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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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Should Company B enter the market in the following cases

Say Company A has a monopoly producing product E, at a constant marginal cost of $3$ USD. Say the ideal number of units produced is $1$ unit which produces a profit of $2$ USD (=$P_{A}$). Next, ...
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What is the difference between personal consumption expenditure price and PCE quantity?

What is the difference between these two things? How is PCE price different from PCE quantity? Also, I am confused about the difference between PCE quantity and measure of real output. For example, ...
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What makes up GDP in the real estate sector?

The global GDP can be slit up between different sectors to see how sectors contributed to economical growth. I'm interested in knowing what elements are used to calculate the GDP in the real estate ...
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difference between demand for money and credit

As far as I understand in both cases we are seeking money that we don't have and would like to borrow. That being said what I find even more misleading is the fact that as a nominal interest rate ...
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Fiscal sustainability: Debt dynamics

The change in debt ratio can be written as the equation Where G-T is the primary budget deficit. r is a constant interest rate. g is the growth rate. The equation for debt ratio can be drawn in a △d/...
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Using the labor market modeled in terms of real wage what are the changes in real wage and labor if the labor force falls/rises and taxes rise?

W/P = real wage N = labor I understand that if the Labor Force (LF) rises, it is a rightward shift of the NS curve (Labor Supply) and if the LF falls, it is a leftward shift of the NS curve. ...
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German economic growth in 20th century

I have question regarding this great animation: https://www.visualcapitalist.com/animation-the-worlds-10-largest-economies-by-gdp-1960-today/ Why Germany GDP shrunk so much from 1995 to 2000, while ...
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Japan economic growth in late 20th century

I have question regarding this great animation: https://www.visualcapitalist.com/animation-the-worlds-10-largest-economies-by-gdp-1960-today/ The lost decade, when started in 1991. However GDP in ...
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Start year and coming year

Here which is start year and which is the coming year??If the starts the year for ex: 2018-19 then coming year is 2019-2020 right? Actually my doubt is about if a firm's inventory 100 at 2018-19 ...
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Change in inventory

Inventory change=last period's ending inventory- the current period's ending inventory. Change in inventory= production of the firm during the year- sale of the firm during the year No doubt in (1) ...
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Is nominal/real income and nominal/real wage the same? If so, is it possible for your nominal income to rise as your real income falls?

In macroeconomics, I understand that nominal wage (W) is your wage in dollars, while real wage (W/P) is what you can get for that wage (in apples, etc...). But is this the same thing as "nominal ...
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What would the production function look like if MPN (marginal product of labor) were constant, rising and declining?

I know this is a macroeconomic topic and I believe I understand the what the graph for the production function (with Y, Real GDP, and N, labor on the axis) would look like if the MPN were constant and ...
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Does decreasing deficit (by decreasing government expenditure) improve consumer confidence?

I read in a solution manual for the book "Macroeconomics" by Blanchard that decreasing budget deficits will improve consumer confidence and thus recover some of the output lost due to a decrease in ...
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Inventory based question [closed]

"If a firm produces 1000 shirts (finished products), expecting to keep an inventory of 100 shirts at the end of the year." Here Why a firm keep an inventory of 100 shirts ? What is the need of it? ...
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How to Calculate the productivity multiplier?

Given a Cobb Douglas $Y_t = A (K_t^\alpha L_t^{1-\alpha}) $ $ K_{t+1} = sY_t + (1-\delta) K_t$ How do we get the multiplier on productivity to be equal to $ \frac{1}{1-\alpha}$? I understand ...
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How is the level of full employment in an economy determined?

Is this a statistical thing or...? It seems very abstract to me, haha!
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Solve for the steady state with CRS Cobb-Douglas, problem with the system of equations

There is one agent with utility function given by: \begin{equation} U(c,l) = \frac{c^{1-\sigma}}{1-\sigma}-\frac{l^{1+\gamma}}{1+\gamma}\tag{1} \end{equation} With budget constraint: \begin{...
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Is there consensus on why inflation is not rising?

I find it kind of odd that we are not experiencing any significant inflation recent years despit the low rates and quantitative easings. Is there a consensus why this is the case among economists? If ...
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what is the Relationship between Zero nominal interest rates and liquidity traps

So I'm reading mankiw"s principles of economics and I'm in the chapter about the influence of monetary and fiscal policy on Aggregate demamd. The part about nominal Interest rates and liquidity traps ...
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Is this a joke by Galbraith or did he have something more serious on mimd?

In the Sydney Morning Herald, May 1982 Galbraith is on record for saying: Wealth, in even the most improbable of cases, manages to convey an aspect of intelligence. As an economist Galbraith would ...
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Did Galbraith have specific corporations in mind in reference to this quote?

Galbraith is on record for writing: When the modern corporation acquired power over markets, power in the community, power over the state and power over belief it is a political instrument, ...
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Cobb-Douglas production function, given $w$ get $r$ regardless of input levels. Why?

