Macro Unit 12-13

Macro

Promote Economic Growth
Limit Unemployment
Keep Prices Stable (Limit Inflation)

[Unit 12] National Economic Accounts (NEA)

就是一车经济的统计数据。

i.e. Total Personal Income, Corporate Profits, GDP, Real GDP, CPI, PPI, etc.

[Unit 12] Gross Domestic Product (GDP)

（PPT 12.1）

shows Quantity in term of dollar
GDP is part of NEA
The most important measure of economic growth
The dollar value of all final goods & services produced within a country in one year
GDP measures Production, NOT Sales
A total flow of income and expenditure can be represented by the circular flow diagram

（上课笔记）

Value product
Within a country (location)
- Domestic Firms & Foreign Firms
Within a period (a year)

Nominal GDP

Also called "current-dollar GDP"

\[\boxed{N.GDP = \sum P_{\text{current}} Q_{\text{current}}} \]

Real GDP

Also called "constant-dollar GDP"

\[\boxed{R.GDP = \sum P_{\text{base year}} Q_{\text{current}}} \]

GDP Deflator & Inflation Rate

\[\boxed{\text{GDP Deflator} = \frac {N.GDP} {R.GDP} \times \textcolor{red}{100}} \]

\[\boxed{\text{Inflation Rate} = \% \Delta \text{GDP Deflator}} \]

💡 近似计算

（Katie 课）

近似公式：

\[\boxed{\% \Delta \text{GDP Deflator} = \% \Delta N.GDP - \% \Delta R.GDP} \]

准确公式：

\[1 + \% \Delta N.GDP = (1 + \% \Delta \text{GDP Deflator}) (1 + \% \Delta R.GDP) \]

这个近似和下文的 Fisher's Hypothesis 是一样的。

Example

(2015 MCQ #52) Suppose that in a particular country, nominal gross domestic product (GDP) grew by $8$ percent, and the GDP deflator increased by $10$ percent. The country’s growth rate of real GDP would be approximately equal to

(A) $-2\%$

(B) $-0.8\%$

(C) $0.8\%$

(D) $2\%$

(E) $18\%$

$8\% - 10\% = -2\%$，选择 A。

GDP Calculation

The Expenditure Approach

\[\boxed{GDP = C + I + G + X_n} \]

$C$ is consumption expenditures by households
$I$ is investment by firms
$G$ is government purchases
$X_n$ is net exports
- $\boxed{X_n = \text{Exports} - \text{Imports}}$

The Income Approach

\[\boxed{\begin{aligned} GDP =& \text{Personal Income} & \text{(Household)} \\ +& \text{Net Profit} & \text{(Firm)} \\ +& \text{Tax} & \text{(Gov't)}\\ +& \text{Depreciation} \end{aligned}}\]

Personal Income 不是 Disposable Income！
- $\boxed{\text{Disposable Income} = \text{Income} - \text{Income Tax}}$
Firm 是 Net Profit 而不是 Revenue！
Depreciation 是 Capital 在使用过程中因磨损或技术过时等导致的价值下降，一般会均摊在公司每一年的 cost 中。
- 为什么要加 Depreciation：
  - $\text{Net Profit} = \text{Revenue} - \text{Cost} - \text{Depreciation}$
  - $\text{Income} = \text{Revenue} - \text{Cost} = \text{Net Profit} + \text{Depreciation}$

The Valued-added Approach

\[\boxed{GDP = \sum \text{Value added by all firms}} \]

GDP does not Include

Underground Economy
- illegal
- some legal items and activities
  - DIY
Second-hand goods
- e.g. Ebay
Goods in process
Transactions that are purely financial
- e.g. Stock

Limitations of GDP

不能衡量 Happiness（Quality of life / Standard of living）。
Only represents the price in the current year, but not the development of technology.

Per Capita GDP

GDP per Capita is the best measure of a nation’s standard of living.

\[\boxed{\text{GDP per capita} = \frac {GDP} {\text{Population}}} \]

一般是 $N.GDP$。

standard of living 可以代表 national income level。

PRACTICE [Unit 12]

（Chapter 12 书后练习）

Which of the following is counted in GDP?
- [YES] Final goods and services purchased by the government
  - $G$ in $C+I+G+X$
- [NO] Both the peaches used by a bakery to make peach pies and the peach pies
- [NO] Museum purchases of ancient art
- [NO] Imported goods and services
- [NO] Sales of antiques
- [NO] The estimated value of housework
- [NO] The value of illegally produced goods and services
- [NO] The value of stocks, bonds, and other financial assets
- [YES] The change in business inventories
  - $I$ in $C+I+G+X$
  - Deepseek 说，可以视为企业“购买”了自己的产品。
- [NO] Secondhand sales

The cabbages you grow in your summer garden 在 GDP 里怎么算？
- 不算。因为没卖。

If your grandparents have a new home built for their retirement, this would primarily affect
- $I$ (Investment).
- New residential construction is included in investment even if the home is built by a household.

