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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(Net worth) combined annual output of Japan, Germany and UK?

The following is a quote from old news. What’s the meaning of “combined annual output of Germany, Japan and Britain”? Which output? The Fed said Thursday that U.S. households' net worth tumbled by $...
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23 views

Why decreasing co-state variable (over time) is Compulsory?

I have a short question. In the continuous time infinite horizon optimal control maximization problem Like $$\max \int^{\infty}_0 u(c_t)e^{-pt}dt$$ I use current hamiltonian function and I obtain ...
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What is the economic interpretation of the solution of this optimal control problem?

I have the following optimal control problem $$\max_{c_t} \int^{\infty}_0 e^{-p_it}\ln(c_t(i))dt$$ subject to $$\dot{w_t}(i)=rw_t(i) -n_ic_t(i)$$ $$w_0(i)=w_0>0$$ I have some wealthy and ...
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How monetary profit is possible if aggregate prices exceed public purchasing ability?

When firms produce products, they pay households for labor. Later households use the earned money to purchase those same products... but since households purchasing ability is equal to firms' ...
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New Keynesian IS curve

Can somebody help me solve this new keynesian IS curve question? This is from a few years ago so there is no solution I can check if I'm right or wrong. There are 3 questions but I know I have to ask ...
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Does demand side economics only apply to manufacturing

For example, if investment falls then manufacturing falls. but there is no investment in secondary markets. Wouldn't recessions cause factories to collapse but why would they affect realtors, used ...
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Canonical RBC model and technology shock [closed]

Could you help me with these questions? I have to explain "why" this statement is True/False/Uncertain, but lost "In the Canonical RBC model, more persistent technology shocks help to match the level ...
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Question regarding couple economic terms and concepts

I am trying to read some economic articles for future use. However, as a statistics major student, I am quite unfamiliar with couple of economic vocabs and concepts. Followings are the very vocabs. -...
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Does GDP Income Approach hold?

Let me introduce my question with an example. There is a company producing cars. 20 cars are produced, with a value market of 20000u. GDP = 20*20000u = 400000u. Assume that the company doesn't ...
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What are macro-economics simulations horizons and limits possible with exascale computing?

What are typical examples in literature of large scale simulations of macro-economies of our time as of 2019 and what will change with the introduction of exascale computing? In terms, are there ...
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What was the difference between the UK government’s special liquidity scheme and quantitative easing?

How exactly were the two schemes related and was the lending of treasury bills the same as electronically creating money to buy bonds?
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How exactly did Venezuela's economy fail?

Venezuela has unfortunately become the example of a first-world, wealthy democracy failing, and I'd like to make sure I understand why. My understanding comes down to a few major steps, namely: ...
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Writing constraint

A firm accumulates useful knowledge $k$ by investing in R&D activities. Specifically, if the firm invests $r > 0$ dollars into R&D, the stock of useful knowledge grows by about $2\sqrt{r}$ ...
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Finding optimal path in continuous time

I have the following optimal control problem $$\max_{c_t,l_t} \int_0^{\infty} [ln(c_t)+\theta ln(1-l_t)]e^{-pt}dt$$ st. $$\dot{k_t}=k_t^{1/2}l_t^{1/2}-c_t-\beta l_t$$ $$k_0>0$$ I do big part of ...
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Value Added Approach of GDP calculation

Suppose I sell bread loaf for 20 dollars, the cost of raw material like oil,flour,electricity.... is 13 dollar, I pay 2 dollars to my workers, 1 dollar to transportation company to transport it to ...
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Bliss point hamiltonian function

I have the following utility function $$u(c_t)=g(c_t-b)^2$$ for constants $g,b>0$ Edited: in order to be bliss utility function, It must be g is negative. But in the question g is given to be ...
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US Federal reserve keeps the Federal Funds rate at 1.75%; what happens to the velocity of money?

