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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1answer
55 views

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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How to define world interest rate using IS-LM-BP diagram?

Can you suggest where is the world interest rate in the economy which has a positive current account and a financial account surplus, fixed exchange rate and relative capital immobility? The graph of ...
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4answers
963 views

What benefits does Bitcoin (i.e. cryptocurrency) offer?

I really, really like moderate inflation. I live in Sweden where the interest rates just went negative because we are on the brink of deflation, and the rate of inflation we have now is far too low. ...
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196 views

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

I am trying to estimate a simple Cobb-Douglas production function $Y=AL^{\alpha}K^{\beta}$ on US data and get an unrealistic estimate of $\alpha$ and a high p-value for $\beta$. Structure of ...
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1answer
40 views

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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1answer
28 views

Difference type of crowding out effect in economics

In macroeconomics I came across two type of crowding out. First, in IS LM model where in classical case, when LM curve is vertical increase in government expenditures have no increase in output i.e. ...
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1answer
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Assumptions in GDP calculation

The standard approaches for calculating GDP are: $$ \text{GDP} = \text{Consumer Spending + Capital Investments + Govt. Spending + Net Exports} $$ And $$ \text{GDP} = \text{Total wages + Profits + ...
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2answers
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Real wages fluctuation as per classical economics

I have just started studying Macroeconomics and have noticed that as per the Classical economics, the real wage level will always remain same because any change in price level in the market is ...
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1answer
18 views

How can autonomous private spending change budget surplus?

I was reading Keynesian economics in R.Dornbusch's book where he mentioned the defects of using budget surplus as a measure where he says it can be changed and effected by autonomous private spending ...
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How can I add fixed-effect constant variable in Stata?

I want to test a model like this: alpha denotes full set of country fixed effects and delta denotes full set of year fixed effects in the article in which this model is used. My model is similar to ...
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Bayesian Lasso Standardized Variables Coefficient Interpertability

I am attempting to duplicate Belmonte et al. 2014. The paper applies a Bayesian Lasso to state space models to get better out of sample prediction. Bitto et al 2019 expands on this model. Their ...
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1answer
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How does a mortgage-backed security issued by a bank allows it to borrow cheaper and make more loans?

I am currently reading a book called "Austerity, the history of a dangerous idea" by Mike Blythe. I am not an economist, but I am interested to learn more. Blythe writes (p.24): "The old 3-6-3 ...
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What are some common causes of jobless growth?

While "jobless recovery" is often discussed in the aftermath of recessions in Western countries, it seems it's always a short-lived phenomenon. On the other hand, it looks like in other parts of the ...
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1answer
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Beginner wanting to learn about economics/finance to explore career options?

I want to explore the banking/financial industries more for potential career options, can you recommend any books/ free online courses and sources in general as a starting point to build on my ...
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Impact of public expenditure on income

In the context of the ongoing global pandemic crisis, within the framework of the simple Keynesian model and the IS-LM model, what is expected to happen to the impact of public expenditure on income, ...
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2answers
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Economics of Justifying N95 masks and Mass COVID testing [closed]

The US has shutdown a significant fraction of its economy because of COVID-19. Eventually we will all migrate in a pre-COVID direction. Obviously, too fast would be a medical disaster, too slow ...
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1answer
58 views

Net Neutrality and Recent Telecom Projects

It has come to my attention that the big telecom providers are launching some big infrastructural projects recently (at the time of post, Jan. 2018). I presume by that they mean talking laying cables ...
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1answer
45 views

Real Income and a Fixed Money Supply

What would happen to nominal income and wages if the money supply were fixed (100% reserve banking). Would real wages increase, even though nominal wages would stay the same or even decrease?
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1answer
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Estimating the rental rate of capital from data

Take the classic optimization problem of the neo-classical firm: \begin{equation} \begin{array}{*2{>{\displaystyle}r}} \mbox{maximize (over $K, L$)} & f(K, L) - RK - WL \end{array} \end{...
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Does “I” in Y = C + I + G + X - IM refer to the domestic investment?

We know the national income identity: $Y = C + I + G + X - IM$. From many resourses, $I$ refers to domestic investment. For example in this link: https://opentextbc.ca/principlesofeconomics/chapter/...
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1answer
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Labour markets and supply-side policies: too much stress put on the WS push factors?

In reading several macro textbooks, it seems that most of the supply-side policies tend to be focused on the labour supply side (wage setting curve), instead on the firm/labour demand side(price ...
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4answers
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Why do economists disagree so much?

I'm coming at this from a scientific point of view, having had no formal training in economics - most of what I know about it was from self-studying an undergraduate economics textbook. My question ...
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1answer
61 views

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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4answers
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What institutions are examples of “shadow banking”?

I often hear the term shadow banking tossed around when discussing the United States and Chinese economies. What exactly is shadow banking and could you give examples of some specific companies that ...
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Imports/Exports in the equation of exchange

From the equation of exchange: $MV=PY$, where $M$ is the money aggregate, $Y$ is the real output, $P$ is the price level and $V$ is the velocity of money, we derive $\% \Delta M + \% \Delta V = ...
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How does interest rates impact investment

How does a decrease in interest rates decrease investment rates? This is how I believe a liquidity trap works, not sure if it is correct. Thank you
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Why was the price of gold lower when gold confiscation act was issued but raised afterwards?

I was reading up on the gold reserve act which made it illegal for US citizens to own gold with some minor exceptions. According to the gold confiscation act which was issued before the gold reserve ...
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1answer
25 views

Is it reasonable, in panel data, to use past values of explanatory variables as instruments to deal with simultaneous causality?