Given:

Government expenditures $300
Depreciation $200
Investment $400
Consumption expenditures $900
Taxes $100
Corporate profits $500
Exports $200
Imports $300

GDP equals _____?

(The Expenditure Approach)

$G$ Government expenditures
[NO] Depreciation
$I$ Investment $400
$C$ Consumption expenditures $900
[NO] Taxes $100
[NO] Corporate profits $500
$X$ Exports $200
$X$ Imports $300

算出来 $1500。

[Unit 13] Inflation

Inflation, Disinflation, and Deflation

Inflation (通货膨胀): a sustained increase in most prices in the economy.
Disinflation (反通货膨胀): when the inflation rate is decreasing, but prices are still rising, not as briskly
Deflation (通货紧缩): when prices are falling.
- Deflation is bad because people will hoard money and assets.

后面遇到的一些东西，整理过来了。

Stagflation (Double Trouble) (滞胀): Price Level 高，Unemployment 高。
Hyperinflation (恶性通货膨胀)
Depression (萧条): 大的 Recession (衰退)。

Costs of Inflation

（书 P261）~~这段我还打了个五角星来着，但是完全没印象了~~

Financial wealth is eroded
Savings are discouraged
Menu costs—resources are misallocated with rising prices
Inflation tax—wealth is redistributed from lenders to borrowers

Fisher’s Hypothesis

\[\boxed{\text{N. Interest Rate} = \text{R. Interest Rate} + \text{Expected Inflation Rate}} \]

\[\boxed{\text{N. Interest Rate} = \text{R. Interest Rate} + \text{Actual Inflation Rate}} \]

e.g.

2022 年我向银行借钱，借 10 年，Real Interest Rate $3\%$，银行预计这 10 年内的 Expected Inflation Rate 为 $4\%$，根据第一条公式算出 Nominal Interest Rate 为 $7\%$。
2024 年遇上 COVID-19，Actual Inflation Rate 达到 $10\%$，但是 Nominal Interest Rate 是在合同上写死的不能变，依然是 $7\%$，根据第二条公式算出此时的 Real Interest Rate 为 $-3\%$，我赚麻了。

(2019 MCQ #20) Which of the following is true about inflation and interest rates?

(A) The higher the inflation rate, the higher the real interest rate.

(B) If there is no actual or in expected inflation, the nominal and real interest rate are equal.

(C) If the economy is experiencing deflation, the nominal interest rate exceeds the real interest rate.

(D) The higher the inflation rate, the lower the nominal interest rate.

(E) The nominal interest rate is the difference between the real interest rate and the expected inflation rate.

Answer: (B)

💡 其实它真实的样子是这样：

\[1 + NIR = (1 + RIR) (1 + \text{Expected Inflation Rate}) \]

只是忽略了一个特别小的项。

https://en.wikipedia.org/wiki/Fisher_equation

Consumer Price Index (CPI)

（PPT 13.2）

The most commonly used measurement of inflation for consumers.

只包含生活中常用的消费品（即并非全部产品）
- 随着时间的变化，这个 basket 也会变化。
- e.g. 房子不算，房租算。奢侈品不算。
Includes prices of imported goods

\[\boxed{CPI = \frac {\text{Price of market basket}} {\text{Price of market basket in base year}} \times \textcolor{red}{100}} \]

\[\boxed{\text{Inflation Rate} = \% \Delta CPI} \]

算出来的 Inflation Rate 可能和 Deflator 算出来的不一样，但是总体趋势是相同的。

（小王的课）

💡 具体计算中可能会用到的：

\[CPI = \frac {\sum P_{\text{current}} Q_{\text{base year}}} {\sum P_{\text{base year}} Q_{\text{base year}}} \times \textcolor{red}{100} \]

都是 Base year 的 Quantity 哦！

Example: Calculation of CPI

	$P_1$	$Q_1$	$P_2$	$Q_2$
Base Year	30	20	10	10
Current Year	40	10	50	10

\[CPI = \frac {40 \times 20 + 50 \times 10} {30 \times 20 + 10 \times 10} \times 100 \]

Problems with CPI

(PPT 13.2)

As prices increase for the fixed market basket, consumers buy less of these products and more substitutes that may not be part of the market basket.
The CPI market basket may not include the newest consumer products.
The CPI ignores both improvements and decline in product quality.
the CPI can overstate cost of living increases.

[Unit 13] Unemployment

Unemployment: Do not have a job & Looking for a job actively

\[\boxed{\text{Unemployment rate} = \frac {\text{\# Unemployed}} {\text{\# Labor Force}} \times 100\%} \]

Types of Unemployment

（PPT 13.1）

Structured Unemployment (location, condition)
Seasoned Unemployment (nature of business)
Cyclical Unemployment (business cycle)
Frictional Unemployment (Between jobs)

Full employment: 失业率 $\boxed{4\% \sim 6\%}$，只有 1 和 4。

Labor Force