Referencing the US economy and the velocity of M2. https://fred.stlouisfed.org/series/M2V Velocity of M2 has essentially been slowing since the end of 2010 when it was 1.740 As of October 30th,...
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How will asteroid mining impact the economy?

Just a side note, I'm not sure if this goes here, or in a science exchange... Asteroids are expensive, and can easily be worth billions of dollars. They contain many types of precious metals, like ...
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What caused the velocity of money in the US to increase (accelerate) from Q2 2017 to Q3 2018?

Regarding the US economy. P = (M)(V) / Y Where M is the money supply, V velocity of money, P price level and Y real GDP I want to take a deep-dive into trying to understand what has and what will ...
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27 views

Why do the gross return of wealth and wealth move in opposite direction?

I have a short question: Why does the gross return of wealth decrease as wealth increases? Why do the gross return of wealth and wealth move in opposite direction? $$R=1+(a/w^2)$$ where a is non-...
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1answer
14 views

Difference type of crowding out effect in economics

In macroeconomics I came across two type of crowding out. First, in IS LM model where in classical case, when LM curve is vertical increase in government expenditures have no increase in output i.e. ...
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Total factor productivity persistence [closed]

Would it make a difference whether a decrease in total factor productivity z on the labor, goods, and money market is persistent? (That is, whether decreased productivity today also is predictive of ...
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Meaning of UK Employment Change Index - 3 Months Average

I am trying to understand the meaning of an economic index which is measured in the following way: The value for month n is determined by calculating the average of the last 3 months (n, n-1, n-2) ...
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76 views

What is Economic Interpretation of three nonlinear equations?

I have the following nonlinear system $w$ is wealth $c$ is consumption $r(w)$ is gross return on wealth $a,b, d$ are parameters which are strictly positive and fixed. $$\dot{w} =r(w)w-c$$ $$\...
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Examples of textbook definitions of transaction costs, for a non-econ student

I'm not an econ major, neither am I taking it as a minor, however seemingly out of nowhere economics has jumped into my CS class when talking about the role of IT in reducing transaction costs of ...
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Strategic Complementarities and Multiplicity

Consider a coordination game, in which actions taken by players are strategic complements. Moreover, assume that actions are strong strategic complements, in that the slope of the best response ...
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Estimate Markov process for incomplete market model

Let's say I have an economy in which the agent's budget constraint is: $c_t + k_{t+1} = (1+r-\delta)k_t+w_t\varepsilon_t$ Where $\varepsilon$ follows a Markov process with 2 states. I now want to ...
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50 views

Is a 6% wealth tax a sustainable source of income?

Elizabeth Warren is planning to pay for various things with a 6% wealth tax on those with fortunes in excess of $1B USD. Now, right or wrong, this seems to be an awfully big annual scoop from a ...
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29 views

Understanding a Keynesian point of view

The statement is - Inflation is caused by independant cost push factors and causes an increase in money supply .This is from the Keynesian school of thought.How would cost push factors ,say an ...
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Relation between foreign currency reserve and exchange rate and others

What is the relationship between foreign currency reserve(USD) of a country with it's exchange rate (against USD), and also with export and import strength ? And if it's too complicated to explain, ...
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1answer
53 views

Solving Euler Equation for standard DSGE Models

I am studying a rather standard DSGE Model with a standard Utility function $U = f(c_t, n_t, M_t)$ subject to a budget constraint. Now, tosolve the intertemporal optimization problem I have, or ...
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calculating quarterly rates from

What is the "normal" way to calculate quarterly rates OR Prices. E.g. calculate the quarterly Oil Price, if I have the monthly data? I suppose simply taking the average of the three months isn't the ...
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Interest rate in the Ramsay-Cass-Koopmans model in a closed economy

I am struggling to understand the optimal choices of firms in the Ramsey-Cass-Koopmans model. Specifically, everywhere I see there is the following optimality condition for the interest rate, $r_{t}$, ...
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1answer
29 views

