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
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How to show the production function is concave in K and L but not strictly so?

Suppose we have a production function with constant returns to scale. Let us denote it by $F(A,K,L)$ where $A$ is the technology, $K$ the capital and $L$ Labor. Further assume the first partial ...
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1answer
118 views

Where do I find the US GDP growth on FRED? [closed]

I have never used FRED before. I need to locate the annual growth rate in Real GDP to do some data analysis for my intro macro class. The TA and the Prof were utterly unhelpful and I'm frankly lost. ...
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3answers
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In log-linearized New Keynesian model, what do $Y$, $Y_t$, $y_t$ actually mean?

This may be a weird question, but I am unfortunately confused by terms. Let us suppose log-linearized New Keynesian model as suggested by Gali here: http://crei.cat/people/gali/pdf_files/monograph/...
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1answer
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Lagrangian: How to understand the No-Ponzi Condition

In http://www.uni-hamburg.de/fachbereiche-einrichtungen/fb03/iwwt/makro/slides2.pdf page 8, lagrangian is written as follow: $$L = E_0 \sum_{t=0}^{\infty}\beta^t\{U(C_t,N_t) + \lambda_t(P_tC_t + ...
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Present value of a payment

Suppose I've just won 1'000'000 dollars in a game show. At the end of the program they tell me that they will pay me the prize as following: they will deposit in my bank 50'000 dollars every year for ...
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3answers
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Has the natural rate of unemployment decreased with modern travel and the Internet?

The natural rate of unemployment is a combination of structural unemployment and frictional unemployment. Structural unemployment is caused by a surplus of labor at a given wage in a given area. ...
6
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2answers
952 views

CES production function estimation

Introduction There are different ways of estimating the parameters of a production function. For example, single-equation and system equation techniques are both possible. Another difference among ...
6
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2answers
117 views

Who regulates the balancing of the books for commercial banks and how is this done? Is it public information?

I've just read Money Creation in the Modern Economy, an article published by the Bank of England. This article brings about a lot of questions in my mind. This article talks about money being created ...
4
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Efficient Market Hypothesis and constant ex-ante real interest rates?

According to Hayashi's Econometrics (page 151), efficient market hypothesis is a joint hypothesis combining: Rational expectations $\rightarrow$ expected inflation$= \mathbb{E}(\pi_{t+1}|I_t)$, where ...
4
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1answer
409 views

Endogenous Growth: Balanced Growth Path with CRRA Utility

I've got a model of endogenous growth due to spillovers. $\textbf{Model:}$ $$K_t=\frac{1}{n}\sum_{t=1}^nk_t$$ In this model, $k_t$ is chosen by agents, and $K_t=\bar{k}_t$ (the average of all $k_t$). ...
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372 views

How to solve a linear forward-looking equation $x_t = \beta E_t[x_{t+1}] + k$ where $\lim_{t \to \infty} x_t = 0$ and $0<\beta < 1$?

How does one solve a linear forward-looking equation $x_t = \beta E_t[x_{t+1}] + k$ where $\lim_{t \to \infty} x_t = 0$ and constant $k,\beta \in \mathbb{R}$, $0<\beta <1$?
3
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Why New Zealand dollar keeps falling against USD and other currencies?

New Zealand seems to have strong economy and governed well by the RBNZ. Agreed that recent decrease in the dairy prices globally has some negative effects on the economy. But with the large service ...
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75 views

Why is poverty worse in larger cities?

