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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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47 votes
7 answers
8k views

Is zero inflation desirable?

Is zero inflation really desirable? To be more precise: Does inflation in real life have benefits that in some situations outweigh its social cost? E.g.: it works as a disincentive against holding ...
Giskard's user avatar
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44 votes
11 answers
8k views

What is the economic purpose of increasing the minimum wage?

It is generally accepted among economists that minimum wage warps the equilibrium point between the supply and demand of labor by instituting a price floor and increases unemployment for unskilled ...
Mathematician's user avatar
75 votes
13 answers
26k views

Fundamental equations in economics

For the other sciences it´s easy to point to the most important equations that ground the discipline. If I want to explain Economics to a physicist say, what are considered to be the most important ...
Lumi's user avatar
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19 votes
5 answers
5k views

How do economies grow?

These days, we hear again and again about the so-called "need" for economic growth. But how do countries actually grow economically? That is, why/how does their GDP increase over time? ...
FooBar's user avatar
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12 votes
2 answers
3k views

What is the Gross Domestic Product (GDP)?

I suppose GDP is supposed to create a measure of a country's wealth/welfare, something easily indexable. But how exactly is it composed? And is its composition disputed? How good is it at measuring a ...
FooBar's user avatar
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51 votes
10 answers
4k views

Seminal papers that later were proven to contain errors

I was reading on institutions, and I came across Acemoglu, Johnson and Robinson (AJR) paper on The Colonial Origins of comparative development: An Empirical Investigation, and this paper seemed so '...
An old man in the sea.'s user avatar
10 votes
1 answer
369 views

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 ...
Rich's user avatar
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10 votes
7 answers
6k views

Mathematical Micro/Macro Economics Textbook Recommendation

I was formerly an economics major and now also majoring in mathematics. I want a textbook that is rigorously based on mathematics; not just using mathematics whenever the author wants, but in a more ...
Taxxi's user avatar
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31 votes
4 answers
5k views

From an economics perspective, what are the ramifications of a currency with fixed money supply?

I'm thinking specifically of bitcoins. What are the pros and cons of having a fixed number of coins, as opposed to more "normal" currencies? Would the currency have no inflation?
Jason Nichols's user avatar
9 votes
4 answers
2k views

What would happen if the world switched to a single currency?

What would happen if all countries suddenly stopped using local currencies and adopted a global currency (like the Euro, but for everyone)?
oyvind's user avatar
  • 209
8 votes
2 answers
3k views

Is the economy a zero-sum game?

Theoretically speaking, if all the Earth's inhabitants were to save money and invest, is it possible for everybody to get, let's say, a 4% yearly return for everyone? Is the economy a zero sum game (...
dreamoki's user avatar
4 votes
2 answers
18k views

Does GDP count both the investment and the house rental?

Suppose you bought a new house in the year of 2010. Then the price of the house in counted toward the 2010 GDP. Say then you live in the new house in the following years. So in these years, the GDP ...
Kun's user avatar
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13 votes
7 answers
4k views

Textbook for macroeconomics (advanced undergrad)

I find that many contemporary macroeconomics textbooks are too applied, filled with examples, case studies and intuitive illustrations, often at the expense of quantitative rigour and therefore the ...
Constantin's user avatar
11 votes
2 answers
1k views

Inflation and economic growth

Noticeable works about the impact of inflation on economic growth are dated back to the 90s. For example, Barro (1995): the impact effects from an increase in average inflation by 10 percentage ...
Anton Tarasenko's user avatar
11 votes
2 answers
490 views

The Case for Basic Income in developed and underdeveloped countries

From what I can tell, the idea of the basic income guarantee is very popular in some circles as an excellent alternative to a lot of modern welfare systems. Has anybody developed a theoretic or ...
Jamzy's user avatar
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5 votes
2 answers
1k views

Why is modest inflation a good thing? [duplicate]

I have been reading a BBC news article about inflation in the UK, which is saying that inflation has recently become negative (http://www.bbc.co.uk/news/business-33147660). The article suggests that ...
Karnivaurus's user avatar
0 votes
1 answer
110 views

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 ...
Sayaman's user avatar
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25 votes
2 answers
3k views

Should we expect more structural technological unemployment if growth becomes more limited by natural resources and less by labour?

