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
538 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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46 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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1answer
410 views

Long-,short-term interest rates and inflation

I just read about the "dynamics" of long-, short-term intreset rates and inflation. Does the logic go as follows? Centrals banks determine interest rates which in turn determine the short term rates. ...
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1answer
29 views

Hep with total differentiation of an AD function [closed]

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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1answer
56 views

Why doesn't stock market help to boost the economic growth directly?

For example, during the recession, the central bank often goes to buy financial instruments that are riskier than government bonds (such as corporate bonds)- which is called "quantitative easing&...
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5answers
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Does the Federal Reserve buy and sell stocks?

Can the Fed buy and sell stock in publicly traded companies? Is there evidence of this and, wouldn't this behavior drive the price as opposed to actual market forces?
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4answers
6k views

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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2answers
252 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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4answers
229 views

Why is it good to create jobs?

I was reading this article on planned obsolescence, which states On a macroeconomic scale, the rapid turnover of goods powers growth and creates reams of jobs In context, it's implied that this is ...
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416 views

Are goods that are wasted counted into the GDP of a nation?

If x apples are produced in an economy, and only x - y are consumed (y apples get rotten at different stores in the country), is the value of these wasted apples considered as a part of GDP?
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360 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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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 ...
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1answer
245 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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321 views

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 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 ...
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3answers
285 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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136 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 ...
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339 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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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 ...
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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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13k views

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 ...
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599 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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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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5answers
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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 ...
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1answer
117 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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345 views

Why does falling global bond yields signal coming deflation?

This article 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 falling ...
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1answer
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A country borrowing from the rest of the world

Well I'm having a some difficulty in understanding completely what the following sentence means and I would like to be sure. «(...) a country running a trade deficit is buying more from the rest of ...
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3answers
1k views

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 ...
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241 views

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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2answers
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Cyclicality of Real Wages? Counter, pro or acyclical?

Is the real wage counter or pro- cyclical? I've read in some textbooks that the real wage is mildly pro-cyclical, but I've also found some papers stating that it's acyclical. So, which is it? Also, ...
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1answer
178 views

Abenomics and the Japanese VAT tax hike

Abenomics seems to me like a straightforward and modern plan of economic reflation through monetary easing and some attempt at structural reform. While it's still early, it looks like many of the ...
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2answers
78 views

When a country collects data for calculating the Gini index, do they usually neglect single household?

OECD data for South Korea is based on the numbers provided by Statistics Korea, which does not count single household family income data in their statistics. I am just curious that neglecting single ...
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1answer
160 views

DSGE and Demography

Are there any known DSGE models with a demography component, i.e., that model the effects of aging population in output growth? Any help would be appreciated. Edit: I've been thinking, this question ...
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1answer
115 views

How much better off would the average person be if we took away enough money from the top 1% to make them no richer than the average person?

In my hypothetical situation, the USA population takes enough money away from the top 1% so that they are no richer than the average person. That money is then redistributed to the lower and middle ...
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1answer
98 views

Is there any mainstream criticism of the Benes-Kumhof conclusion that the Chicago Plan would improve the US economy nowadays?

A 2012 IMF Working paper by Benes and Kumhof "The Chicago Plan Revisited " has this abstract, finding in favor of the Chicago Plan an all counts basically: At the height of the Great Depression a ...
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What was the Rogoff & Reinhart spreadsheet mistake?

In class our professor said that the Rogoff and Reinhart research on growth and debt was discredited due to spreadsheet mistake. What was this mistake? Also did they perform their research in excel ...
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1answer
268 views

How do I verify Philips curve empirically for recent years?

I wanted to verify the relationship between inflation and unemployment empirically, so I took data from the World Bank and used excel to correlate them. I got a very, very bad correlation between ...
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94 views

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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2answers
4k 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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1answer
169 views

Savings = investment with private money creation?

I've been reading some introductory macroeconomics and I'm struggling to understand one of the basic accounting identities. In a closed economy with a fixed money supply it's clear that every dollar ...
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0answers
684 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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2answers
246 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 ...
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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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3answers
482 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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1answer
60 views

Why high levels of inflation doesn't leads to high levels of employment?

According to the original Phillips curve $\pi=(\mu+z)-u$ there's a negative relation between inflation and unemployment. That being said, if there were a really high level of inflation, then there ...
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1answer
53 views

Other factors that affect the supply of money

I've read that it is not a hard-and-fast rule that the overall money stock growth rate speeds up in response to an accelerated expansion of the monetary base and a growing money multiplier. If this is ...
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2answers
151 views

Does price affect quantity or vice versa?

On nearly all graphs found within economics textbooks, quantity is label on the x-axis and price on the y-axis, implying that the quantity supplied affects the price. Is this really so? Intuition ...
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1answer
48 views

How could you partition Household Food Expenditures into Producing Industries?

From the 2019 Consumer Expenditure Survey, the average household annual food expenditure was $8,169 for that year. There are subcategories such as "Food at Home" and "Food away from ...
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1answer
66 views

What metrics can be used to distinguish between capitalistic and socialistic economies?

What macroeconomic indicators are meaningful to distinguish whether a country leans towards socialism or capitalism (and where to find such data, specifically for european countries)?
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1answer
234 views

In classical macroeconomics, why Labor supply responds to real wages and not money wages?

real wages = money wages/price(P). what are the assumptions here? why labor doesn't respond to money wages ?