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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Production technology and efficiency

I have been practicing some questions on production function and efficiency and I came across the following questions. For question 1 what I did is, the efficiency of firm A in q1 = production of ...
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1answer
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Leveraged Return on Investment

A general return on investment (ROI) formula is: \begin{equation} \text{ROI}=\frac{\text{Net Profit}}{\text{Total Investment}}. \end{equation} But if you think about an investment that requires some ...
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Gross interest rate ($R$) v. Net interest rate ($R-1$)

I am reading a macro-finance article that deals with asset financing. While it defines the gross interest rate to be $R$, it defines the net interest rate to be $r\equiv R-1$. In equilibrium, the ...
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Nominal and real government expenditure

I just need to know that how to make a data series of real government expenditures using nominal government expenditure data series.
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Why do prices go up when the central bank increases money supply?

From my understanding, when the money supply curve shifts to the right, interest rates go down, it follows that the price level decreases and the prices should go down? Thanks in advance.
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How can capitalism be improved? [on hold]

Many people want to try socialism because of valid criticisms of capitalism. So, are there any good ideas on improving the problems of capitalism before we go down the path of socialism?
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Upper bound on wealth that can be created for each country

I get very confused on the subject of wealth and I do not, I repeat, I do not have the time to read Adam Smith. And I have no formal training in economics. As a layman, I wish to ask a simple question....
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How should the government react to 50% of the population being wiped out?

In Avengers Infinity Wars the villain snaps his fingers and wipes out 50% of all living creatures. His rationale is that it will save people from starvation and collapse due to resource exhaustion in ...
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In what kind of economic environment would the cliche of “keeping money under the mattress” be warranted?

I'm trying to apply (ideally empirical-backed) economic theory to an age-old cliche. We must be very articulate about the assumptions, because if it's a total collapse of the dollar, then that ...
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Would a perishable currency work in a financial crisis today?

I read about perishable currencies in the following article Now my question is if there have been any studies on this and if this may work in modern financial markets?
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What is the equilibrium income (b) calculate trade balance (c) what is the value of foreign trade multiplier

An economy is characterized by the following equations c=60+.9y^d . I=10. G=10. t = 0 . x=20 . m=10+ .05y
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Need help to solve this task(calculus)ASAP [closed]

Tasks: 1) A firm has MR(x)=3x and MC=AC(x)=(1/3)x^2. Find the profit obtained by the firm for production level between the starting point and the point when MC(x)=MR(x). 2)A firm has marginal ...
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Why doesn't the trade balance equation take into account the value of products sold by the U.S.?

$$NX ≡ (S-I) + (T-G)$$ Read this as “the trade balance (net exports) is identical to the sum of net savings (savings minus investment) and the government’s budget surplus or deficit (taxes minus ...
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What are the risks of investing with Etoro?

I have seen advertisements on Etoro on YouTube a couple of times. It advertises itself as a trading platform that allows you to copy the investment behavior of professional investors, supposedly to ...
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1answer
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Purchasing power of currency abroad

Say you have two countries A and B. Suppose we have a situation where country A's currency can purchase much more in country B than the other way round. What causes this phenomenen? Is it possible ...
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Why does inequality fall in recession in business cycles in first world nations [closed]

See title. Why does inequality always fall in recessions? For example, every recession. Is this a problem for Liberal ideology? See title
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How does investment have a negative impact on the current account (trade balance)?

NX ≡ (S-I) + (T-G) Read this as “the trade balance (net exports) is identical to the sum of net savings (savings minus investment) and the government’s ...
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1answer
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Does diminishing government spending lead to a reduction in trade deficit?

NX ≡ (S-I) + (T-G) Read this as “the trade balance (net exports) is identical to the sum of net savings (savings minus investment) and the government’s budget surplus or deficit (taxes minus ...
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1answer
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Has there been an applications of search and matching theory in the Neoclassical Growth Model?

Specifically, I am looking for the standard neoclassical growth model, but the labour decision is based on either search or matching theory instead of a Walrasian labour mechanism.
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What is unknown in Bellman Equation?

\begin{align} V(W)=\max\limits_{W'\in[0,W]}\qquad& u(W-W')+\beta V(W')\qquad\forall W \end{align} $\textbf{My Question}$: Why is the unknown in the Bellman equation $V(W)$ itself? Isn't the ...
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Is the concept of limited liability in corporate law beneficial to economy

The concept of limited liability in corporate law is widespread all over the world. Limited liability means, that owners of a company can only loose their capital invested into the company - the ...
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Optimal fiscal transfer rate

I'm aware of the theory of optimal currency areas, and that both the Euro and the US dollar* are technically not optimal. This would tend to cause their optimal monetary policy to diverge over time. ...
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1answer
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What is low unemployment and low gdp growth symptomatic of?

Obviously there are caveats with GDP, if you build a bridge to nowhere it counts as GDP, but if you mow your own lawn or volunteer to pick up garbage it doesn't count, and so forth and so on. However, ...
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1answer
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discount factor, function, and rate

Consider an exponential discount factor $\delta\in(0,1)$. Similarly, consider an exponential discount $\textit{function}$: $g(t)=\delta^t$. Then, is defining the discount $\textit{rate}$ as below a ...
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1answer
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Does scarcity apply only to commodities?