Velocity of M1 versus M2 money

According to Pablo Kurlat's textbook on Macroeconomics, the graph of Ch 13 compares the velocity of M1 and M2 over the years. I don't understand why M1 velocity exceeds M2 even though M2 includes more ...
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Deflation and Wealth Inequality

I've just seen an article where the author states that deflation has the possibility of reducing wealth inequality. His rationale is as follows: When deflation occurs, the prices of assets falls (he ...
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Why is the state variable in Brock-Mirman model bounded above?

as a beginner in macro, I'm trying to understand the Brock-Mirman model for one of my assignments and I am told (in the assignment) that there is a $k^*$ such that k is bounded. From the production ...
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Why would microeconomics be considered more “objective” than macroeconomics?

I can imagine the following reasons for this: conflation of positive vs normative economics in macro micro phenomenon is less complex (or smaller): thus easier to create reliable models for Thanks
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calculate magnitude of a recession

I'm doing an exercise from Blanchard Macroeconomics where I'm, apart from other things, asked to calculate the severity of recessions in the US since 1960. The data on the webpage that's referenced is ...
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Where to find series of capital-output ratio for the US?

While the capital-output ratio is widely used in Macroeconomics as a target in calibration, it is usually just set to be equal to 3, without specifying the data source nor the methodology used to ...
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Would households rather live in a world with or without the unemployment insurance?

Would households rather live in a world with or without the unemployment insurance? What is a good example of world in which unemployment insurance is seen as a benefit, and not a hindrance?
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Effect of Agricultural products on GDP/capita

What is the best way to regress this effect. I would like to show the effect of the production of different agricultural products (Rice, maize, wheat etc..) have on the gdp of a country (India in this ...
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Why would expanding fiat paper issue lead to decreased exports?

I'm reading "A History of Money and Banking in the United States" by Murray Rothbard, and I'm having trouble understanding this one piece of history. Basically, the Massachusetts government issues ...
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Question on Central bank loss function interpretation

How do you interpret this central bank’s loss function: $$L(\hat x, \pi)=\alpha \hat{x}^2+(\pi-\pi^T)^2$$ where $\alpha >0$ and $\hat x$ is output gap. Phillips curve is $\pi = \theta \hat{x}+\...
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Overlapping Generations Model Pension System Question

Part 1 Pension System OLG Model with pension system: Each individual lives up to two periods. The surviving probability at period 2 is p. At period 1, the young household consumes c1, saves s1, and ...
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Measuring economic growth in GDP (in USD) vs Real GDP (domestic currency)

I've noticed that a lot of data online seems to measure a non-US country in USD. This seems odd to me, because doesn't that mean that US fiscal/monetary policies, politics, and economics would affect ...
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Numerical Solution Using Excel about optimal consumption of households

I'm not sure how to solve this problem. I'm given the discount factor, interest rate, probability of high income shock, and various income shock sizes that I need to use to compute optimal consumption....
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Central bank loss function (I did a solution, but it doesn’t totally make sense I guess)

I have question on central bank loss function. We know that the central bank loss function is $$L(\pi, \bar{Y})= (\pi- \pi^e)^2+\beta \bar {Y}^2$$ And we know that fisher equation is $$i=r+\pi^e$$...
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What insights can be gleaned from examining inflation spreads?

I was reading through some econ articles and there was much discussion on various measures of inflation. Though I'm not narrowing the scope to this article, I'll include the excerpt here for context: ...
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elasticity of income if price changes by 10 percent

Arista always spends 10 % of her income on whatzits. Assume that her income increases by some percentage while the price of whatzits remains constant (and that all whatzits cost the same). What is ...
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Analyse the influence of interior demand and trade on exports

I would like to have a primer on how the current slowdown of the German economy is affecting its partners, for instance France, Spain and Italy. More specifically, if it goes mainly through Germany's ...