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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Gvernment deficits, by driving up interest rates, can contract the economy?

I don't grasp that boldened sentence. According to IS-LM model, rise in interest rate does cause decrease in Y. IS-LMentary - The New York Times What use is this framework? First of all, it helps ...
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What would happen in the IS-LM model if there is a simultaneous decrease in tax and interest rate?

Since there is a fiscal expansion with a decrease in tax i'm not sure what the interaction would be with a decrease in interest too, would money supply and output both increase? Thanks
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Applying Econometrics to Monetary Economics

I've been given a problem in which I am told that GDP is a function of the supply of money, prices and demand, $$Y = (M/P)^\delta$$ Taking logs, $$\log(Y) = \alpha + \beta \log(m - p) +u$$ ...
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The derivation of Central bank's loss function?

How to derive the central bank's loss function?
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Creation of Money - Hypothetical Situation

Imagine you sell me some consulting services. I don't have any cash, so I give you a $100 IOU instead. You now have a $100 Note Receivable on your Balance Sheet. ...
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2answers
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Should unemployment caused by the government closing non-essential businesses during quarantine be counted as structrural unemployment?

I have following definition of structural unemployment (taken from "Modern principles of economics" by Tyler Cowen and Alex Tabarrok): Long-term unemployment caused by shocks or permanent features ...
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FDI, FPI relation with interest rates

I understand how a rise in interest rate might lead to an inflow of capital into debt securities, however wouldnt these Foreign Portfolio Investments (FPI) remove their funds from equity. And for ...
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Reason for the increase in aggregate demand due to the existence of black money

How can existence of black money amd black assets due to corruption, tax evasion etc., increase the aggregate demand? Can anyone explain this with an example?
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Meaning of the sentence

I am having trouble understanding this economic concept: Consumer can obtain maximum utility only if he/she incurs expenditure on various commodities in such a manner as to equalise marginal ...
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Isn't recession is when there's an actual decrease and not just a less rapid growth?

I heard that for 2020, the global economic forecast is recession. The growth will be less than 2.5%. But isn't recession is when there's a decrease in GDP (for two consecutive quarters, as I recall), ...
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Shouldn't the total global debt amount to zero and not $253 trillion?

In Jan 2020, the Institute of International Finance (IIF) came out with a report (read summary here) that the total global debt is expected to climb to a new all-time high of more than $257 trillion ...
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What are the exact sources of CARES Act economic transfers?

The bill Coronavirus Aid, Relief, and Economic Security Act provides "2 trillion". (There is also H.R.6201 - Families First Coronavirus Response Act providing aid.) From which sources will the ...
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Why is investment included in GDP?

Why is real investment included in GDP? I thought GDP is only supposed to measure final goods produced? I thought capital is an intermediate good but I guess I am wrong. An intermediate good is sold ...
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Federal Reserve Leveraging of COVID-19 Fund

Reading an article in The New York Times about the COVID-19 stimulus bill, I stumbled on this detail the Fed can take a limited amount of funds and deploy them widely: The central bank only needs ...
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How do deal with negative values when finding log difference?

I’m trying to run a regression with GDP quarterly growth as the dependent variable. I’ve been asked to find the log diff of the data values however I’m unsure on how to do this on excel and how to ...
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Moral Hazard and Covid19 stimulus - situation, and possible alternatives [closed]

Premises: The stimulus package agreed today includes about 1500USD one off helicopter drop payment to each US citizen, (to a total of about 0.5 trillion usd? ) The Covid19 pandemic will cause peak ...
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what would be an efficient investment when central banks have massive qe?

Recently the central bank said in a statement on its website. “Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift ...
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Question About Consumer Price Index (CPI)

So my question is regarding how a change in consumer buying behavior affects the CPI. Say for example, that in times of crisis people tend to buy their goods from shops with cheaper prices than the ...
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Elasticity of substitution in leisure

This might be a very basic question, but I am a beginner in macro models. I would appreciate help with my doubt. In different papers I have read about the elasticity of labor supply or the inverse of ...
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FDI - Foreign Direct Investment

If in the sector foreign direct investments (FDI) are not stable, for instance, increasing dramatically in one year, decreasing next year. fluctuation continues over ten years, what FDI can say about ...
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Prove that a preference is linear

Given the following two conditions: $x\succ y$ implies $x+a\succsim y+a$, And, $x\prec y$ implies $x+a\precsim y+a$ We want to prove that $\succsim$ is a linear preference. One of the ...
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Are typical macro DSGE (RBC or New Keynesian DSGE) models linear, non-linear, or log (linearized)?

In Carl Hommes 2015 book on Expectations, it seems he considers DSGE models (being it either RBC DSGE or New Keynesian DSGE) to be linear, or (log)linearized models, on page 3 of the introduction. He ...
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US Pandemic Stimulus [closed]

What is the limit of money available to the US federal government for pandemic related economic stimulus? If economic shutdown continues until July (as many perfect) can the government keep ...
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Why would the price of goods rise up after increased consumption due to the outbreak?

On the wake of the COVID-19 outbreak, consumption of some goods will increase. But, my question is why so? My understanding is that, since aggregate demand for these goods has increased, supply can'...
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What are main reasons a typical DSGE model is called non-linear? Why are these non-linearities important?

