New answers tagged

1

Not sure what you mean by formally proven in this case, but it’s just true by definition. Macroeconomics is by definition branch of economics that studies the behavior of economy as a whole as opposed to individual markets or actors separately which is studied by Microeconomics. General equilibrium is by definition an equilibrium of whole economy or ...


0

As mentioned, if you can identify the sources used for the reported figures, that should solve the problem. Art is correct in terms of the the unit of time with Q4/Q4 comparing growth from the same quarter from the prior year, and that the Y/Y based on the according calendar year. His calculations appear to be correct as well, and my guess is that it was ...


1

If you could include the source(s) you were talking about that would be great. Without further info, my initial guess is that the Q4/Q4 means you compare GDP in 2018Q4 to GDP in 2017Q4. Y/Y means you compare GDP in the whole year of 2018 to that of 2017. Upon further inspection, if you take a look at the US's real GDP, you'd get the following: Growth in ...


0

I think you use the inverse (1-MPC) of the MPC to derive the marginal propensity to save (MPS) and create the investment function. So, I= 60 + .2*1000 = 260, or an additional 200 from the autonomous level.


1

I am not sure if 41% is correct I wanted to double check it but could not find a reference to primary source for 41%, but the overall narrative seems to be true. For example, Reinhart, C. M., & Smith, R. T. (2002), in their paper that you can read here argue that Switzerland in the late 1970s in which substantial capital inflows – partly ...


0

Because using efficiently does not mean that all labor is used (this holds also for any other factor of production). This is so because on the margin at some point additional inputs might not produce enough value to justify the cost. Consider simple supply and demand on perfectly competitive labor market with no market failures and all standard background ...


2

No. There is nothing in the economic literature on a post-service world. It is true that the development of most countries follows the agriculture -> manufacturing -> service pattern. There is nothing to suggest another sector coming after services.


3

why would they force to trade in U.S. dollars instead of just taking the oil from their country by force? One of the basic tenets of power is that $control$ is superior to $ownership$. War is expensive, oil must be stored before it is used, and any captured production assets must be defended and maintained at great cost. Rather than own all of this ...


1

I'll try to answer your question as best as I understand it. There are innumerable reasons for why taking oil by force from these nations would be seen as unnecessary by the US, for both political and economic reasons. Just to name one risk, the condemnation of the world community and the breach of trust in our status as a relatively non-predatory hegemon ...


2

In your comment you say you want the answer in context of the classic textbook model for goods market/output equilibrium. Following the Blanchard macroeconomics textbook lets consider closed economy so the output will be given by: $$Y=C+I+G$$ where $Y$ is output/income (they must be always equal), $C$ consumption, $I$ investment and $G$ gov. spending. ...


0

The use (use-value) of credit cards are to facilitate exchange. Now you can buy commodities on credit without actually having to exchange material money. If you can speed up circulation, the velocity of money accelerates. The greater the velocity of money, the less you need in circulation. I am speaking on Karl Marx's quantity theory of money For Marx,...


1

You can estimate it in multiple ways. If you have panel data then you could first log linearize the expression giving you: $$ln(F_{it})=ln(A_{it}) + \alpha ln(K_{ti}) + (1-\alpha) ln(L_{it}) $$ Which could be estimated in multiple ways. You could estimate it as a pooled cross-section where the technology would be assumed constant across the time and same ...


1

In a nutshell, a higher GDP is the very same as an increase in average incomes, at least if the population remains constant. If there is more stuff produced and consumed, overall income is higher and average income as well. As you rightly point out, since income is measured in monetary terms, one has to correct for price increases. And this is usually done. ...


0

In the short term, economic growth is caused by an increase in aggregate demand (AD). An increase in AD will cause a higher level of real GDP. If GDP is increasing then that most likely mean that more people are buying goods and services which could result in more people working and earning more income. However, it is possible for GDP to increase and ...


0

It's possible, although highly unlikely. Take a look at this article here, in it, it clearly states that this has been tried before in European countries, but it was often ineffective due to a lack of effective 'policing' (where a country's tax agency taxes all those who the new tax woul apply to, rather, only getting a small percentage). I (and many ...


0

(My answer is based on what I learned from the answer and comments of user 1muflon1. This answer wouldn't be possible without their patient attempts to put some knowledge under my thick skull. Here I will pretend to be another person and address Past-Me as "You"). At first, let's start with intuition for why increased consumption implies increased PPF. ...


1

$W(4) = \max\left\{4+bW(4),\frac{1}{2}\left(4 - k + bW(4)\right) + \frac{1}{2}\left(16 - k + bW(16)\right)\right\}$ $W(16) = \max\left\{16+bW(16),\frac{1}{2}\left(4 - k + bW(4)\right) + \frac{1}{2}\left(16 - k + bW(16)\right)\right\} = 16+bW(16)$ First solve for $W(16)$ to get $W(16) = \frac{16}{1-b}$. Then substitute it in $W(4)$ to solve for $W(4)$ as a ...


1

It's not about riches. According to the CIA World Fact Book, World Gross Domestic Product per person in Purchasing-Power-Parity USD was estimated at 17,500 in 2017. And it was only 7,200 PPP USD in 2000. Now assume away all inequality. That would mean that a family of four, say two adults and two children, would have 70.000 USD living in USA... sounds a lot?...


0

If by “greater”, you mean higher number It depends on how you quote exchange rate. Under American system the exchange rate between USD and euro would be given by $S=EUR/USD$ under European system the exchange rate would be quoted other way around as $S=USD/EUR$. So under American system if the USD appreciates due to higher interest rates the $S$ would ...


