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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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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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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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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1answer
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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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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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2answers
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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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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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3answers
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How was the Cobb Douglas function derived?

In economics and econometrics, the Cobb–Douglas production function is a particular functional form of the production function, widely used to represent the technological relationship between the ...
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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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Macroeconomic model of the open economy - NCO and loanable funds

Can anyone explain to me why a capital flight from a country increases the demand for loanable funds in that country. Here's the standard explanation. https://policonomics.com/lp-open-economy-loanable-...
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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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How do I change the base year of real GDP using the GDP deflator and nominal GDP?

I'll use the US as an example. I have three data series nominal GDP $(Y)$ real GDP in 2005 USD $(\bar{Y})$ the GDP deflator $(d)$, with 2005 as the base year, so $d_{2005} = 100$ I want to change ...
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Can a closed economy flourish?

I was wondering if it is possible to run a country based only on domestic economy and not to enter the world economy. Basically, if certain economy of a certain country fails and poses threat to world ...
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1answer
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Will a Guaranteed minimum income not eventually just be crowded out by inflation?

That is, if we implement a guaranteed minimum income, would inflation not eventually rise to a point where it is essentially useless? I would expect prices to be adjusted knowing people have a certain ...
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4answers
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Could eliminating all taxes and only creating new money theoretically work?

Imagine you had the opportunity to found a new country from scratch (in 2020). Value exchange would be digital, where only the state can create new currency units. Instead of relying on income tax ...
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10answers
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People pathologically hoard so much cash that they impoverish the entire nation

"If a man has an apartment stacked to the ceiling with newspapers we call him crazy. If a woman has a trailer house full of cats we call her nuts. But when people pathologically hoard so much cash ...
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10answers
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Why do we need to “get the economy moving again”?

Sorry I have no background in economics but as a computer programmer, I specialise in building models out of simple math and logic, so I hope we can speak the same language without having to get into ...
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4answers
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Why do economists disagree so much?

I'm coming at this from a scientific point of view, having had no formal training in economics - most of what I know about it was from self-studying an undergraduate economics textbook. My question ...
3
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1answer
52 views

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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2answers
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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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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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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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1answer
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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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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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1answer
119 views

How is employment related to aggregate demand and aggregate supply?

When we talk about excess or deficient aggregate demand , how does employment suddenly comes ?
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2answers
218 views

Balanced budget and change in taxes

Consider a simple Keynesian economy in which the government expenditure ($G$) exactly equals its total tax revenue: $G = tY$ where $t$ is the tax rate and $Y$ is the national income. Suppose that the ...
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0answers
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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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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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2answers
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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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3answers
781 views

Opportunity profits vs. opportunity costs

Having learned that Opportunity costs = the costs for avoided profits are a well established and quite useful economic concept, I wonder how its counterpart is officially called and investigated: ...
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2answers
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Is the money market model based on assumption of no interest rate targeting on the part of the central bank?

This is quote from Gregory Mankiw's macroeconomics text about mechanism of formation of the interest rate in the money market model: How does the interest rate get to this equilibrium of money supply ...
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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
43 views

What is causing the difference between USA financial indexes and perceived economy?

While the world is facing economic problems since the spread of Covid-19 in Feb 2020, the main indexes in the world (S&P500 and NASDAQ100) reached and exceeded twice their maximum levels. I ...
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0answers
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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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1answer
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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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Quarterly GDP growth terminology: YoY vs QoQ

Quarterly GDP growth can be calculated either in terms of YoY change or — in the case of seasonally adjusted data — in terms of QoQ change. (A third option would be to annualize the QoQ rate.) To ...
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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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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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2answers
154 views

Difference between the International Dollar and PPP

This may be a very rudimentary question but I am trying to discern the difference between purchasing power parity and the international dollar. I am starting to work on a project where we are trying ...
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1answer
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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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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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