Technological unemployment, where unemployment arises from (with some oversimplification) workers being replaced by machines, has so far been temporary as new jobs were created that replaced the old ...
gerrit's user avatar
  • 1,754
12 votes
2 answers
2k views

What is the difference between "aggregation" and a "representative agent?"

What is the difference between "aggregation" and a "representative agent?" I'm sorry if I'm not entirely clear on this question, but that's why I ask. It seems to me as if a representative agent is ...
jmbejara's user avatar
  • 9,355
12 votes
3 answers
7k views

Is 'full employment' synonymous with 'the natural rate of unemployment'?

Is the phrase 'full employment' synonymous with the phrase 'the natural rate of unemployment'? Parkin, et al. (2010) seem to use these two terms interchangably in chapter 20, but looking up these two ...
ahorn's user avatar
  • 1,230
9 votes
2 answers
6k views

Meaning of Additively Separable, Linear in X

Often I see both in micro and macro two common terminology : Additively separable. Linear in price or linear in probability. I understand exactly as they sound by looking at the functional form ...
Frank Swanton's user avatar
8 votes
6 answers
1k views

What is the relevance of economic growth?

Economic policies often mention high economic growth as a desirable path. For example, "We started to lay a new foundation for stronger, more durable economic growth." -- President Obama, ...
FooBar's user avatar
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6 votes
1 answer
3k views

S=I in a closed economy

In a closed economy, the national income identities imply that $$S=I$$ However, the intuition is not clear to me. The saving is the part of national disposable income that is not consumed. $I$ is the ...
ChinG's user avatar
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2 votes
1 answer
900 views

Why isn't National Net Worth of a country used to calculate its economic power, as opposed to GDP?

From Wikipedia: GDP Gross domestic product (GDP) is a monetary measure of the market value of all final goods and services produced in a period (quarterly or yearly). National net wealth ...
red-o-alf's user avatar
  • 131
2 votes
1 answer
113 views

How do debt-free governments control the money supply?

From what I read in my introductory macroeconomics textbook, central banks can control the money supply by selling government bonds in the market (decreases money supply), or by buying government ...
Flux's user avatar
  • 553
31 votes
4 answers
9k views

Are there historical cases of country A printing the currency of country B for the main purpose of economic warfare?

I recently read in a news article that a large amount of Libyan banknotes printed in Russia were seized in Malta following an order coming from the USA. Both Russia and the USA have geostrategic ...
Genorme's user avatar
  • 413
20 votes
5 answers
2k views

Unemployment and the Minimum Wage---what are the main counter-arguments to Card and Krueger?

Card and Krueger's paper (AER 1994, "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania") uses a difference-in-difference identification strategy to ...
jmbejara's user avatar
  • 9,355
17 votes
3 answers
1k views

Complete Markets in Continuous Time

In the standard discrete time economies with a finite number of states, $n$, a complete markets economy is simply an economy with $n$ independent assets (Think Ljunqvist and Sargent Chapter 8). This ...
cc7768's user avatar
  • 1,613
14 votes
3 answers
7k views

Log-linearization of Euler equation with an expectation term

There are a few online resources available to help with log-linearization (e.g., here or here). However, log-linearization where an expectation is involved is a little tricky because the log can't ...
ethan1410's user avatar
  • 141
10 votes
3 answers
3k views

Why can't countries print another country's currency?

Counterfeiting money is clearly a difficult thing for individuals, but surely a country should have no problems counterfeiting another country's currency. Why don't countries do it? For example, for ...
Allure's user avatar
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10 votes
3 answers
992 views

What is the calculable effect of counterfeiting on an economy?

I'm curious whether one can numerically calculate the effect that counterfeiting has on an economy. As I understand it, counterfeiting essentially amounts to theft of the wealth of everybody holding ...
Claudiu's user avatar
  • 263
9 votes
3 answers
527 views

Is there an alternative metric to GDP that measures a country's assets rather than flows?

The Gross domestic product measures the value of all final goods and services produced in a period. This has some limitations. For example, if a car hits a lightpost and both need to be repaired and ...
gerrit's user avatar
  • 1,754
6 votes
2 answers
2k views

What would happen if the US defaults on its debt?

