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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18 views

Are interest rates low because of low aggregate demand? If so, what are the reasons for low AD?

Interest rates seem quite low in most of the western world and it looks like the market thinks this will last for a long time. 10-year government bonds in US, Canada, Australia, France, Japan, ...
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47 views

Why would overemployment mean that labor is used inefficiently?

If labor is being used efficiently, there is no excess unemployment or over employment. This phrase from Khan Academy struck me as quite strange. Why on Earth would over employment mean that labor ...
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Deprivation vs. Marginalization

I see many studies of poverty use 'marginalization' and 'deprivation'. What are the difference between them?
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Economic move from agricultural to manufacture to service in ?what after service sector?

is there anything after service sector .in oecd nation most of employment in service sector.is there anything like post service world.
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Why is oil being traded in U.S. dollars?

I am trying to understand the concept of money,forex, depreciation of currency,devaluing,...(just the basic stuff). While I was reading about why oil is being traded in U.S. dollars, on the internet, ...
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Does stagflation lead to redistribution of wealth?

Suppose there is inflation in our country, but we take a short term, thus some prices are sticky and there is non-positive "growth" of the real GDP. In other words, we experience stagflation. If I ...
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Do I understand correctly that taxation-based government expenditures allow GDP to grow?

Suppose (it's an example) GDP= $1 000 000, Marginal Propencity to Consume(MPC)=0.25, that borrowing money is an absolute taboo for our government and that said government wants to increase GDP. What ...
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Why should government bonds have been a part of FSB rules on repo markets? [closed]

Since the financial crash, reforms have been made by the FSB, I would like to know why there is the opinion that government bonds should have been part of FSB rules on repo markets
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What will be the additional investment?

I recently encountered upon this question: Suppose, in an economy,autonomous consumption is Rs 100 crore and autonomous investment is Rs 60 crore. Imagine that in this economy,with every increase in ...
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Cost of living index

Say you have a cost of living index based on the dollar for each state. Such as this one: https://www.forbes.com/sites/chuckdevore/2019/08/06/when-is-a-dollar-not-a-dollar-states-and-the-cost-of-...
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When does the interest rate parity curve shift?

Given the IS LM IRP model, can somebody tell me the difference for when there is a movement along the IRP curve and when there is an actual shift in the IRP curve?
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How to calculate the multiplier in an open economy?

So suppose there is an open economy were only the goods market exists: C=0.6(Y-T) T=0.25Y Imports=0.2Y exchange rate=1 exports=0 Investment and government spending added up together=6. How to you ...
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In a production function, the technology can vary across the firms and times. But the “power” must be same for the same industry?

Let $F_t=A_tK_t^\alpha L_t^{1-\alpha}$ be the production function with two parameters. In regression, we know the firm level $F_t$, $K_t$, and $L_t$. We want to estimate $A_t$ and $\alpha$. I've ...
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Why does an increase in GDP lead to an increase average incomes?

I am a high-school student...sorry if this is a very simple question. Is it due to the fact that, as there is more money in the economy, firms can afford to pay higher wages/employ more people? But ...
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Linearization of the dynamic system (I did it, but I have a mistake that I cannot catch. Help me please)

I have the following dynamic system in discrete time For p is price, d is demand and s is supply. $$p_{t+1}-p_t= a(d_t-s_t)$$ $$s_{t+1}-s_t=bp_ts_t-ws_t$$ $$d_t= k-gp_t$$ I have to linearize this ...
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Economic interpretation of the given dynamic equations

How do you interpret these equations $$c_{t+1}/c_t=1-\beta [(c_t/w_t)-a]$$ $$w_{t+1}+c_t =kw_t+q$$ where $\beta$ a, k, q are strictly positive parameters. $c$ is consumption and $w$ is wealth. ——...
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Job search theory in discrete time

Let us assume that there is a labor who lives in discrete time universe and discounts future payoffs with the discount factor $b\in (0,1)$. And we assume that this labor is at period $t=0$ at first. ...
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Brainard on ELB Policy

In this speech, FRB Governer Lael Brainard suggested the following approach to monetary policy at the Effective Lower Bound: .....I have been interested in exploring approaches that expand the ...
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1answer
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How does exchange rate change with respect to interests?

If the central bank raises intereat rates, isn't the money supply now less and the exchange rate is greater? I have run into opposite statements and dont know how to approach this problem. Thanks in ...
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What would be the consequences of Downsizing on the economy?

In the 2017 movie Downsizing, a chunk of the population decides to reduce their body size to just a few inches. What would be the consequences of this on the economy? I'd like to know chronologically ...
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Why do we say that trade and specialization according to comparative advantage lead to one-time increase in PPF of given country?

PPF shows us different combinations of goods that we would be able to produce if we employed existing resources of our country in the most efficient way. One thing to notice about PPF: It's ...
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What does it mean to “kickstart the economy”?

This answer claims that: the central banks have been lowering and lowering [interest] rates, desperate to kickstart the economy, but it's not been working What does "kickstart the economy" mean ...
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Market impact function

I have the following Dynamical system for market impact function $$p_{t+1}-p_t=a(d_t-s_t)$$ $$s_{t+1}-s_t=bp_ts_t-cs_t$$ $$d_t=y-rp_t$$ where $s_t$ is quantity supplied, $d_t$ is quantity demanded, ...
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Why is so much of macroeconomic theory dedicated to economic growth?

I'm an economics PhD student and throughout my macroeconomics education I've found the topic of economic growth always being discussed at great length. From an Naive perspective id expect that one of ...
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Is there no equivalent exchange? [closed]

There is no equivalent exchange. I think it doesn't exist. The so-called equivalent exchange is imaginary. In exchange, one side always makes money while the other side loses money. For example, if ...
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Which one of these intepretations of belonging of a factor of production is correct in context of calculating “income of our citizens abroad”?

