Macroeconomics Building Blocks for Understanding.

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Presentation transcript:

Macroeconomics Building Blocks for Understanding

GDP CPI Business Cycles Inflation/Deflation Price Level Monetary Policy Fiscal Policy

NATIONAL INCOME GDP –Gross Domestic Product Value of final goods produced IN the U.S. GNP –Gross National Product Value of final goods produced BY U.S. citizens Real GDP -adjusted for inflation using the CPI – Consumer Price Index

What’s included in GDP? ConsumptionConsumption- consumer spending InvestmentInvestment – business spending Government purchasesGovernment purchases Export SpendingExport Spending – expenditures made by other countries’ citizens buying U. S. goods. GDP = C + I + G + (EX – IM)

What’s NOT included? Illegal goods/services “No record” transactions” Unpaid labor Used Goods Stock transactions Government transfer payments –Social security, welfare

Business Cycle

Between , 31 cycles

Forecasting Business Cycles Leading Indicators – first signs –Stock prices, money supply, consumer confidence, labor hours in manufacturing Coincident Indicators – concurrent –Personal income Lagging Indicators –Unemployment

What causes the business cycle? Different economists have suggested… Changes in money supply Business investment, residential construction and government spending Politics Innovation Supply shocks

Task Read “Inflation” p –Notes + Section Review #1 p. 350.