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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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Endogenous technology

Given the following endogenous knowledge (technology) model where production function is as follows - Can anyone tell me - For what values of φ does this model get closer to a Solow model of growth? ...
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Does open source software contribute to GDP?

Does open source software contribute to the GDP of a nation? If yes then how, and how does it depend on the increase in usage? For instance, would an increase in the usage of open source software ...
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Intepretation of $dC_1=-\theta(dT_1+\frac{dT_2}{1+r})=0\Longleftrightarrow dT_1=-\frac{dT_2}{1+r}$?

We are studying the Ricardian equivalence in a macro course and we are asked to show that a tax cut today will be matched by a tax hike tomorrow. I believe the above is supposed to be the solution, ...
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Macroeconomic models with labor-replacing capital?

I am reading article http://public.gettysburg.edu/~tlin/research/robots-main.pdf "A New Keynesian Model with Robots: Implications for Business Cycles and Monetary Policy" and I wonder how actual this ...
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real exchange rate formula doubt

Real exchange rate formula is the exchange rate multiplied by the ratio of two prices. what does this ratio actually imply? What is the rationale behind taking the ratio?
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Real exchange rate

I have a doubt: I'm studying about real exchange rates and I'm having some problem with the formula. RER= NER* price ratio What I don't understand is how do you take this price ratio? Which price ...
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3answers
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Why does a reduction in money demand lead to a rightward shift in the LM curve?

In my textbook, it says Y must rise to restore money market equilibrium as the justification.
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2answers
44 views

Bank Runs During the 1930s

Why were there numerous banks run right after the stock market crash of 1929? Why would a bank fail because the stock market crashes?
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63 views

How is there full employment level at equilibrium level according to Keynesian theory(AD-AS approach)?

According to Keynesian theory :- Equilibrium level is the point at which Aggregate Demand curve intersects Aggregate Supply curve . And this point is termed as Full Employment Level How do we ...
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How is Aggregate Supply(Willing) equal to National Income(Actual)?

Acc. to definition of Aggregate Supply It is the total value of final goods and services that the producers are willing to supply in country . Definition of National Income It is the value of ...
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1answer
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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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1answer
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Analyzing vast economic/financial data

I have data science projects coming up in a university course in the upcoming quarters, and I was interested in using financial/economic data since there is so much of it. Also, I do have a hobby for ...
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Breaking Up The Big Banks

How can banks break themselves up? If they refuse to how can the federal government force them to break up or break them up themselves?
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What is Application of Vector Algebra in Economics?

I through one tutors heard that vector is used in economics . But on searching about it on internet could not find anything Recently I studied about Vectors in Mathematics So I was wondering how ...
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1answer
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How can Factor Income paid to abroad be negative?

There was a question in my book in which the factor income paid to abroad was given as negative . I guess here negative means that we are not paying but receiving from them but how can it happen that ...
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4answers
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Do consumers also invest?

Definition of Investment that I have found: Investment is the expenditure incurred on the procurement of such capital assets that would help in further production . According to this, it means that ...
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Why having Silver/Gold cover can be bad for bankers?

I was randomly reading on the assassination of John Kennedy. And I found that some of the possible reasons why he was assassinated, is because he was planning to issue some kind of silver cover. Such ...
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Is the definition of Investment variable in Economics?

I studied that Investment is the expenditure incurred on the procurement of such goods that would help us in production of goods and services. And mainly consists of Fixed and Inventory Investment ...
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1answer
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Question on shifts in Supply and Demand Curves

I have a super basic question on the shift in supply and demand curves ( I haven't seen this stuff since high school). More generally, this is about solving systems of simultaneous equations. We have ...
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1answer
26 views

Why doesn't Aggregate Demand mean National Income whereas Aggregate supply is equal to national income?

Aggregate Demand is Basically $$ AD = C + I + G + X - M $$ Is not this national income Through Expenditure Method ? Then why don't we treat AD equal to National Income ?
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Do all OLG models posess the possiblity of dynamic inefficiency?

Do all OLG models posess the possiblity of dynamic inefficiency or is this just a feature of the diamond model?
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2answers
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How do central banks earn profit?

I thought of Central banks as the regulators of financial markets. But surplus reserves of some Central banks surpass giant corporate companies. Please explain me how do they manage to make profit in ...
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Diamond OLG model: Understanding Dynamic Inefficiency

I've been having difficulty understanding how exactly dynamic inefficiency occurs both mathematically and graphically in the Diamond OLG model. The reason why I'm saying this is because even after ...
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1answer
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Wealth Creation: Where does the money come from?

I'm trying to better understand wealth creation– let's use trade as an example. I've bought a cup for \$2 and sold it for \$10. We've "created some new wealth" there– but without a net increase in ...
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1answer
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The Effects of Demonetisation

I do not wish to get into the details of the Demonetisation implemented by the Indian Government on 8th November, 2016. Endless political debates have already been conducted advocating or berating ...
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1answer
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Lecture note recommendations for the endogenous growth model (EGM)

I'm curious if anyone has a recommended lecture notes, slides, or book, anything really, that goes through evolutions of basic models like $y=AK$, to $y=AK^aL^{1-a}$, to $y_t=A_tK_t$, to $y_t=A_tK^{a}...
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How did US supply of Gold become less than foreign claim to gold?

