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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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Does National Savings equal zero in a closed economy? Please give an economic intuition

Context: $Y -(C+I+G) = X - M$ In a closed economy, $(X-M) = 0$ Notations Y --> Income/Output C,I,G --> Consumption, Investment and Government expenditure respectively. X --> Exports M --> ...
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real exchange rate appreciation

i find the topic of real exchange rate appreciation / depreciation often not very well explained. even the excerpt below from the following accepted answer on this website is not correct in my ...
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How does the money supply grow in the long term?

For inflation to happen at roughly 2%/yr and for people to trade the same (or higher) volumes of goods, people must be trading more money. For such a trend to exist in the long term, there must be ...
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What is the relation between probability of default and country's interest rates?

Is probability of default expected to increase with increase in the interest rates set by the central bank?
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What is Return to Consumption Asset

In a paper I was reading, a budget constraint for the Euler equation for the consumption asset was described as:- $$ W_{t+1} = (W_t - C_t) R_{c, t+1} $$ Here $ R_{c, t+1}$ is the 'return to the ...
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Solow Model - criticism of Harrod model

I have started out reading seminal paper of Solow - Solow Growth model. It starts out with discussing weaknesses in Harrod Domar Model, a simple model of economic growth which featured prior to solow'...
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Where can I get national debt data?

I'm trying to find out about the history of South Africa's government debt. However, I couldn't manage to find suitable literature or websites showing the history. It is also very difficult to find ...
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How is job creation measured? [duplicate]

often i see in central bank reports the number of jobs created in a country/state/province for a given quarter. How is job creation measured?
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AR(p) with white noise error term — always covariance stationary?

Is it always true that an AR(p) process with a white noise error will be covariance stationary?
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China - US Trade War: Holes in this analogy?

I have recently listened to a podcast by Peter Schiff concerning the China - US trade war. Schiff to me is an interesting chap; he always puts an interesting spin on things. However, from time to time ...
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When can one read the general theory of employment,interest and money?

I am a first-year undergrad econ student and was interested in reading Keynes' book. in the preface, Keynes pointed out that the text deals in the abstract and is meant for his fellow economists. ...
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29 views

On what does currency value depend [closed]

How is the currency value estimated? Why India has lowest prices to dollar? For example if you buy bread in India it will cost you 1 dollar and in USA 5 dollars
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Explanation Rational Expectations

I am struggling understanding the concept of rational expectations. Can someone explain in simple words the concept of rational expectations? Does someone know a good (online) source explaining ...
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2answers
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How saving and investment influence growth in the long run?

Here are 4 points from my class. • Because resources are scarce, devoting more resources to producing capital requires devoting fewer resources to producing goods and services for current ...
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Why would a rise in the discount rate stop foreign gold drain and make banks fail?

I am reading "Capitalism and Freedom" by Milton Friedman. In Chapter 3, "The control of Money", Dr. Friedman explains how the Fed exacerbated the Great Depression of the 1930s. In particular: In ...
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Is Cobb-Douglas the only output function corresponding to a competitive economy?

Apologies if this is a rather simple question, I appreciate any guidance. $$ Q(K,L) = AK^\alpha L^{\beta} $$ where A is a constant. Identify the conditions on $\alpha$ and $\beta$ for ...
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How to engineer the economic system, so that an individuals self interest leads to fulfilling collective interest

So it is said that Adam Smith said that self interest leads to collective interest. This is obviously not the case. We do not have a society that maximises the collective good*. My question is, Is ...
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On trade, What justificaion does the USA have to accuse China of 'selling too much not buying enough from USA'

There's a trade war (dispute) going on between USA and China, and it boils down to the USA accusing China of not buying enough American products, relative to what they sell to America. Putting aside ...
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Interdependence of national depts, low GDP and unemployment?

I remember that I had once long ago in school learned that there will always be significant components of national debts or low GDP or unemployment in a state economy such that one can never press all ...
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How is marginal benefit measured?

In my economics class, we're learning about the production possibilities frontier, marginal benefits, and marginal costs. The book uses the example of a company that can choose between producing colas,...
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Can the CPIH be used to find the real terms rise in price of a component of the basket of goods?

I want to calculate the real terms rise in UK private rent prices since 2011 using the CPIH measure. The indexes of nominal rent prices and the CPIH rose by 14.7% and 13.5% respectively, so I can say ...
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Why slope is constant in demand/supply curve?

I was reading Mankiw and it showed variation of demand/supply curve with external factors. However, in all the cases the curves only shifted but didn't change in shape. What I am wondering is why the ...
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1answer
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Common sense of economics as reflected in proverbs [closed]

May I ask what other proverbs reflect the common sense of economics, such as those who dig for gold are not better than those who sell shovels? What I'm talking about is that during the Gold Rush in ...
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GDP Calculation and treatment of Personal Savings

While calculating GDP of nation, how personal savings which is not invested in economy or has become part mandatory reserve ratio of government is treated? Similarly do we include import and export of ...
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Higher wages and lower prices?

I am reading an article about inflation where the author argues that defining inflation in terms of price level is too broad since if we do that then an anti-inflation policy would be a policy that ...
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Empirical implementation of Milbourne et al's 2003 model of growth for time series data

I'm interested in testing the relationship of public investment in human capital and infrastructure, and the rate of growth of the GDP for Colombia, during a 20 years period. Given that I'm only an ...
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1answer
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Why a non-autonomous increase in aggregate demand will not trigger muliplier effect?