NFFI can be calculated as income of foreigners here MINUS income of our citizens/corporations abroad. As far as I understand, it's assumed that our citizens earn income by using OUR factors of ...
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Market competitiveness → Capital earns its marginal product. But why?

Why is it possible to tell that, in the case markets are competitive, capital earns its marginal product? What's the formal explanation and what is the economic intuition behind it?
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Would GDP for a pure endowment economy be equal to zero?

(Am I correct?) As far as I understand, a pure endowment economy means that good just appears in the country without any labor involved in producing them. Like maybe given country lives entirely from ...
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Where are expenditures of non-government non-proft organizations in the expedienture approach of calculating GDP?

We have 3 categories of spenders: 1.Households (except for buying first-hands houses, all their expenditures are counted as consumption) 2.Firms (all their expedintures are counted as investments) ...
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Do I make correct conclusions about international trade (and ways to increase GDP) from the expedenture approach formula for GDP?

(Please correct me if my reasoning is wrong somewhere) Net Exports is a part of GDP and consequently its increase or a decrease also causes GDP to increase or decrease, assuming everything else stays ...
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Current Account vs Net Exports

In Mian, Sufi and Verner (2017), the authors look at the impact of an increase in household debt on both net exports and the current account, and find a significant negative coefficient in the ...
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Why will inflation raise sellers' purchasing power?

According to my textbook, in the chapter on inflation, "When a price rises, buyers of that good must pay more, but sellers get more revenue when they sell it. The loss in buyers' purchasing power is ...
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How can we know how PPF of our country looks like?

PPF of our country is based on potential the most efficient use of our resources, NOT their actual use. The problem is, it's unclear for me how to estimate said potential. How to know where ...
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Calculating Real Budget Deficit, given Nominal Deficit and Inflation

I am doing this course on Coursera. In the context of explaining what Budget Deficits are, the professor puts up the following formula: Real Deficit = Nominal Deficit - (Inflation*Total Debt) My ...
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1answer
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Do policy functions exist for Finite Horizon Dynamic programming problems?

I've been looking at the cake eating problem over a finite horizion and have been trying to figure out if we can derive a policy function for such a problem. My work is written below. sequence form ...
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Why do we add Net Foreign Factor Income instead of substracting it while calculating GDP?

(It's assumed that we use the income method.) GDP is supposed to include all incomes received on territory of given country, no matter if receivers of income are citizens or not. So incomes of ...
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When calculating GDP using the income approach how do we make sure that we count only wealth produced in given year?

As far as I understand, when we calculate GDP we want to estimate wealth produced during given year in given country. But it seems like it will be problematic when using the income approach (the ...
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Questions about the future of macroeconomic modeling and the role of simultaneous equation systems

I started to study about macroeconomic modeling and I am interested in the following questions. I understand that there are no definite answers to these questions. But I am interested in the opinion ...
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Is my reasoning about economic growth and environmental sustainability correct?

Below is my attempt to answer question "Can we have economic growth and environmental sustainability?". Please correct me if I got something wrong in my reasoning. Let's see what is counted as ...
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Why do economic cycles include downturns, but not upturns?

The United States has experienced economic downturns, or recessions, roughly every 5-10 years since they began being tracked in the late 18th century. 1785, 1789, 1796, 1802, 1807, 1812, 1815, 1822, ...
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Would shortages occur if consumer saving falls and investor saving increases

Say consumers consume 100% of their income and investors invest only 90%. Wouldn't this cause a shortage or price increase since investors aren't producing what consumers are buying?
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Can a market function if everyone has the same preferences

Assume everyone has the same preferences. Therefore there would be , for example, no trivial concept of liquidity preference differences etc. Would the economy still work?
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What is the logic behind that one can “grow out of debt” via increase in GDP?

As we all know the US has a big debt and increasing deficits. The head of FED J. Powell commented that the US was on an unsustainable path w.r.t some debt to GDP ratio. A few commentators I listen to ...
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Who exactly suffered more in the US-China trade war?

The US and China signed a trade deal recently that made the news. Shortly afterwards, Nobel-prize winning economist Paul Krugman claimed that the US lost the trade war. His argument is that US ...
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Are there really only two main macroeconomic models?

I was told that there are really two broad categories of economic models in macroeconomics. These Being: 1)Neoclassical Growth Models 2)Overlapping Generations Models All other models that exist are ...
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Basic question on S=I

Consider the identity: $$ Y=C+I+G+X-M $$ where $Y$ is defined either as value-added output, or income, or total expenditure. Now, consider private individuals, who decide to save money, as opposed to ...
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What is the difference between microeconomics money and macroeconomics money?

In microeconomics, \$USD are a store of value. I can sell a candy bar for \$1, and I can hang onto that \$1 for a year and then buy the same candy bar for that same \$1. If I print \$1 (and get away ...
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Possible “debt-to-…” ratio indicators for debt-to-economic growth relationship?

Suppose we are interested in the relationship between public or external debt and economic growth. One can look at the debt-to-GDP ratio or debt-to-export ratio. What may be other possible "debt-...
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(Modified comparative advantage model)Can trade with a country that only has one industry be mutually beneficial?

Suppose there are two countries, China and Japan. Suppose there are also only two goods, namely food and bronze mirrors. China produces both food and bronze mirrors, while Japan produces only food. In ...
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Solow's growth model with human capital (mankiw (1992) footnote 12 style equation)

i've never seen this type of model with human capital, and the derivatives of K and H seem to be different than what I find in literature about the subject. It's similar to mankiw romer weil (1992) ...

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