0

It would decrease consumption, lowering demand on many markets, meaning that prices would go down. If downsizing would rampant enough it's possible that economy would experience deflation, maybe even recession. As the result, maybe central banks would be decreasing key interest rates (i.e. make new debts cheaper), start buying bonds and lowering reserve ...


0

For this you first have to put some numbers on the problem to be able to draw PPF and consumption. Lets assume that Cheestopia can produce 1 cheese at 1 labor, and 1 wine at 2 labor and Winetopia 1 cheese at 2 labor and 1 wine at 1 labor, and both country has 100L avaiable for production, this gives you the following PPFs for both countries in autarky (the ...


0

Additionally, lower (or even negative) interest rates make a country's currency less attractive, so in principle lowering its value in foreign exchange, thus potentially leading to an increase in exports, which in an exports-oriented country could have the effect of stimulating the economy to grow. (Note that this can lead to a currency war, in which other ...


-2

At its core, the fixation on growth follows from the assumption of an endlessly growing population. Maintaining or improving on the utility-maximizing outcome with a growing population means that, in real dollar-denominated terms at least, growth of the economy must occur. The reason I say "must" here is that whether your favorite social welfare function ...


2

In short, the belief this reflects is that cheap money is spent more freely. Since GDP counts the sum-total of value-added transactions in the economy, in principle this means that monetary policy affecting the velocity of money can in turn affect GDP. Theoretically, this is valid to the extent that debt-servicing costs are a significant friction in the ...


1

This is some dynamic supply-demand model (I am not aware of it having some special name). The first equation gives you the evolution of prices. It says that there will be inflation if there is excess demand $d_t>s_t$ and deflation if there is excess supply (that’s why the first equation has ($d_t-s_t$). The second equation tells you how supply changes ...


4

Have you read: Barro and Sala-i-Martin (2004, 2e), Introduction Acemoğlu (2009), Introduction Paul Romer (2016), "The Deep Structure of Economic Growth" Robert Lucas (1988), "On the mechanics of economic development", Introduction: I do not see how one can look at figures like these without seeing them as representing possibilities. Is there some action ...


1

There are two reasons for that as far as I can see: In past macroeconomics combined not just what we think of macroeconomics today but also a great deal of public economics which deals with inequality (one can see that just by looking at the writings of Keynes or Hayek). However, nowadays macroeconomics don’t deal with distributional questions any more ...


-1

The seller's idea is different from the buyer's. The seller wants to make money, so the seller can't ignore the cost. The buyer does not know the cost of shoes, so the evaluation may not be accurate, and the seller will use various means (such as advertising, preferential, packaging, etc.) to interfere with the buyer's judgment, making its evaluation higher ...


2

The value is subjective. If the buyer values the shoes at 10 yuan and the seller values 10 yuan at 10 yuan then from economic perspective equal amount of value was exchanged (i.e 10 value of yuan embedded in paper notes for 10 value of yuan embedded in shoes) regardless of what were the costs of production costs. Also money just serves to solve double ...


0

The right (and shorter) name for " income of our citizens/corporations abroad" is "the national FFI", where FFI stands for Foreign Factor Income. I will use this name. The second interpretation is correct, it will lead to correct calculation of the national FFI. If our corporation/citizen gets income from a factory that they own, but said factory is located ...


0

Nobody really cares about PPF of the country in the real life, we use "potential GDP" instead. As for the line between things considered possible and impossible, firstly, there is no universally agreed upon procedure for finding "potential GDP". Secondly, during calculation of "potential GDP" we either use subjective input from an expert OR make a rought ...


1

Friend, To find non-profit organizations (non-government) expenditures within the national accounts for GDP you can visit the BEA site (www.bea.gov) and go to the national accounts table 1.13. non-profit organizations is listed as Nonprofit institutions serving households (line # 49). To attempt to answer your question it would fall between firms and ...


0

If you assume, as you have, that nothing is produced domestically, GDP, which stands for "gross domestic product" would be zero. There is no economic activity, so there's no production, and GDP for that year would be zero. One could argue, of course, that there's value added involved in transportation, etc., but I think that's not what you're after. To be ...


0

GDP would not be zero in endowment economy in general. There are still prices and also interest rates, savings and investment in endowment economy. First, lets ignore other countries because foreign aid complicates GDP calculations (as Art pointed out if the endowment is foreign aid GDP would be zero). So lets suppose there is only one country, lets call it ...


1

Your conclusion would be correct in pure endowment economy where there is no production $Y(L) =0$ (assuming only labor as factor of production) and everyone has the same endowments. In an endowment economy where there is no production and GDP is just dropped on both home and foreign country trade is indeed a zero sum game as $M$ subtracts from your endowment ...


0

Both of your conclusions are correct. For #2, however, your example might have left something out. Consider a country that could not produce wine. By banning imports of wine, the country's net export would increase (a decrease in imports). However, this will also mean a reduction in consumption of wine as well. In fact, the increase in net exports of wine ...


1

Indeed, their theory relates primarily household debt to net exports. This is the main focus of their working paper. However, as a referee, I would try to find out more and ask whether the change in net exports comes from imports or exports, or whether household indebtedness could also affect international transfers. A household may use debt to invest abroad ...


0

He has goods in inventory that he is able to sell for higher prices.


0

Am not a trained economist, but I would think this may be a temporary effect. A merchant may sell his newly purchased items for $2. Scruples aside, he could sell his existing inventory of that item (purchased at the pre-inflation wholesale price) at the post-inflation retail price. Again, an opportunistic, but temporary, advantage.


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