I understand a non-autonomous increase in AD as an increase in AD caused by an increase in income (please correct me if I am wrong). However, I do not understand why the multiplier effect must be ...
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Are there empirical studies that quantify shoe-leather or menu costs?

Two theoretical arguments why a high level of inflation is bad (e.g. for growth) are: shoe-leather cost: keeping lower money balances when inflation is high (implying more frequent trips to the bank/...
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Short run Aggregate supply curve is horizontal or positively sloped?

I want to understand the adjustment process from Very short run production decision to Short run production decision to Long run production decision. As far as I've understood: consider an increase in ...
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Models of a Planned Economy

Are there any mathematical models of a planned economy like in the soviet union? Specifically id like to know how we would model 5 year plans. Do any exist?
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2answers
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What will happen to the world economy if the price of oil/Coal/natural gas/electricity and all energy sources drops to lowest? [duplicate]

Imagine if some country identifies a large resource of oil/coal/natural gas or other sources of energy that can be supplied to the entire world for the cheapest rate ever.(say for electricity 1 Cent/...
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1answer
31 views

Market Theory: Upper limit of capital/weatlth accumulation?

Politicians often bicker about how big the government should be when it comes to redistributing wealth. Question: My question is simple; would a laissez-faire approach to the market always result in ...
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1answer
228 views

Euler's Theorem

Can anyone give me connection and intuition behind each of the following euler's equation- Euler's equation in production function represents that total factor payment equals degree of homogeneity ...
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1answer
34 views

Yield curve and cash rate (multiple choice)

I'm working on this supposed to be a simple multiple choice question: The yield curve indicates? A. the relationship between existing short, medium and longer term interest rates, independent of ...
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What is the difference between horizontal short run aggregate supply curve and positively sloped short run aggregate supply curve?

Both of these curves corresponds to short run then what assumption leads to first one and what leads to second one? For horizontal SRAS we say that in the short run when we have aggregate demand of ...
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What does it mean if country X has a higher GDP at Purchasing Power Parity (PPP) than country Y?

I understand the implications of having a higher/lower GDP at market exchange rates. I also understand what PPP measures. But, what does a difference in GDP, at PPP, indicate in terms of differences ...
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Empirical means of discerning “economy” and “bubble”

In the news lately and in previous administrations, one of the most popular sound bytes I've heard was: "so and so is not growing the economy, he's growing the bubble." As with much sensationalism in ...
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Is it possible to quantify & cost the ideological obstruction to climate change?

Paul Rogers in an article on Open Democracy, writes: It is also significant that the term 'hothouse earth' has caught on, and that the idea of runaway climate disruption is covered in the media in ...
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Why is the law of diminishing marginal returns justified?

Shouldn't it be easier to produce more quantity of goods for a producer? Isn't it the case that the ease of production is inherently tied to the quantity you produce? Shouldn't it be the case that the ...
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1answer
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Lagrangian: when to discount budget constraint?

I am getting a bit confused about setting up the Lagrangian in intertemporal constrained optimization problems. The confusion is as to when is the one-period budget constraint multiplied by the ...
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Cons of printing more money but not injecting in the system directly

So I don't know if this might be the right place, if it isn't I'd appreciate if anyone can link me to the right place. Anyways here is the question. I've read up on what are the cons of printing more ...
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What policies are in place to police financial speculation in the modern era?

Maynard Keynes in section VI in chapter 12 of his General Theory of Employment, Interest & Money writes: If I may be allowed to appropriate the term speculation for the activity of forecasting ...
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1answer
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Ramsey growth model - per capita vs aggregate variables

I am reading a paper Okuguchi,1981 with a Ramsey growth model. There is a constant population growth $n$ such as $L(t)=e^{nt}$. The way he writes the Hamiltonian is quite interesting (equation 5 on ...
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1answer
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Income gap in Ramsey model

Ramsey model with income tax Question: For this question you are required to setup a Ransey-Cass-Koopmans model economy with a Cobb-Douglas constant returns to scale production technology, with ...
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1answer
45 views

Laffer curve in one period economy

Let us consider a perfectly competitive one-period production economy consisting of one firm, N>0 household(s) and one government. Each household is endowed with x unit(s) of physical capital and with ...
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2answers
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when a=0, would economy accumulate more physical capital? Why?

Utility function is $U(c_t,l_t)=(1-a)ln(c_t)+aln(l_t)$ $l_t$ is leasure time $c_t$ is consumption Production function is $y_t=k_t^e(1-l_t)^{1-e}$ $k_{t+1}=i_t+(1-\delta )k_t$ where k is ...
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1answer
21 views

Daily variable for inflation

I was wondering if there is a way to account for daily inflation data. I have daily short-term interest rates, and I would like to convert them to real short-term interest rates. Can I just average ...
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0answers
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Finding savings in an Overlapping Generations model

I have not seen this question asked anywhere, so I'm posing it here in case anybody else (hopefully) can help me get to the answer. In a nutshell, my question is: how do we arrive at the saving ...
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2answers
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Are Investments positively or negatively correlated with interest rate

Having just begun self-studying economics, I apologise if this question is too simple. Do investments increase or decrease with increased interest rate? According to the small, closed economy model (...
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Are goods and services not assets in NCO definition?

In Mankiw's Principle of Economics, net capital outflow = purchase of foreign assets by domestic residents - purchase of domestic assets by foreigners. And also, NCO = NX (net export). But if we ...