Main Point - Macroeconomics is about studying both how the economy grows and how it moves through the business cycle.
Main Point - Economists use statistics to track the economy and to test their models of the macroeconomy.
Part # 1 - Introduction to Macroeconomics
Reading - Introduction to Macroeconomics - click here
Part # 2 - Macroeconomic Statistics
Reading - Macroeconomic Statistics - click here
Practice Problem - Gross Domestic Product - - GDP is calculated based on economic transactions that are reported to the government, such as the sale of goods or money paid to workers currently. Economic activity that is not reported to the government or the sale of used goods is not recorded in GDP. How would the following be included in GDP accounting? (Write the dollar amount of the transaction that would be included in GDP) (Answer)
A. A person pays a carpenter $50,000 to build a garage.
B. A person pays a carpenter $50,000 to build a garage to replace one that burned down in a fire.
C. A person buys $10,000 of materials and builds their own garage that has a value of $50,000.
D. A person builds a garage for themselves with scrap material they did not buy that has a value of $50,000.
E. A person buys a new computer on Amazon for $1000.
F. A person buys a used computer on Craigslist for $1000.
Practice Problem - Difference Between Real and Nominal GDP - Suppose there is an economy with only 2000 people in it and it only produces 7000 buckets of chicken in one year and each bucket of chicken costs $10. The next year the economy has a population of 2500 people and it makes and 8000 buckets of chicken in the next year which cost $11. (Answer)
A. What was the rate of inflation during this period?
B. How much did the nominal GDP grow during this period?
C. How much did real GDP grow during this period?
D. How much did real GDP per capita grow during this period?
Practice Problem - Calculating Inflation - Consider an economy that produces both buckets of chicken and containers of mashed potatoes. In the first year, the price of a bucket of chicken is $10 and the price of a container of mashed potatoes is $5. In the second year, the price of a bucket of chicken is $11 and the price of a container of mashed potatoes is $6. The "market basket" of goods is one bucket of chicken and two containers of mashed potatoes. (Answer)
A. What is the cost of a market basket in the first year?
B. What is the cost of a market basket in the second year?
C. What was the rate of inflation in this economy between year one and year two?
Practice Problem - Unemployment - Use the following information to calculate the size of the labor force and the official unemployment rate in a society. Total population is 500, the population under age 16 is 120, the population of retirees not in the labor force is 150, and the number of unemployed is 15. (Answer)
A. What is the labor force participation rate - the percent of the population in the labor force?
B. What is the unemployment rate in this society?
C. Suppose the population of the society changes and the number of retirees increases to 180. What effect will this have on the labor force participation rate and the unemployment rate? Should economists and society be concerned with this?
D. Now, suppose there is a large influx of 70 immigrants of working age into this population and the number of unemployed goes up to 20. Should economists and society be concerned by this?
Supplementary Materials