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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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11 views

Why was reform of Chinese State owned enterprises needed?

Why was reform of Chinese SOE needed in the mid-1990s? And how did the government go about implementing these reforms? I've read a bunch of texts on this stuff, but a high-level explanation would put ...
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10 views

calculate magnitude of a recession

I'm doing an exercise from Blanchard Macroeconomics where I'm, apart from other things, asked to calculate the severity of recessions in the US since 1960. The data on the webpage that's referenced is ...
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Where to find series of capital-output ratio for the US?

While the capital-output ratio is widely used in Macroeconomics as a target in calibration, it is usually just set to be equal to 3, without specifying the data source nor the methodology used to ...
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Would households rather live in a world with or without the unemployment insurance?

Would households rather live in a world with or without the unemployment insurance? What is a good example of world in which unemployment insurance is seen as a benefit, and not a hindrance?
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13 views

Effect of Agricultural products on GDP/capita

What is the best way to regress this effect. I would like to show the effect of the production of different agricultural products (Rice, maize, wheat etc..) have on the gdp of a country (India in this ...
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21 views

Why would expanding fiat paper issue lead to decreased exports?

I'm reading "A History of Money and Banking in the United States" by Murray Rothbard, and I'm having trouble understanding this one piece of history. Basically, the Massachusetts government issues ...
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2answers
61 views

Question on Central bank loss function interpretation

How do you interpret this central bank’s loss function: $$L(\hat x, \pi)=\alpha \hat{x}^2+(\pi-\pi^T)^2$$ where $\alpha >0$ and $\hat x$ is output gap. Phillips curve is $\pi = \theta \hat{x}+\...
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What is the savings rate formula in a generic OLG economy with a Pay As You Go pension system?

What is the savings rate formula in a generic OLG economy with a Pay As You Go pension system?
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Overlapping Generations Model Pension System Question

Part 1 Pension System OLG Model with pension system: Each individual lives up to two periods. The surviving probability at period 2 is p. At period 1, the young household consumes c1, saves s1, and ...
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36 views

National Income [on hold]

Please I need someone to solve this question for me Given the following information about the National Income structure of an economy $$Y= C+I+G+X-M$$ $$C= 20+0.06 (Y-T+R)$$ $$I= 0.015Y-4$$ $$I= 30$$ ...
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Measuring economic growth in GDP (in USD) vs Real GDP (domestic currency)

I've noticed that a lot of data online seems to measure a non-US country in USD. This seems odd to me, because doesn't that mean that US fiscal/monetary policies, politics, and economics would affect ...
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Numerical Solution Using Excel about optimal consumption of households

I'm not sure how to solve this problem. I'm given the discount factor, interest rate, probability of high income shock, and various income shock sizes that I need to use to compute optimal consumption....
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1answer
66 views

Central bank loss function (I did a solution, but it doesn’t totally make sense I guess)

I have question on central bank loss function. We know that the central bank loss function is $$L(\pi, \bar{Y})= (\pi- \pi^e)^2+\beta \bar {Y}^2$$ And we know that fisher equation is $$i=r+\pi^e$$...
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12 views

What insights can be gleaned from examining inflation spreads?

I was reading through some econ articles and there was much discussion on various measures of inflation. Though I'm not narrowing the scope to this article, I'll include the excerpt here for context: ...
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1answer
18 views

elasticity of income if price changes by 10 percent

Arista always spends 10 % of her income on whatzits. Assume that her income increases by some percentage while the price of whatzits remains constant (and that all whatzits cost the same). What is ...
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Analyse the influence of interior demand and trade on exports

I would like to have a primer on how the current slowdown of the German economy affects its partners, for instance France, Spain and Italy. More specifically, if it goes mainly through Germany's ...
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1answer
21 views

Macroeconomic Theory Consumption [closed]

Can we assume that consumption behavior features excess sensitivity when examined in macroeconomic data?
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Query regarding derivation of aggregate demand curve

What is the difference between AD curve derive from is-lm model and quantity theory of money.
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2answers
55 views

The relationship between profit and wages

It seems obvious that an individual company increases their profits when they reduce wages or increase automation or some such. But if wages fell universally because of this, wouldn't that decrease ...
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1answer
19 views

Percentage/proportion of published papers with DSGE models

I remember reading a few years back an article that showed an interesting graphic with the percentage/proportion of published papers with DSGE models across time. I've tried searching, but I get so ...
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22 views

Profits and Aggregate Supply

I feel like this is quite a stupid question, but I can't wrap my head around it. Why do suppliers make less of a good as profits drop? Intuitively, shouldn't they make more of the good in order to ...
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21 views

Balanced Growth Path Calculation

Consider an extension of Alesina - Rodrik paper 'Distributive politics and economic growth' (1994). Instead of wealth taxation, impose a labor income taxation with a slight change in the model ...
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1answer
19 views

Why does the bond market induce efficient allocation of capital?

Going from this quote by Bryan Collins of Fidelity on China's economy: One of the nice things we see from the development of a domestic bond market is that it starts the process of pricing ...
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13 views

How do treasury bill auction work?

So i am having a couple of issues understanding the auctions of treasury bills. I know that the treausury accepts the bids offering the highest price. The treausury accepts the competitive bids in ...
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open economy, and reduced world market price [closed]

Can someone help ? :) Suppose that a small, open economy that exports labor-intensive goods experiences a reduced world market price for its export goods. Explain the effect this fall in prices ...
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Under what conditions should I use a Social Accounting Matrix Model vs. Multimarket Model vs Computable General Equilibrium Models?

What are the differences between the SAM, multimarket and CGE models. When should I use one over the others?
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How can I model the impacts of improved agriculture technologies and food aid in a multimarket model?