What are main reasons a typical DSGE model is called non-linear? Why are these non-linearities important? Is a non-linear model inherently less stable than a linear model? Why?
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Real wages fluctuation as per classical economics

I have just started studying Macroeconomics and have noticed that as per the Classical economics, the real wage level will always remain same because any change in price level in the market is ...
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Beginner wanting to learn about economics/finance to explore career options?

I want to explore the banking/financial industries more for potential career options, can you recommend any books/ free online courses and sources in general as a starting point to build on my ...
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Find yield rate (bid-ask spread)

On March 2, a Treasury bill expiring on April 20 had a bid discount of 5.86, and an ask discount of 5.80. Calculate the best estimate of the risk-free rate to be used in valuing options with the Black ...
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How to calculate the maximum willingness to pay? (Reservation price)

I have to solve the following exercise. I cant figure out what I have to do know. I hope i can get some help. Suppose you have the following utility: $U (x_1, x_2) = 4x_1 ^ .5+2x_2 ^ .5$ and you have ...
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Negative long term effects of wage cap, especially on purpose of money?

It can be figured that a wage cap could have some noticeable short term effects - mainly, those who are higher paid will not receive as much money anymore, meaning less spending by the richest in the ...
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How can autonomous private spending change budget surplus?

I was reading Keynesian economics in R.Dornbusch's book where he mentioned the defects of using budget surplus as a measure where he says it can be changed and effected by autonomous private spending ...
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Why dont capitalists use demand side economics [closed]

An asset manager with trillions could buy up a small economy like Singapore or Nigeria and stimulate it for a 300% multiplier if its in a recession. What stops capitalists from using demand side ...
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Solving for value function (non-Bellman)

I am trying to build a model and am having trouble getting a closed form solution for this value function: $$V(h_{t})=\max\limits_{{k_{t+1},\tau_{t},l_{2},I}} ln[w(h_{t})[1-l_{2}-\alpha I]-k_{t+1}-\...
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Real Exchange Rate and PPP [closed]

I'm struggling to answer this question. *Consider the real exchange rate. Suppose that the nominal exchange rate is 30, which is 10% lower than the level predicted by the absolute PPP. Answer how much ...
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How to calculate velocity of money when some people make long-term savings?

Bob gets paid every month and lives paycheck-to-paycheck, so for Bob's money velocity is 12 (assuming that there is nobody else in the economy). Al gets paid every two weeks and lives paycheck-to-...
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Log-linear version of current account equation

I am working on my thesis, doing a two-country model with traded and non-traded goods considering incomplete asset markets and imperfect pass-through. In a sense, I am following Benigno & ...
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Forecasting integrated variables in a macroeconomic setting

I am trying to measure the effects of restrictions on immigration to a specific country on both real estate rental indices and real estate property price indices during the next 3 to 5 years. As a ...
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What happens to Interest rate if the money supply is fixed?

With the increase in Money supply, the nominal interest rate tends to increase. But what happens if the supply of money is fixed? What happens to the Interest Rate?
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Multiplier and slope of Aggregate Expenditure

I have question I can't wrap my head around. Here's the question ...
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Fed vs Treasury: 2008

Re-visiting the issue of the Troubled Assets Relief Programme (https://www.thebalance.com/tarp-bailout-program-3305895), both the Treasury and the Federal Reserve had a role to play in the "bailout". ...
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Are there automatic stabilizers that react with contraction to a stagflation?

So far I know only two automatic stabilizers, namely "progressive tax system" and "unemployment benefits". Both of them would react expansionary to stagflation. During stagflation incomes of people ...
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After a permanent shock what would happen to the interest rates?

If there was a permanent negative population shock that reduced the population of the young by x. What would happen to interest rates under an OLG model?
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Export is high sensitive to external income. How can be this explained?

I am estimating an export equation, where dependent variable is export and independent variables are exchange rates, external income and other controls. Each coefficient is an elasticity. The results ...
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An overview of 4 books for an undergrad course in Mathematical Economics

I plan to self-study, at an undergraduate level, Mathematical Economics. There's 3 main topics to cover Introduction to economy science Microeconomy Macroeconomy (each of these have lots of sub-...
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Why is a nations economy is divided into sectors?

I understand that modern economists divide a nations economy into sectors such as such as primary, secondary, tertiary, quaternary and quinary. What is the point of such classification?
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(AD-AS model) How is it possible for firms to spend less, but supply more at higher price level, assuming no increase of the SRAS?

According to the interest rate effect theory higher prices will lead to lower GDP demanded because firms will spend less due to loans being more expensive. It seems at odds with what the SRAS curve ...
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Exchange rate pass-through for a monopolist

I am trying to solve an exercises that required to derive an expression for exchange rate pass-through for a monopolist. From the maximand I've found that P= (A+WS)/2 With W* being the marginal cost, ...
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Log-linearization of real exchange rate

I have a doubt on how to log linearize an expression for the real exchange rate. I have read in several papers that they express it using substitutions. I haven't been able to find out what ...
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Is there an “ideal” ratio of tax revenue to GDP? Or, at least, can I assume a higher ratio is better?

At the link below, you can see countries have a huge difference in ratios of tax revenue to GDP. Is it fair to assume that a higher ratio is better? Does raising a substantial portion of your GDP in ...
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What is the predominant adverse effect between US monetary and fiscal policy interplay?

I can't find the exact issue, but I recall reading in the Economist something to the effect that: QE has been undermined by debt-management policy I assume this to mean as the US finance ministry ...

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