In inner cities in the US there is more poverty (as a proportion of the population) than in mid-sized cities or small towns. Do we have a definitive answer as to why this is?
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3answers
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Literature Recommendation: Advanced Undergraduate Economics

I come from a strong quantitative background and am going to law school in the fall. I'm interested in financial product regulation and competition law. I have taken an introductory course in ...
3
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1answer
446 views

Calculating Time to Balanced Growth Path

$\textbf{Model:}$ $$\underset{\{c_t,k_t\}}{max}\;\sum_{t=0}^\infty\beta^t\frac{c_t^{1-\gamma}}{1-\gamma}$$ $$s.t.\;c_t=Rk_{t-1}-k_t$$ $$c_t,k_t\geq0$$ At time $t$, $c_t$ is consumption and $k_{t-1}$ ...
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265 views

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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How to relate real rate of return on capital to bond interest rate: Lagrangian

Suppose that household resource constrain equation is as follows: $$P_tC_t + Q_tB_t+ P_tI_t \leq W_tL_t+R_tK_t+B_{t-1}+D_t$$ where $P_t$ is price at time $t$, $Q_t$ is the price of one bond quantity, $...
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3answers
96 views

How important are capital requirements for controlling broad money supply?

Interestingly, the Bank of England (BoE) is one of the few central banks that does not have reserve requirements. Canada, the UK, New Zealand, Australia, Sweden and Hong Kong have no reserve ...
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1answer
387 views

S=I in a closed economy

In a closed economy, the national income identities imply that $$S=I$$ However, the intuition is not clear to me. The saving is the part of national disposable income that is not consumed. $I$ is the ...
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Most important but untested theories in economics? [closed]

In the opinion of the economists here, what are some of the more important theories in economics that remain untested? By untested I mean theories that, though perhaps evaluated using empirical data, ...
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1answer
45 views

What could happen if a country changes their currency rate constantly?

Introduction Imagine this random country. "Yolistan", it is a new country that appeared after a war/revolution/independence/whatever. The currency it's the "Yolo" Yolistan needs to import resources ...
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1answer
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Hep with total differentiation of an AD function [on hold]

Is there anyone who can help me with a total differentiation exercize. I am starting with the following formula for AD: $$x=\mu ^{-1}(g+i+e)$$ Where $\mu$ is the Keynesian multiplier. And have to ...
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192 views

Why does capital flight cause inflation?

Context: I was watching a video about Venezuela, and, it all started with capital flight due to poor confidence in the government. The government tried to stop it, and in the process it created a ...
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4answers
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How does a national budget differ from a household budget?

We are often told by pundits that "Country X cannot spend more than they take in in revenue, because a house that makes A and spends B will always collapse if B>A". Essentially the siren calls of a ...
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217 views

Why plug deficits with bonds rather than printing money?

The UK is running a budget deficit £107 billion a year. Inflation is currently running at 1%. Given these facts, why do they plug the gap by selling debt rather than just creating the money to cover ...
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1answer
236 views

What was happening in Madagascar during 1971-1996?

In the course of my research I have been examining these days macroeconomic time series for per capital household consumption, using the databank of the WorldBank. The unit of measure was constant ...
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977 views

Why can't countries print another country's currency?

Counterfeiting money is clearly a difficult thing for individuals, but surely a country should have no problems counterfeiting another country's currency. Why don't countries do it? For example, for ...
7
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1answer
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Differing Inflation Rates for Separate Income Groups; Literature?

So here's a few ideas that have been floating around my head since undergraduate university. It seems that money owned by the highest net wealth owners is always moving around and making a return, but ...
6
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2answers
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Is the economy a zero-sum game?

Theoretically speaking, if all the Earth's inhabitants were to save money and invest, is it possible for everybody to get, let's say, a 4% yearly return for everyone? Is the economy a zero sum game (...
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179 views

How wealthy are modern day humans compared to preindustrial times?

I would like to see a quantitative wealth comparison between the average human in a hunter gather or agrarian society to average human in the today's world. I'm mostly interested in how the discovery ...
6
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3answers
276 views

Conventional Monetary Policy and Income Inequality

In almost every textbook, it's stated that monetary policy is preferred to fiscal policy, since the latter is more politically difficult to implement due to smaller consensus on its redistributive ...
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1answer
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Do import tariffs tend to increase a country's exchange rate (if so, why)?

From Prof. Stiglitz' Vanity Fair article: How, one might ask, is this possible, given Trump’s rhetoric, his determination to move against China with a 45 percent tariff? There’s a global ...
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1answer
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How does a cash deposit change the M1 measure of the money supply?