I feel like Wikipedia may be misleading me in a subtle or egregious way. The very first line of Scarcity is: "Scarcity is the limited availability of a commodity..." It does, of course, helpfully ...
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Typical Growth Model Social Planner Problem

Consider the following social planner's problem, hand-waving the usual assumptions on the preference, technology, endowment, and inelastic supply of labor: $V(k_o^*)= max_{\{c_t,k_{t+1}\}_{t=0}^{\...
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Growth Model Choices

In a typical macro growth model, a set-up usually concerns with the following trade-offs or choices to be made in each $t$: (1) $c_t$ v. $c_{t+1}$, consumption today versus tomorrow. (2) $c_t$ v. $1-...
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Stokey, Lucas (1989) p 11 FOC

My Lagrangian is: $L=\sum\limits_{t=0}^T \beta^tU(f(k_t)-k_{t+1})+\sum\limits_{t=0}^T\lambda_t(f(k_t)-k_{t+1}).$ My FOC for $[k_{t+1}]$ is: $\beta^tU'(f(k_t)-k_{t_1}^*)(-1)-\lambda_t^*+\beta^{t+1}U'...
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Dixit Stiglitz price index FOC?

In the solution to the problem below provided by my professor he applies a first order condition to the lagrangian for ct, getting pt for the partial derivative of the argument "$\frac{d}{dc_t(t)} \...
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1answer
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Measure of New Firms Born in Each Period

In an economy with stochastic overlapping generations of firms, how do we easily understand the measure of new firms born? The set-up states: "In each period, measure $\rho\in(0,1)$ of new firms are ...
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1answer
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Puzzle: Fairness of consumer price indices

I have learned a bit how the consumer price index (= inflation rate) in Germany is calculated. It's a complex process, which takes into account a lot of measured values (mainly specific prices for ...
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Why people respond to surveys like that of Purchasing Managers' Index?

A lot of data, including indexes, rely on surveys. For example, Purchasing Managers' Index. (1) Why people answer these surveys (is there any benefit)? (2) How to make sure the data is correct? What ...
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Real Business Cycle model and demand shock

Suppose there is an increase in demand in a real business cycle set-up. Since aggregate supply is fixed and prices are fully flexible, won't that leave output unchanged as prices adjust to clear the ...
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Why is an inflation rate of 2% optimal? [duplicate]

Learning from different sources I got the impression that the European Central Bank targets at a inflation rate of 2% (not sure along which time scale actually). Can it be explained by general ...
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The law of supply and demand - How does it work?

I've learned what the principle of supply and demand says, and would paraphrase it like this: The price of a good is at equilibrium when supply and demand are equal. Or with other words: The ...
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Is the New Keynesian Phillips Curve a supply curve?

In New Keynesian models, the Phillips curve typically takes the form: $\pi_t=\beta E_t(\pi_{t+1})+\kappa y_t$ Here, $\pi_t$ refers to inflation in period $t$, and $y_t$ refers to output. Would it ...
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Difference between shocks, innovations and disturbances

In macroeconomics and macroeconomic models, shocks, innovations, and disturbances are very prominent and often mentioned in the literature. In general, is there a difference between macroeconomic ...
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Is there any mainstream criticism of the Benes-Kumhof conclusion that the Chicago Plan would improve the US economy nowadays?

A 2012 IMF Working paper by Benes and Kumhof "The Chicago Plan Revisited " has this abstract, finding in favor of the Chicago Plan an all counts basically: At the height of the Great Depression a ...
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The TYPICAL law of motion of capital

Consider a typical macro firm set-up where the capital can be produced from output goods using a linear technology. It costs some X units of output good to make a unit of the capital, and the capital ...
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The economics of a “no deal” Brexit

A "no deal" Brexit is presented in negative terms. In such a scenario the UK would set tariff schedules in line with trade strategy and protect domestic industry/agriculture with tariff rate quotas. ...
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1answer
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Remittance: Migrant workers sending money to their families

I wonder about the role of migrant workers in a general economic context. Migrant working appears all over the world and on many time and space scales: around cities (e.g. commuters) inside ...
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log linearization around steady state (price dynamics)

I'm stuck with a derivation from Gali's book. In the version 2008, I can't get eq. (7) from chapter 3. All is ok until the following: $$ (1-\epsilon)\log\pi_{t}=\log(\theta+(1-\theta)\exp[(1-\...
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2answers
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What happened to the money multiplier after QE?

QE meant that the monetary base increased dramatically, yet we don't see such a large reaction in money supply (I am thinking of M4 for the UK) nor in inflation. Why is this money not being lent out? ...
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Would apprenticeships improve the economy long term?

Evening my name is Nick and I am a high school student from Fairfield California and I’m 17, my super hyper theatrical question is about a substitute to college in order to create more efficiency in ...
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Do countries have an obligation to match their savings and consumption rate with that of the U.S.?

https://www.barrons.com/articles/europe-is-now-a-bigger-trade-villain-than-china-51558118723 The above articles state that trade imbalances are a bad thing and that if a government doesn't enact ...
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What is meant by “resource base” in this sentence?

I read a sentence in a chapter in my book which was: The emphasis on developing a resource base also meant that export-oriented growth was limited. I googled the for the term "resource view". But ...
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How can I obtain State level Investment in the US?

How can I obtain investment level data by state in the US? I want to analyse how Public investment vs Private Investment responded to TFP shocks on a state level, so I am looking for Gross Private ...
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1answer
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What is the proper term for “contraction economics?”

By "contraction economics" I mean theories and work based on the assumption that the population of a country will decline over time. An example might be a paper looking at the housing market for ...
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1answer
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Quantity theory of money

Suppose the velocity of circulation (V) is constant. Annual growth rate of real GDP is 5%. The money supply grows by 14% per year. Use the quantity theory of money to calculate the inflation rate. My ...
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lifetime consumption explained

The formula for today's consumption is defined as: $$C = Y - T -S^P $$ That being said the consumption of tomorrow is: $$C' = Y' - T' + S^P(1+r)$$ Could anyone possibly explain to me why the ...