOC of $k_{t+1}(s^t)$. I get that $0 = -\lambda_t(s^t)$; I can't see why the sigma remains for the FOC of $...
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Value function iteration with stochastic productivity's standard deviation

Hello I would like to know how would you discretize the AR(1) process of technology in a standart RBC model when there is stochastic productivity's standard deviation. Namely I have: Technology $Z_t$ ...
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Value function iteration with habit

I would like to know how I could write a value function when there are habits in preferences. I have the following equations: $$ u\left(C, t, H_{t}, L_{t}\right)=\frac{\left(C_{t} / H_{t}^{\kappa}\...
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Calculate gdp by using all approach of accounting system and interpret the result [closed]

Given 1,Interest on borrowed capital=1500 2,Rents paid to property owners=1300 3,Compensation of employees=2180 4,Proprietor's income=2040 5,Retained earnings=1800 6,Dividends=1720 7,Corporate income ...
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Alternative ways of visualizing longitudinal macro data?

Problem: Visualizing longitudinal is challenging when the dataset has large number of panel members. A common ways to visualize such data is to either make a large set of small individual plots such ...
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Fluctuations in income

Consider the following income fluctuation problem. An agent lives for two periods, 0 and 1, and faces stochastic income in period 1. We are given this utility maximization problem: $$\text{max}\ U(c_0)...
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2answers
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long run growth of money supply

I am trying to understand how the money supply (bank deposits + currency) grows over time. That's the end goal. This is the first part of my awful struggle. I'm superconfused, and almost everything I ...
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1answer
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Derivations of trade balance

I am facing some problems in deriving the two equations for trade balance (from which we derive that the trade balance is zero within each country) in the article "A SIMPLE FRAMEWORK FOR ...
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1answer
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Data on inflation target on different countries around the world

Does someone know if there's a page, like a "global bank" online page, where one could see the inflation target for different countries? For example, in x country, for x' year, the inflation ...
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1answer
34 views

Why doesn't national savings, in aggregate, always equal to zero in monetary terms?

Referring to this question and this one Imagine you had a closed economy with two people and they both started off with $100 dollars. How would net savings in aggregate ever not be zero? Anything ...
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1answer
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Does savings always equal investment? Are there any cases where savings could be removed from the economic system altogether and break the balance?

Assuming a closed economy, does savings always have to equal investment? If an individual produces a certain amount of a resource and saves it, that becomes part of the savings of the economy. However,...
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1answer
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Would a car that was produced last year but bought this year be accounted for in the GDP? [duplicate]

The equation for the GDP is: $$C+I+G+(X-M)$$ If consumers are buying new cars produced last year...would those still be included in the GDP?
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Can an appreciating currency lead to inflation?

If a currency, e.g. the rupee (INR), is appreciating against, say, the USD, it possibly means that there is a high demand for the former. India could have net exports, high remittances, increasing ...
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Can inflation show up in assets without necessarily being reflected in classic inflation indexes?

I have been having an argument with a friend of mine who obtained an economics degree in college. I have been arguing that increased money supply from the fed has led to inflation in asset prices, ...
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1answer
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Trouble at differentiating a consumption function

everyone. This is kind of a basic question, but I have a weak background on calculus and I already tried to figure this out by myself for a few hours without success. So, I am finally appealing on you ...
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1answer
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Financial manipulation and Inflation as tools for sovereign debt default

In the book This Time Is Different, by Reinhart and Rogoff, in chapter 8, the authors state that Higher minimum level of reserves (?) And/or upper bound/ceiling to interest rates ( will help increase ...
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Intro to Stokey / Lucas and Sargent / Ljungqvist

I would like to ask, if you can recommend me some introduction to these 2 macro textbooks: Stokey / Lucas and Sargent / Ljungqvist, which I will be using in the 2nd year MA in Economics. So something ...
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1answer
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To what extent can cryptocurrencies be influenced by monetary policy?