There is a market economy with technology given by: $$Y = K^\alpha L^{1-\alpha} \tag{1}$$ Firms behave competitively and input prices are: $$r = \alpha K^{\alpha-1}L^{1-\alpha} = \alpha(\frac{L}{K})...
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Estimation of a Non-linear production function with Non-linear least squares

Suppose that you have to estimate a Non-linear production function (for instance a Cobb-Douglas or a CES) by using Non-linear LS (and hence without log-linearization). You have just aggregate time ...
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Factor-augmenting technologies (Acemoglu and Restrepo 2018c)

In that paper, they consider the following production function: $Y = F(A_KK,A_LL)$. Where: K denotes capital, L is labor, and $A_K$ and $A_L$ denote capital-augmenting and labor-augmenting ...
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On a statement of Harry Browne (revised)

I am reading a book on an investment strategy proposed by Harry Browne (1999, Fail-Safe Investing: Lifelong Financial Security in 30 minutes, pp. 39–40) known as the "permanent portfolio". He makes ...
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Euler equation of consumption in RCK model

(...) usually called the Euler equation for consumption (in effective units of labor) or the Keynes-Ramsey Rule (after those first deriving it): $$ \frac{\dot{c}(t)}{c(t)} = \frac{r(t) - \rho -\...
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Can a government invest in public companies so their dividends can finance the government

Is it possible that a country could use the money in its sovereign wealth fund to invest in different country's Stock Market and use the dividends to finance its government thus increasing spending ...
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Greek Debt Crisis

If the Greek government defaults on its bonds issued by French and German investment banks, how does that prevent the French and German governments from paying back the money that they owe to ...
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145 views

Can money flow from Firms into the Financial Market in the Circular Flow?

In Macroeconomics, we learn that the circular flow diagram is a simple economic model that illustrates the flows of goods and services through the economy. Can the arrow that connects the "Financial ...
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The dynamics of c and k in Ramsey model (using the phase diagram)

I am having hard time understanding the dynamics of c and k using the phase diagram, the arrows don't make any sense to me. Any explanation will be a lot of help using the equations given. Thank you.
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Differentiating through this integral in banking loans?

Working through the math which gives the following profit function for a bank but I can't seem to solve this first order condition. The profit function is defined as follows, \begin{equation} \pi_t = ...
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How can you find the government spending multiplier from a VAR?

I have done a VAR investigation of how a number of macroeconomic aggregates respond to a government spending shock. However, I can't seem to remember something as basic as how to find the government ...
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Dot over a variable, Neoclassical growth model?

Looking at the Neoclassical growth model, I have hard time understanding what dot over a variable mean? I know it is short for taking the derivative with respect to time, I don't understand the ...
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How is labor demand measured?

For instance, in the introduction of this paper (first paragraph), talking about Figure 1, they say that labor demand is measured as the real wage bill normalized by population. Is it common to ...
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Linearisation of the IS curve?

How to the IS curve linearised around the structural equilibrium?, what is the math behind it?
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FOC and Log Linerizations

I was wondering whether anyone might be able to help me or at least push me in the right direction with this New Keynesian Model. I apparently have that the household function is as follows: ...
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National income referred as GDP?

National Income is the total value of all services and goods that are produced within a country and the income that comes from abroad for a particular period, normally one year. Gross Domestic ...
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Economic interpretation of a CES production function

I am following a paper where a production function of this type is used. $$Y=\left [\beta K^{- \rho}+\alpha \eta \left (\frac{K}{L} \right )^{-c(1+\rho)}L^{- \rho} \right ]^{-1/\rho}$$ It is a ...
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Why bonds held by foreign investors is greater than total bond issued?

Total bond issued is reported by BIS debt securities data. Let BIS denote this amount. Bonds held by foreign investors is reported by Balance of payment statistics (IMF). It is the portfolio debt ...
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Elasticity of substitution between leisure in two periods

This is a basic question, but I am new to macro models. The question is from Romer's text. Assume a household only has one member and has no initial wealth, and the household lives for two periods. ...
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Bellman and Lagrange equation used at the same time

I just encounter a strange maximization problem in Sargent's Recursive Macroeconomic Theory book, when they have Bellman equation and Lagrange equation at the same time. Specifically: $P(v) = \max_{...
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is there a way in NIPA accounts to see a measure of size/change in private debt stock?

is there a way in NIPA accounts to see a measure of size/change in private debt stock , and how is it measured? if not then how is it measured?
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Can central bank interest rate hikes lead to a price gain in equities?

I ran an empirical analysis on recent interest rate changes of European central banks on Swiss equity prices and found statistically significant results. A 1 percentage point increase in interest ...
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what are Investments (as defined in macroeconomics) that Households make?

i guess a) NEW house b) buying shares in a domestic company in an IPO c) investment in a personal business , eg taxi driver buying a NEW taxi, shop owner buying his shop or renovating it what about ...
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exchange rate calculation

Suppose you have one U.S. dollar with which you wish to purchase U.K. (one-year) bonds in period t. Which of the following expressions represents the amount of U.K. pounds you will receive in one year ...
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Probability of history occurring at time $t$

I am reading LS book "Recursive Macroeconomics Theory". In this book, as well as in some online lecture notes on the Internet. They often denote, for example, $\pi_t(s^t)$ for probability that ...
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Central bank loss function

$$ L_t = \gamma(\pi_t - \pi_t^\otimes)^2 + \hat{Y}_t^2 $$ Central banks loss function is given by the equation above. This loss is increasing and convex in the distance from the inflation target, i.e....
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What does it mean when a discount lender “rediscount[s] reserves”?

I was reading a wikipedia article about the evolution of global financial system: https://en.wikipedia.org/wiki/Global_financial_system#Interwar_period:_1915%E2%80%931944. In the passage about the ...
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Statistical distribution of wages and wealth

How are wages distributed globally? Wages do not follow a normal distribution, do they? Is wealth distributed in the same way or differently?
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The reality of the multiplier effect

I was just reading my economics notes when I stumbled upon this paragraph: Singapore has a very open economy and imports most of its inputs and necessities, which means that MPM is likely to be ...