I am trying to examine the determinants of economic growth, essentially regressing a number of variables upon economic growth. I face a problem that there is likely simultaneous causality between many ...
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New Keynesian Model Output Gap and Calibration

I am trying to solve following problem regarding the New Keynesian Model: So, I have calculated following equations by using the Taylor Rule, Phillips Curve and IS Curve: $$\pi=\frac{\kappa\phi_y}{(1-...
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0answers
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What are economics effects of new, larger wave of locusts in Africa on North Americans?

The second wave of locusts has come to Africa. Weeks before the coronavirus spread through much of the world, parts of Africa were already threatened by another kind of plague, the biggest locust ...
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What's Term Auction Facility and how does it address the liquidity problem

I have read https://en.wikipedia.org/wiki/Term_auction_facility and https://www.investopedia.com/terms/t/term-auction-facility.asp Under the program the Fed auctions collateralized loans with terms ...
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2answers
31 views

Industries that thrive in crisis like COVID 19

I am aware that some industries thrive during crisis times like COVID 19...Food supplies, medical, counselling, funeral services, liquor etc. Are there any other industries that may do well during ...
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1answer
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How new money flow work in country?

I want to find out how money flow works in the country. Imagine I leave in country X. Country has 100$ in general, 50 dollars have a government, 50 dollars have peoples. My part is 10 dollars, this ...
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4answers
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What is the relationship between inflation and imports/exports?

According to the aggregate demand curve, when the price level is higher, the real GDP demanded is lower. One of the explanations given is a consequence of the Mundell-Fleming model: "As the price ...
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1answer
34 views

Log linearising EUler equation

I am trying to solve a problem that asks to log linearise following Euler equation of the New Keynesian model: $$C^{-\sigma}_t=\beta E_tC^{-\sigma}_{t+1}(1+i_t)/(1+\pi_{t+1}).$$ The solution is ...
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1answer
22 views

Why is the velocity of money in an economy affected by the frequency in which the worker is paid (like weekly, bi-weekly, monthly, etc.)?

I don't have any economics background, and was going though a course on Macroeconomics. I was solving the practice question here: https://mru.org/practice-questions/causes-inflation-practice-questions?...
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0answers
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Do (any) governments or central banks have an explicit or econometrically probable policy to “prop up” stock market prices?

This assumption (that governments [in the a broad sense of the term] prop up stock prices deliberately) has been taken as a given/assumption in another question here. Is there evidence that they ...
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2answers
755 views

How is capital outflow calculated?

I would like to understand the meaning of the following phrase: Capital flight from Russia in 2014 was 151 billion dollars. First, I would like to know how such a calculation can be done. Secondly,...
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1answer
341 views

Log linearization of the technology dynamic

I am still dealing with DSGE models and with log-linearization of characteristic equations of the model. The one that creates me more doubts is the technology shock, that is usually modeled as an AR(1)...
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2answers
1k views

Interest rate Effects on labour supply

I was analysing, free of specificities, the effects of an increase in the real interest rate on labour supply in a two period setting. The obvious effect on leisure is the intertemporal substitution ...
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2answers
33 views

Capital flight and interest rates

I am currently reviewing some stuff on capital flight and self-fulfilling crises. In this scenario, investors generally think that a low availability of reserves could imply that the central bank ...
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0answers
21 views

How to derive and draw phase diagrams: Ramsey-Cass Koopmans model

I am confused by how to construct phase diagrams. For instance, I have been given the following two equations from the Ramsey model: \begin{align*} \frac{\dot C}{C}=&\frac{1}{\gamma} (F_K(K) - \...
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2answers
152 views

Balance of Trade ( Surplus and Deficit)

I'm new to economics. I want to ask that what remedies that the government can actually employ to address the deficit/surplus in the fish trade balances over time? My attempt, Trade deficit (i) The ...
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1answer
62 views

Negative Inflation, AS/AD framework, What Graph to use?

My macroeconomic homework contains the question below, and I'm not sure what graphs we're suppose to use to solve it. I believe I can answer the whole question using the IS-MP Diagram, but do I need ...
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1answer
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What are the effects of a 12 month sudden stop/shutdown of a capitalistic economy like the US? [closed]

Consider a scenario where consumer confidence remains low until a virus such as COVID-19 is contained. In this scenario, containment is defined as being achieved once a vaccine is manufactured and ...
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1answer
19 views

Effect of a depreciation on foreign interest rate?

According to the interest rate parity condition , if there is a depreciation of the domestic exchange rate, then the domestic interest rate will increase and the foreign interest rate will decrease. ...
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0answers
19 views

Elasticity of substitution, marginal rate of substitution and price ratio

so there is a problem I do not know how to tackle: The is an utility maximisation problem and the solution to the Lagrangian leads to:$$\frac{C_1}{C_2}=(1+\rho)^\frac{1}{\sigma}(\frac{P_1}{P_2})^\...
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1answer
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What are some good books, explaining why the society and economy developed like it is through the history? [closed]

It has always been fascinating to me why, out of so many other options, the society has developed in this way. So I was searching for resources which explain what chain of events-and why- from ...
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1answer
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Net exports term in aggregate expenditure [duplicate]

This might be a basic question, which I don't yet understand. The aggregate expenditure (i.e., in my understanding, the total amount of inflation factored (i.e. real) money spent in the economy by its ...
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1answer
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Endogenous Growth in the case of externalities (Learning by doing)

so for the Learning by doing model productivity is defined as $$A_t=BK_t$$. Inserting this into the optimum conditions leads us to the following:$$r_t=\alpha BL^{1-\alpha}$$ and $$w_t=(1-\alpha)B^{1-\...

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