My understanding is that US ran consistent current account deficits in the 60s and 70s, which led to a substantial net outflow of dollars. But, given that each ounce of gold was pegged to $35, how did ...
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Government policy on emerging financial instruments: historical evidence?

After coming across a recent statement from David Gerard (perhaps best known for his book: Attack of the 50 Foot Blockchain) on the topic of bitcoin, my interest in emerging financial instruments was ...
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1answer
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What are key economic mechanisms explaining long term damage during Great Recession [closed]

can you tell me what could be key economic mechanisms that explain long-term damage of the Great Recession?
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1answer
56 views

How does the economy of a city work?

I'm interested in learning how the economy of a town is analyzed. For instance, some occupations serve only people in the town, for instance the town grocer, baker, restaurant, dry cleaner, etc. Their ...
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2answers
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Evolution of GDP to debt ratio

Is it possible for an entity (say a state, e.g. USA) to keep a constant GDP/debt ratio with a monotonically increasing debt. I should probably mention that I am not an economist (physics and c.s ...
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1answer
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Is there any reason deflation would reduce profit?

Profits are the difference between input and output prices. Is there any reason deflation would cause profits to decline generally rather than in those industries where output prices fell faster?
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Lagrangian multiplier

Consumer's problem \begin{equation} \max \sum_{t}\beta^{t}[c_{t}-1/2(1-x_{t})^{2}], \end{equation} \begin{equation} \ s.t. c_{t}+q_{t}b_{t+1} \leq (1-\tau_{t})(1-x_{t})+b_{t}, \end{equation} where c=...
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Main assumptions when discussiong what effect that a Turkish recession will have on EU GDP

Assuming that the Turkish economy will hit recession level numbers next year, what underlying assumptions can economist use to explain the likely effect on European GDP on a 5 year horizon. So, ...
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1answer
155 views

Showing marginal product of capital is independent of the scale of production

The image is pretty much self-explanatory. To add some context, I'm learning Solow-Swan Growth Theory and my professor said that the marginal product will not change if both capital and labor increase ...
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1answer
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Why Certainity Eqivalence in PIH only holds for quadratic utilities

In my current macro economics course, it has been stated that there is certainty equivalence in the random walk permanent income hypothesis ("which implies individuals act as if future consumption was ...
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1answer
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Why don't banks just buy m0 and create unlimited loans?

In fractional reserve banking a bank can buy m0 and use it to create any amount of m1/m2. Why don't they do this? The loans could be just banks lending each other at 0% interest to create unlimited ...
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3answers
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Fixed-income investment in a low interest-rate environment

From an investment perspective, it seems to me that a low interest-rate environment can yield to some relatively "un-risky" profits. As the interest-rate can barely go lower, we now it should rise ...
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0answers
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Automation of macroeconomic modelling (DSGE modelling)

There are automation software https://cloud.google.com/automl/ and https://autokeras.com/ that automatically builds and tunes machine learning models and machine (deep) learning pipelines. Are there ...
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1answer
45 views

Augmented Gravity Model

I am currently using the gravity model for my dissertation on migration flows. Do gravity models need to be augmented by dummy variables only or can other explanatory variables (such as the ...
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Effect of Modified Utility Function on Initial and End Values of Capital, Labor and Production

I am trying to model a transition path of an economy exposed to a permanent shock to government spending on dynare via matlab. We start with these model equations (standard dynare code format). <...
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J Curve and DD Schedule in the Short Run (International Finance)

Assume that the J-curve is true. What would the DD curve look like during the early period of the J-curve (where the value effect dominates)? What would the effect of temporary changes in monetary ...
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1answer
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Cost-push inflation and labour shortage

Is it possible for there to be a shortage of labour in an economy when there is cost-push inflation?
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How to extrapolate nominal GDP figures from year to another?

If I have data for nominal GDP data in local currency for several countries for a given year, how can I extrapolate the nominal GDP forward? Give that nominal GDP = quantities x prices, could I just ...
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0answers
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'Taxes less subsidies' included in income approach of GDP

Why is 'taxes less subsidies' a part of the calculation of GDP (income approach)? Is it because in the expenditure method of GDP, consumption expenditure will exceed those of the total "wages and ...
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1answer
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How printed money gets to the commercial banks?

can you please clarify this for me? Gov't need money for deficit elimination, so they issuing bonds (lets say 1T, 10 years, 2%). Fed is buying the bonds with fresh money, so the gov't now has new 1T$ ...
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How can the number of hairdressers in the UK be up 50% since 2010?

In this recent article, The Economist argues that one of the reasons behind the anaemic recent wage growth in Britain is that the recent job growth has been concentrated in lower-productivity jobs and ...
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1answer
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influence of growing foreign demand for local products on the net exports in a fixed exchange rate regime

Suppose we have a country $A$ with a fixed exchange rate regime. Suppose that, suddenly, the foreign demand for $A$'s made products rose up. What will happen to $X-IM$? As far as I can tell $X$ ...
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1answer
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Deriving average productivity from a CES production function

Following the work of Raurich et al. (2012) I got stuck trying to derive the average productivity starting from the following CES production function: $$Y=A\left [ \alpha K^{\frac{\sigma -1}{\sigma }}...
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2answers
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Causal effect of population growth on GDP per capita increase

I'm wondering if there is a logic for the causal influence of population growth on the increase in GDP per capita. I guess, increase in population as a factor of production might move aggregate ...