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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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find the equilibrium level of Y

Assume that the LM curve for a small open economy with a floating exchange rate is given by Y = 200r – 200 + 2(M/P), while the IS curve is Y = 400 + 3G – 2T + 3NX – 200r. The function for NX is NX = ...
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How to efficiently study and learn Economics?

I read there are a couple of questions asked in this regard, but I am not quite satisfied with the provided answers. I am currently doing my master's degree (expecting to pursue a PhD) in Economics, ...
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MCQ question about trade restrictions

a country has decided that it wants to increase its free trade with trading partners. which measure would help achieve this objective a)a higher quota on imported cars b)subsidy to domestic car ...
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Different explanation for economic growth, depending on the length of the period considered

I'm being introduced to macroeconomics, and a colleague asked why do we say that in the short term the productivity of a country is determined by the "demand side" (IS/LM model) while in the long run ...
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Is deprecation included in the value added approach?

I have been asked this question: "Folt Industries in 2017: It sold 1000 in sweaters, it imported 200 in wool from abroad, and purchased 200 in wool from domestic suppliers, it purchased a sewing ...
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The value of money in a model economy. Has this been addressed?

Consider the following question: "Given a simplified economy which produce and trade some products A,B,C etc... with N agents and a total money supply of M. What will be the price of A, B, C as ...
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Is it possible to give , in economics, an example of a relation ( set of ordered pairs) that is not a function?

In mathematics, some relations ( sets of ordered pairs) are not functions. I know economists make use of functions. But do they also consider relations that are not functions. In which branch of ...
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Financial market Goods market

I'm a first year in economics. I really am getting confused with the financial market and money market and goods market. In terms of what they do, the financial market finds the real interest rate in ...
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Pareto efficiency (optimality conditions) in simple New Keynesian model

I am looking for the pareto-optimal equilibrium for a central planner's problem in a simple New Keynesian model. The planner's problem is to choose $\{ C_{t}, H_{t}, Y_{t}, \pi_{t}, \{h_{t}(j)_{j=0}^{\...
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How to derive aggregate demand and supply from IS-LM with sticky prices? [closed]

I was wondering if my thinking is correct on these questions. For part 1, I just put the two equal to eachother after solving for 1000r, and I ended up with Y = 500/P + 200 for the aggregate demand. ...
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Data Set for Mankiw, Romer, and Weil 1992

I am trying to replicate the results of Mankiw, Romer and Weil 1992, and cannot seem to find the original data.
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Wages in Solow growth model with savings = 0

I am trying to understand the change of wage rate and rental rate in the Solow growth model with s = 0. It is clear that capital per capita will approach 0 (due to depreciation of capital). Also is ...
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Kink in the dynamic IS-curve

I am reading Monetary policy, inflation, and the business cycle: an introduction to the new Keynesian framework and its applications by Gali. Consider this statement: In the New Keynesian model, the ...
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Macro economics drivers in supply chain

I am working on building a sentiment indicator for companies and investors in the supply chain. I am looking for interesting research on the macroeconomic drivers in the global supply chain (...
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Wealth Distribution and market incompletness

From the literature of incomplete market (e.g. Aiyagary 1993,1994), it seems to be the case that: With complete markets, the capital distribution in the final steady state depends on the distribution ...
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Relationship between Elasticity of substitution of sectoral outputs and elasticity of substitution of inputs

There are two sectors Y1 and Y2. Composite output is given by CES form - Each sector employs Capital and Labor in combination through Cobb-Douglas Production Technology. The paper mentions that ...
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How should I rebase my GDP?

I have a constant GDP data from 1988 to 2009 in constant 1985 prices and GDP data from 2009 to 2017 in constant 2000 prices. My question is how should I rebase my GDP? Upon searching the web, i don'...
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1answer
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Question Regarding 'Potential Output'

I am learning about potential output. We have been told that it is the amount of output that an economy can produce when using its resources, such as capital and labour, at normal rates/maximum ...
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Structural Adjustment Programs question

I am writing a paper about SAPs. Its very controversial because of all the imposed policies on the country they are lending money to, the countries tend to get poorer instead of richer. I am still a ...
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can human development index be a proxy for human resource?

can I use hdi instead of literacy rate as a proxy for human resource ot human capital? is human resource and human capital the same? Thank you.
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Monetary Policy under commitment. How to solve the optimization problem?

Under commitment the CB might follow this problem as Monetary Policy strategy: $$ \min_{\pi_t,x_t}=E_0\sum^\infty_{t=0}\beta^t \left(\frac{1}{2} ( \pi_t^2 + \alpha x_t^2 )\right) $$ $$ \text{s.t. }\...
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1answer
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If saving equals investment, can there ever be a stock of savings?

National product accounting identities imply $S=I$. Since these are flow quantities, everything saved in a particular period is invested, thus there is never an accumulated stock of savings. Is this ...
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How to intentionally crash an economy? [closed]

If you were a high level influencer (policy maker, economic adviser, president, etc.) of a major country or a larger economic area and you'd intentionally want to cause a (recoverable) crash in its ...
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How important are capital requirements for controlling broad money supply?

Interestingly, the Bank of England (BoE) is one of the few central banks that does not have reserve requirements. Canada, the UK, New Zealand, Australia, Sweden and Hong Kong have no reserve ...
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why not we use one universal currency? [duplicate]

I have a little knowledge of "why we still use multiple currencies?" but it does not make a click in my brain or the sense in reasoning that much that some country that is not influenced still use the ...
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What are some common causes of jobless growth?