As has been widely discussed already, the situation in Greece is considered more serious than in the US, as they have dollar-denominated debt and can only print Greek currency. The US, has the benefit ...
Arash Howaida's user avatar
5 votes
3 answers
837 views

In US, was there an instance in the history when two consecutive quarters of GDP decline wasn't classified as recession?

This topic has been a bit politicized. The common perception that two consecutive quarters of negative GDP growth counts as a recession is a myth. There is actually a committee that determines whether ...
Matt Frank's user avatar
5 votes
3 answers
9k views

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 ...
M T's user avatar
  • 153
5 votes
1 answer
392 views

What is the appeal of DSGE models?

As far as I understand people like them, because they fit the data quite well when compared to VAR's for example while also having an economic interpretation. They appear to explain observations in a ...
SomeName's user avatar
  • 153
4 votes
1 answer
122 views

How buying bonds indirectly from the government prevents the central bank from financing government deficit?

From Krugman's macroeconomic textbook (highlighting is mine): "In an open-market operation the Federal Reserve buys or sells some of the exist- ing stock of U.S. Treasury bills, normally through ...
KarmaPeasant's user avatar
  • 1,135
3 votes
1 answer
133 views

what was the world's wealth in 2015?

I was reading an article from 2015 stating that 1% of the world has half of the world wealth. They have several figures such as the world's billionaries have around 7 trillions dollars or the global ...
Pablo's user avatar
  • 545
3 votes
5 answers
354 views

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. ...
52d6c6af's user avatar
  • 581
3 votes
3 answers
433 views

Sanity of lending out made-up money

Background I've done some research to get an understanding into the issue I want to ask about. Regrettably, I found out general descriptions of the mechanism and/or evidently biased explanations, ...
Konrad Viltersten's user avatar
3 votes
2 answers
18k views

Why does the Balance of Payments have to (more or less) equal zero

It seems to me that the non-reversible transactions included in the current account, and the reversible transactions included in the capital and financial account, are unrelated, and should therefore ...
Jason Chami's user avatar
3 votes
2 answers
2k views

Intuition behind the positive slope of LM curve : 'Income must increase'?

Source: by John Floyd PhD (in Economics; U Chicago) The intuition behind the positive slope of LM is as follows: An increase in the interest rate reduces the demand for money and an increase ...
user avatar
2 votes
2 answers
498 views

In what way do developed countries steal trillions of dollars from developing countries?

According to the Guardian, rich Western countries 'steal' large amounts of money from poor countries, much more than they give in development aid. If we add theft through trade in services to the mix,...
Riemann's user avatar
  • 69
2 votes
3 answers
246 views

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 ...
against very long user names's user avatar
2 votes
1 answer
392 views

How is monetary policy fair in the current economy? [closed]

I've just read Money Creation in the Modern Economy, an article published by the Bank of England. This article brings about a lot of questions in my mind. This article talks about money being created ...
Alexandru's user avatar
  • 273
2 votes
2 answers
2k views

Books to self-study applied econometrics

I'm a student and I'm interested in focusing on the application of econometric theory to "practical" situations. It would be great if you can suggest freely available books along with those that are ...
user98139's user avatar
1 vote
1 answer
1k views

Why is machine built this year but not sold this year included in GDP?

GDP is the sum of market value of all final goods in the current year, so why is is machine built this year but not sold this year included? In addition why is machine not built this year but sold ...
CoolKid's user avatar
  • 145
1 vote
2 answers
153 views

If the government builds a bridge, how do we know it's the best possible usage of real resources (i.e. steel, labor, etc) at the time?

I would assume the "goal" of any economic activity is to make the largest amount of people the "happiest" -- i.e. Pareto Efficiency or sum-total 'utility.' How do we know if this ...
David's user avatar
  • 328
1 vote
3 answers
551 views

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 price ...
Hans-Peter Stricker's user avatar
0 votes
1 answer
106 views

Good inflation models

A well-received comment on this site stated: Pundits might not understand inflation but macroeconomists actually understand inflation well nowadays What models are currently used to forecast ...
Giskard's user avatar
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