The question asks what is the immediate effect of the cash deposit on the M1 measure of money supply. The official answer is "There is no change in the M1 measure of the money supply. (Demand deposits ...
5
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1answer
111 views

What major monetary policy actions were taken during the Great Recession (2007-2009)?

What major monetary policy actions were taken during the Great Recession (2007-2009)? Quantitative easing and unconventional policy actions such as asset purchases and "forward guidance". I think I'm ...
5
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1answer
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why is real wage divided by marginal product of labor often called real marginal cost?

As said in the title, why is real wage divided by marginal product of labor often called real marginal cost? In mathematical formula, $mc_t = (W_t/P_t)/MPN_t$ where $MPN_t$ refers to marginal product ...
5
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1answer
321 views

Economic impacts of a declining population

In the article “Japan’s population problem” in The Japan Time, Hugh Cortazzi write: Japanese leaders and Japanese people generally are well aware of their nation’s demographic challenges. The ...
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1answer
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If Trump's economic policies are destructive, why is the US economy so healthy?

One doesn't have to look very hard to find suggestions that Trump's economic policies are damaging to the US economy. Example, example, example, example. In fact I barely recall reading any articles ...
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How is the ARIMA model a valid approach for forecasting Economic Variables?

Ive noticed the use of univariate forecasting methods (i.e the ARIMA model) employed in forecasting inflation (see references below). How is this a valid approach in terms of forecasting economic ...
4
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1answer
110 views

Empirical Data on Demand for Minimum-Wage Jobs in the USA

The idea of a minimum wage and its effects in terms of supply and demand are well-known in mainstream economic theory. I'm constructing an argument regarding the minimum wage, and what I'm curious ...
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2answers
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Is the standard of living of poor & middle class people higher than in the past?

I really hope this is not opinion based. I am just looking for numbers, links, straightforward proof if possible that the lifetime we are in now, this decade, most of us are living better than in the ...
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Why is a high government debt/GDP bad?

Why is a high government debt/GDP bad? It is frequently mentioned as something bad. Today here, for example. I get that when the government spends, real resources like workers or raw materials are ...
4
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1answer
190 views

Why does falling global bond yields signal coming deflation

In this article, it suggests that, "Bond markets are signalling something very nasty coming down the road at us – an all encompassing, worldwide deflation. " I cannot understand why bond yields ...
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1answer
312 views

Limits to Quantitative Easing Programmes

I have been reading recently on the quantitative easing programmes by the ECB and the BOJ, see http://www.cnbc.com/2016/04/07/what-the-bank-of-japan-boj-will-do-now-that-negative-rates-have-...
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Meaning of Additively Separable, Linear in X

Often I see both in micro and macro two common terminology : Additively separable. Linear in price or linear in probability. I understand exactly as they sound by looking at the functional form ...
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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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2answers
229 views

Sanity of lending out made-up money

Background I've done some research to get an understanding into the issue I want to ask about. Regrettably, I found out general descriptions of the mechanism and/or evidently biased explanations, ...
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0answers
370 views

Market clearing condition with Walras law

I have a diamond overlapping model The question is as follows Let us consider an infinitely lived production economy populated at time t by $N_t$ identical and perfectly competitive adult ...
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1answer
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The Effects of Demonetisation

I do not wish to get into the details of the Demonetisation implemented by the Indian Government on 8th November, 2016. Endless political debates have already been conducted advocating or berating ...
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2answers
3k views

What is the difference between quarterly GDP and annual GDP?

I didn't understand how quarterly GDP is calculated. If GDP means Gross Domestic Product in a year, then what does quarterly GDP mean Gross Domestic Product in a quarter? OR it is multiplied by $4$ to ...
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2answers
211 views

Universal Basic Income - Menial Tasks

The Universal Basic Income scenario seems to be one where people are free to cultivate their passions. From what I could gather, the main argument for this to be the best case scenario goes something ...