Given a multimarket model for staple agricultural commodities wheat, rice, maize and sorghum, in a low-income economy, Im trying to figure out how I can use the multimarket framework to look at the ...
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is there a correlation between credit defaul swap(CDS) and geopolitical risks? [on hold]

because in my country,turkey..when we defend our legal security anxieties geographically,our cds values are increasing(500 currently,higher than argentina,greece,syria,iraq and aphganistan)but we are ...
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Derive the Euler equation by using the substitution method to carry out the maximization (instead of the Lagrangian method)

Preference: $$ W=u(c_1)+\beta u(c_2) $$ while $$ b_1=y_1-c_1 $$ and $$ (1+r)b_1+y_2-c_2=0 $$ therefore, $$ c_1=y_1-b_1 $$ $$ c_2=(1+r)b_1+y_2 $$ The new preference becomes, $$ W=u(y_1-b_1)+\beta u((1+...
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25 views

What impact does deficit spending have on economic inequality?

Taxation schemes can be classified as progressive (the tax rate is higher for higher income brackets), regressive (the tax rate is lower for higher income brackets), or neutral (the tax rate is the ...
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40 views

What's the advantage of DSGE relative to BVARs?

DSGE models and BVARs are commonly used in academia and policy circles. They generate different performances (e.g., in forecasting) and perhaps serve different purposes. Notwithstanding, they have a ...
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1answer
39 views

What are the benefits of UBI?

UBI - universal basic income (everyone gets a set amount per period) If you've heard anything about me, it's that there's an Asian man running for president that wants to give every American $...
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81 views

speculation and futures contract [closed]

What are speculations and futures contracts,I was a bank supervisor not a trader.I handled four lac fifty thousand checks worth many crores of Indian rupees during twenty eight years ,I worked in a ...
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1answer
22 views

Aggregate Demand

Today in class, we learned about aggregate demand. However, while I understand the shifters, I am an unable to understand what actual movement along the curve represents. Why doesn't a change in price ...
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38 views

Can we know what mainly caused the latest US manufacturing slump?

Reuters says (Oct 1, 2019): U.S. manufacturing activity tumbled to a more than 10-year low in September as lingering trade tensions weighed on exports, further heightening financial market fears of ...
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1answer
59 views

Does creating more jobs actually help the economy as a whole?

So I recently came across an interesting point on why NASA isn't a waste of money, and it basically stated how NASA supports thousands of jobs, creates community events, and uses a part of its budget ...
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30 views

What strategies can the president employ to deflate the dollar

United States president Donald Trump has publicly declared a desire to deflate the value of the dollar. I have read in news reports that he has asked aids to find ways to decrease the dollar's ...
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29 views

How do major global events interact with debt cycles?

I recently watched Ray Dalio's video on how the economy runs on short/long term debt cycles. However I was wondering how other major events impact economic growth: How does the short and long term ...
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3answers
52 views

What happens to demand economics when rates are negative?

Keynesian economics assumes falling lending opportunity lowers profit. Under negative rates less lending actually means More Profit. So how does this change things?
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1answer
110 views

Is there empirical evidence on usability of Cobb-Douglas production function?

This is my first question at Stack Exchange. I am trying to estimate simple Cobb-Douglas production function $Y=AL^{\alpha}K^{\beta}$ on US data and receive an unrealistic estimate of $\alpha$ and a ...
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1answer
100 views

Bretton Woods vs Gold Standard

I've been reading about the history of the IMF recently, and it strikes me as odd that despite the problems that arose with the gold standard (Germany in the 1920s, Fed cutting money supply during the ...
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Neoclassical Economic Growth Model Shadow Price for Discrete vs Continuous Time

I recently learned about the neoclassical growth model in both discrete and continuous time. The intuitive meaning of the shadow price for both cases is that it represents the value of one additional ...
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23 views

Economic Achilles' heels of global financial economy

The latest attacks on oil production in Saudi-Arabia highlights the need for risk managers to follow up on possible terrorist targets that can have a global impact on the global financial economy, ...
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2answers
58 views

Does free capital mobility invalidate the basic comparative advantage argument for free trade in goods?

In Herman Daly's article "Economics for a Full World", Daly states that international trade must be regulated because free capital mobility would invalidate the principle of comparative advantage (...
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21 views

What is the the return to scale of per capita production function?

If $Y=f(AL,K)$ is CRS, $a_k+a_L=1$ by the Euler Theorem. However, I wanted to know the return to scale of $y=f(1,k)$ (i.e. $Y$ divided by $AL$). I tried $z=p/AL$ , then $py=f(p,pk)$, differentiate w....
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3answers
67 views

Why is that when one person or group gets a good or service, someone else will have to live without it?

! There's this statement in my Applied Economics book that I don't understand. Why is that when one person or group gets a good or service, someone else will have to live without it? I hope you ...
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1answer
24 views

What is it about the money market safeguards that increase volatility?

In recent coverage of the Fed's repo operation, I was struck by this line: It also indicated Wall Street is struggling to absorb record sales of Treasury debt to fund a swelling U.S. budget ...
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3answers
109 views

LM curve: How interest rate is changing without OMOs by the central bank?

The following is the gist from chapters - 3, 4 & 5 dealing with IS-LM model from Macroeconomics, Blanchard & Johnson, 6th edition. Equilibrium in the financial market implies an increase in ...
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How does monetary policy affect inequality?

My thought process here would be that since government bonds are usually held by the richer households, buying of these government bonds would inject a large amount of money only to the richest, thus ...
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AS-AD Model, what would fall in production/output lead to?

Suppose there is some exogenous shock in the economy due to which the production of oil has fallen dramatically. Also, let's assume that oil forms a substantive part of the economy's production. What ...