Background In modern economies, at least up until ~10 years ago, it was assumed that a currency would be technically able to be subjected to monetary policy, that is, where more money is created or ...
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Calibration of labor market frictions parameters

I want to refer to the following paper A Three State Model of Worker Flows. My questions are regarding the calibration of parameters. First, I would appreciate any help when on p. 11 it says that $\...
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Determining the effect of fiscal policy on foreign exchange market

I'm in AP (high school) Macroeconomics and I confirm if my thinking is right. Suppose the US and Taiwan are trading, and the US government decides to decrease taxes. I think this should have two ...
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1answer
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Classical Theory of Inflation - Money Supply, Money Demand and Prices

In every textbook, website I read when talking about the classical theory of inflation, I see the diagram below which depicts the value of money, prices etc. This one below is from Spark notes (https:...
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1answer
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What does negative surprise mean?

I have a look at the meaning of "negative surprise" from google but there is no clear explanation so far. When listening to Bloomberg Market Concept, in the picture, Surv(M) < Actual, ...
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How PMI is the best leading economic indicator and how to retrieve it?

From Bloomberg Market Concept, PMI (Purchasing Managers' Index) is the best leading indicator that alerts to forthcoming turning points in real GDP growth. For example, PMI fell to its low point and ...
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2answers
177 views

Limit of utility function in Ramsey-Cass-Koopmans model

I have given the utility function for the Ramsey-Cass-Koopmans model, as follows: $$ u(c_t)=\frac{c^{1-\theta}-1}{1-\theta} $$ The claim is that as $\theta \rightarrow 1$, then the funciton is ...
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1answer
50 views

Separation rate

I want to refer to the paper Aggregate implications of indivisible labor, incomplete markets, and labor market frictions. In Footnote 9, there is a brief explanation of how the separation rate is ...
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1answer
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Why high levels of inflation doesn't leads to high levels of employment?

According to the original Phillips curve $\pi=(\mu+z)-u$ there's a negative relation between inflation and unemployment. That being said, if there were a really high level of inflation, then there ...
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$15 dollar minimum wage in the U.S. a good idea for the U.S. economy? [duplicate]

After taking principles of micro and macro economics, both intro-level courses, I got the impression that price controls are generally not a good idea for a market economy. However, I continuously see ...
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New Keynesian Phillips Curve (NKPC) derivation in Clarida, Gali & Gertler (2002) using Rotemberg

I have some issues in deriving the NKPC in Clarida, Gali & Gertler (2002) that you can find here. I'm asked to derive the NKPC by combining the log-linearized optimal price setting rule (22) with ...
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How to rebase quarterly price index?

For rebasing annual price index, we divide all price indices by the value of the new base year. With quarterly price indices, there is not a single base year with the value 1.00. In the base year, ...
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Euler equation in Continuous time VS Discrete time

I have seen the euler equation in discrete time for the baseline neoclassical growth model written as: $$\frac{U'(c_{t+1})}{U'(c_{t})}=\frac{1}{\beta(1+r)}$$ however I have also seen the euler ...
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Converting nominal exports to real exports: Which Price Index to use?

I want to convert nominal export values to real one. I have GDP Implicit Price Deflator and Consumer Price Index. I would like to know which price index is better to use in order to get the real ...
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1answer
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Interpretation of sub-unity money velocity

I've read through questions like: Implications of declining money velocity and noticed this trend has intensified since, with velocity printing the lowest readings in history in the past few months. ...
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2answers
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Why in the quantitative equation: $MV=PY$, $V$ and $Y$ can be taken as fixed?

To equation is \begin{align} MV=PY \end{align} where $V=\frac{1}{k}$. Why $V$ and $Y$ can be taken as fixed or constant? Why can $V=\frac{1}{k}$ too? Thanks in advance
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Total differentiation in a IS curve context

everyone. I'm having a hard time trying to figure out how the total differentiation occurs in this exercise. In this excerpt, from Inflação e Crises", by Affonso Celso Pastore, the author ...
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Inter country currency exchange [duplicate]

This is probably a stupid question as I don't know much about economics, please bear with me. My question is; why can't a country insist on the worth of their currency relative to the dollar. For ...
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About the borrowing costs

when a firm borrows a loan, is it charged at the real interest rate or the nominal interest rate? eg when the nominal interest remains constant, the inflation rises and the real interest falls, does ...
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What is the most important factor in sample selection for time series models?

Is there some convention in sample selection for time series analysis? And what is the most important factor in this regard? I mean, I have seen Kónya, I. (2018) use annual data from 1995–2016 to ...

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