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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Capitalism and freedom

While reading capitalism and freedom, Friedman mentioned that in capitalistic nations less was spent on capital. Is this because of technological advancement? Thank you
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UK/EU/US: Impact of current environment on GDP, Inflation and Tax Receipts

hope you are well. With EU, UK and US governments all employing fiscal stimulus measures, thereby impacting the budget deficit: Could someone please share their views on thoughts on the impact of ...
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Why GDP series always has an unit root problem?

In one of the lecture slides of class that I am currently taking our professor mentioned that when it comes to the GDP is it safe to always assume it has unit root and testing for it is just ...
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Increase in Debt / GDP positive or negative for currency?

When a nation-state and/or monetary union increase it's debt to GDP ratio. Is this a net positive or negative for its currency?
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With modern factories and other technology, would it not be possible to mass-produce and distribute food for everyone?

First of all, I know very well about the extreme greed and general evilness of people. I also am not talking about sending the food away across the world; I'm talking purely about the "locals". I also ...
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Calculating CPI

The question is I know how to calculate CPI in the sense without " a basket of 700 goods and services". How does adding this info change my calculation? I only know CPI= (the price of basket of ...
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Real Effective Exchange Rates Based on Manufacturing Consumer Price Index for India

This question is from here What does "Real Effective Exchange Rates Based on Manufacturing Consumer Price Index for India " this mean? Does it mean the value of exports adjusted for inflation?
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Does Direct Benefit Transfers make an economy poorer?

Printing money and giving to the poor causes inflation. Increases demand and hikes prices. This is basically certain. But on the contrary, a paper titled Debunking the Stereotype of the Lazy Welfare ...
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Why do we need to “get the economy moving again”?

Sorry I have no background in economics but as a computer programmer, I specialise in building models out of simple math and logic, so I hope we can speak the same language without having to get into ...
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Are there benefits from the financial economy diverging from the real economy?

There are some adverse effects of the financial economy decoupling from the real economy. Here are just a few debatable, but nonetheless thought-provoking points: High asset prices often create ...
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Helicopter Money in the time of Covid-19

In this voxEU article by Jordi Galí, he says the following: In the current context, the central bank could credit the government's account (or governments, in the case of the ECB) for the amount of ...
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How do the factors of production map to the GDP identity?

How do the 4 factors of production (nature / capital / labour/ entrepr.) map to the GDP components in: $$Y=C+I+G+(X-M)$$ To me it seems that all factors map to all GDP components, simply because it's ...
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Meaning of revenue deficit

On the internet, I find that there are two different meanings given to the phrase' revenue deficit'. One says that it is the excess of revenue expenditure over revenue receipts of ,let us say, a ...
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Overlapping generations model with altriusm basic FOC

I'm working in the OGM with altruism as proposed in Salai's and Barro's book, specifically the problem is: Max $U_t=\sum_{i=0}^{\infty}\large(\frac{1+n}{(1+\rho)(1+\phi)}\large)\large[u(c_{1t+i})+\...
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How does 'building land' fit into economic modeling?

According to the ONS National Accounts 2018 & RICS land valuations and ... Land that is built on has a value that makes it half of the UK's wealth. The rest of the land has a value less than 3% ...
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nominal exchange rate

During 2011 the inflation rate in Brazil was about 6.6% while in the U.S. it was about 3.3%. At the start of 2011 the nominal exchange rate was about 1.7 Brazilian real per U.S. dollar. If purchasing-...
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Stabilizing Property of a Taylor Rule

Considering the New Keynesian Model we have the Phillips curve and dynamic IS curve in log-linearized form with price shock $u^{\pi}$ and demand shock $u^{IS}$ :$$\pi_t=\beta E_t\pi_{t+1}+\kappa(y_t-...
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What does it mean that Ontario is considering a regional approach to reopening? [closed]

I read the article Ontario now considering regional approach to reopening the province but failed to understand what it means by "the province is now considering a regional approach to reopening." I ...
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What are the calculations that policy makers do when deciding to ease a lockdown?

I have heard this question framed as making the decision between lives and the economy. But on the other hand, I also read a StackExchange discussion(I am not sure of the link), where it was shown ...
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Keynesian cross. Can there be a situation when the point of equilibirum “runs away”, shifts in response to attempts to reach it?

In Keynesian cross model, as far as I understand, income-expenditure equilibirum is reached this way: when unplanned inventory investment>0, then firms produce less, when unplanned inventory ...
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Does combination of the paradox of thrift and the acceleration principle reduce economy to c=a level of consumption during recession?

By "c=a level" I mean situation when all consumption by households equals to autonomous spending, more or less. I assume no counter-cyclical policies(including automatic stabilizers). I also assume ...
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“If markets are competitive, the rate of return on capital equals its marginal product, $f'(k)$ minus depreciation $\delta$”?

Consider Solow model with $Y=(AL)^{1-a}K^a$. Then output per effective labor is $y=k^a$ where $k=\frac{K}{AL}$. "If markets are competitive, the rate of return on capital equals its marginal product,...
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How is wealth/income inequality a probelm

I was talking to a friend who said empires rose and fell based on income/wealth inequality within the empire. He cited a the Mongols decreasing income/wealth inequality as a factor in the rise of the ...
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In the presence of non-zero inflation rate, which of the following affects the money Demand? [closed]

In the presence of non-zero inflation rate, which of the following affects the money Demand? A. Only output. B. Output and nominal interest rate. C. Output and real interest rate. D. Only real ...
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Is there any fundamental reason that output elasticity of capital $<1$ in general?