While "jobless recovery" is often discussed in the aftermath of recessions in Western countries, it seems it's always a short-lived phenomenon. On the other hand, it looks like in other parts of the ...
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DMP Search Model - Terminology

In the most basic Diamond-Mortensen-Pissarides (DMP) model we have the variable $V$ which represents the present discounted value of expected profits from a vacant job. The corresponding Bellman ...
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Are unit root tests necessary or useful on small samples of time series data?

I have a 16 year time series (annual frequency with 16 observations). I will conduct an OLS regression. In this setting do I need a unit root test? Do you have additional suggestions for things that ...
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1answer
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How to interpret the difference between natural level and steady state in Macroeconomic theory

I am reading Monetary policy, inflation, and the business cycle: an introduction to the new Keynesian framework and its applications by Gali. In this question I am going to use the output $Y_t$ as an ...
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1answer
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Resources for mathematician trying to develop (macro)economic thinking?

I have a 'hobbyist' interest in economics (read several popular science econ books and listen to a lot of podcasts). Recently I've been trying to take this further by looking at courses in economics....
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2answers
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What's the use of '% to GDP' type of variables?

In my study I will look for the relationship between the Gini coefficient and trade, FDI and other variables. However, as I was regressing it... the result turn out to be insignificant. My data that I ...
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Why consumption is defined as $ C_t:= \left(\int^1_0C_t(i)^{\frac{\epsilon-1}{\epsilon}}di\right)^{\frac{\epsilon}{\epsilon-1}} $

I am reading Monetary policy, inflation, and the business cycle: an introduction to the new Keynesian framework and its applications by Gali. In section 3.1 he presents/defines the consumption as $$ ...
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Can technical change have a negative growth rate?

Using the following nested CES function I have backed out augmentation indices $A_L$ and $A_E$. Where $A_L$ is a labour-augmenting technical change index and $A_E$ is an energy-augmenting technical ...
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Demand for real money balances worked out example

I was looking through some macroeconomic textbooks and came across a seemingly simple equation that derives the demand for real money balances, I also included the explanation for each part of the ...
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Are Complex Roots in Macroeconomics OK?

I've been estimating some non-linear Macroeconomic models. As a field, do we care about complex roots of the autoregressive matrix? Is there any reason to think the real word processes have real ...
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Econometrics thesis

I am doing my thesis on whether FDI is a key determinant of economic growth . my dependent variable and my independent variable is FDI inflows $ . my data set includes 123 observations over 5 ...
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Tax Cuts Affect on Economy?

If we look at the equation for national Savings = S(priv) + S(pub) = [Y-C+Tran-T] + [T-G-Tran] = Y - C - G . We see that Tax falls out of the equation. Therefore, does that mean changes in taxation ...
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How is the Euler Equation for Consumption derived from from intertemporal budget constraint and lifetime utility function in basic macroeconomics

I suspect that what I'm actually asking here is just a basic calculus question, which I have overwrought, but I wanted to ask it here to make sure before taking it to SEMaths. In the Jones ...
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Incorporating Animal Spirits effect

Hello everyone, I am studying Macroeconomics on my own online. I am on the IS\LM model as of now. I derived the equation for goods market equilibrium. I was wondering how can I change this to include ...
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Is weak global economy always a “headwind”?

In the most recent (Mar. 20, 2019) FOMC Press conference, Powell said this: So, global economy was a tailwind for the United States in 2017. That was the year of synchronized global growth, and ...
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Predicting Shifts in Supply and Demand for Loanable Funds

I know the answer is A.  but I need an explanation on why. I thought government savings would decrease since they have less tax revenue, shifting savings left and interest rates up. I could see how ...
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1answer
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Where's a good place to find Information on Non-OCED countries?

I'm looking for Private Savings (Sp), Investment (I), Taxes (T), Government Spending (G) for India.
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Generalized method of moments in Dynare

I am new to dynare. I am trying to replicate the calibration of the paper 'Structural transformation and aggregate productivity' by Margarida Duarte and Diego Restuccia. (Picture attached) In this ...
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Deriving the INADA conditions for CES production function

Suppose that we have a CES production in intensive form with the following marginal productivity for capital: $$MP_{K}=\alpha A^{\beta }\left (\frac{y}{k} \right )^{1-\beta }$$ As we know, the CES ...
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Real Income and a Fixed Money Supply

What would happen to nominal income and wages if the money supply were fixed (100% reserve banking). Would real wages increase, even though nominal wages would stay the same or even decrease?
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Coefficients of lagged inflation in phillips curve should sum to unity

I am working on an assignment and one questions asks to demonstrate mathematically that if the coefficients of lagged inflation in the phillips curve sum to unity the problem of non-stationarity of ...
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1answer
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Why would a commercial bank borrow from another commercial bank instead of the central bank?(more questions inside) [closed]

1) In my textbook, it is said that overnight rate is quarter of a percent below the bank rate, so does it mean that if bank rate is 5%, then overnight rate is 4.75%? What is the point of borrowing ...
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Milton Friedman and Simon Sinek

In Simon Sinek's "Leaders Eat Last" a book on effective leadership within organizations, Sinek is critical of the “shareholder value” theory of business management, which he argues took hold in the ...
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How do I rebase my GDP with different base year?

My data are the following: Current GDP 1996-2017 Real GDP (base year 1985) - 1996-2009 Current GDP - 2009-2017 Real GDP (base year 2000)- 2009-2017 My question is how would I rebase my data from ...
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Overlapping Generations model: Social Planner solution

Assume we have a model of OVG where there are 2 overlapping generations, youngs and olds, the agents are two period living. The utility function is logaritmic, and the production function is Cobb-...