In Solow growth model, if one perturb the saving, there is convergence of old equilibrium capital to new equilibrium capital as investment breaking point capital is attractor. However, in derivation ...
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What is the best measure for the world's economic cycle?

I'm trying to make a graph that shows how the return of major assets (S&P 500 index, % of 3Y T-notes, oil, gold, etc) move along with the world's expansion& recession cycle. I looked into ...
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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 ...
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Will wealth inequality help india in covid 19 related economic crisis [closed]

Will the huge wealth inequality in india help in fuelling domestic demand so that the country can come out of covid 19 related economic crisis, faster than other countries? Does top one percent of ...
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In Solow growth model, increasing consumption drops production which should measure GDP?

Consider Solow growth model $Y=F(K,AL)$ where $A$ measures knowledge progress, $K$ is capital and $L$ is label. I have suppressed temporal dependence. I am going to assume $L$, $A$ grow exponentially ...
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What is the meaning of M2/Base (Monetary base) in money supply?

I plotted the change of M2, Base supplies ($MM) obtained from the below websites: https://fred.stlouisfed.org/series/M2 and https://fred.stlouisfed.org/series/base I interpreted the M2/base ratio as ...
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How can we get negative **real** interest rate?

According to Fisher's equation, Real interest rate=Nominal interest rate - expected inflation rate So, how can we get negative real interest rate? I'm in doubts. On one hand, purely from algebraic ...
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Multiplier effect and GDP

The fundamental national income accounting identity is: $Y = C + I + G + X - M$. The multiplier effect tells us that an autonomous injection into the economy will result in a multiplied increase in ...
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Why does the answer not include increased negative unplanned stock investment?

I will focus on the event "c": The answer for "c" is following: A sharp increase in the rate of real GDP growth leads to a higher level of planned investment spending by producers, according to ...
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Are heterogenous expectations models still determinate, closed models?

Cars Hommes proposed many models based on agents having heterogeneous expectations. Agents switch between a fixed set of prediction rules depending on their forecast error history. However, it seems ...
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What does it mean if a economic model is internally consistent?

What does it mean if a economic model is internally consistent? What happens if it is not? Is it not closed anymore? Can it still be solved? Does it still have an equilibrium?
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Does the law of motion remain constant in a rational expectation model? Does it constantly change in a boundedly rational agent framework?

Is the following true? The rational expectations hypothesis also implicitly assumes that the law of motion of the economy does not change, which actually is a self-fulfilling assumption as long as ...
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In a rational expectation framework, do all agents know the true law of motion of the economy?

Expectations are model consistent, on average, in a RE framework, so errors are made, but on average they are zero. thus In a rational expectation framework, do all agents know the true law of ...
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What would be the “text-book” result of governement taking on massive debt immediately before a significant recession [closed]

Supposing, (entirely hypothetically, of course ;) ), that the UK government had taken on massive future debts (by spontaneously giving 2-3% of GDP to its citizens, in GBP, say.) immediately before a ...
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Does the federal reserve create any type of deadweight/welfare loss?

In microeconomics, we learn that when a good is overproduced or under produced, there is a dead weight loss associated with it. It seems like the same concept would apply to macroeconomics, where the ...
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How does the GDP multiplier work?

When we learn about the GDP multiplier, it is portrayed as 1/MPS, because savings are supposedly a leak out of consumer spending. However, what I don't understand is aren't those savings spent anyways ...
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Why does a model that is used for policy analysis needs its shocks and parameters to be structural (= invariant) to the shock under consideration?

In their paper, " New Keynesian Models: Not Yet Useful for Policy Analysis" V. V. Chari, Patrick J. Kehoe, and Ellen R. McGrattan argue that one needs a structural model in order to analyse the ...
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What is the relationship between population growth and economic growth?

Population Growth is only one of several factors of influence on economic growth but it is not strictly necessary for the economy to grow. I have also heard of the term called the population bonus - ...
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Are overlapping generation (OLG) models extensions of a DSGE model?

Are overlapping generation models (OLG) extensions of a dynamic stochastic general equilibrium (DSGE) model? Or aren't these DSGE per se?
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The energy and the money as common medium of values [duplicate]

Well there are lots of ideas about different types of values/goods and the common medium among them - the money. There were tons of debates on gold standards and pure fiat types of money. But what ...
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Reference for Jacob Viner research on colonies

In this video at 6.02 Milton Friedman mentions some 'famous studies' on colonies from Jacob Viner. Does someone know exactly which studies these are?
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Research question formation

I am in the process of starting a research paper (for those in the IB Board, this is the Extended Essay) and I had previously formed my research question like this: To what extent will factor x ...
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Choice of measure for unemployment

There are six types of unemployment rates in the US (U1-U6). U6 provides the broadest measure of unemployment, taking into account not only the unemployed labour market participants who are actively ...
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Why Does Deficit Spending Work Without a Liquidity Trap?

My understanding is that in a functioning economy, the financial market clears when the nominal interest rate is above zero. It is only when it reaches zero that a liquidity trap occurs and the ...
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Why does real wage equal MPL * L

My macroeconomics book(Mankiw 7th ed.) states the following: Economic Profit = Y − (MPL × L) − (MPK × K ). It also states that the (economic) profit of a firm equals the output minus the total real ...
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Why does the aggregate consumer spending decrease due to to lower expected future disposable income instead of MPC?

This illustration is from Krugman's macroeconomics textbook, it's supposed to illustrate following situation (assuming that it happened for many people): Conversely, suppose you have a good job but ...

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