https://teddyrookbook.com/economics/macroeconomics/Recent content in Macroeconomics on Teddy Rook Bookhttps://teddyrookbook.com/img/share.jpghttps://teddyrookbook.com/img/share.jpgHugoenhttps://teddyrookbook.com/economics/macroeconomics/circular-flow/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/circular-flow/Households and firms meet in product and factor markets, with money flowing one way and goods and resources the other. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/gdp-definition/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/gdp-definition/GDP is the market value of all final goods and services produced within a country in a given period. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/gdp-expenditure/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/gdp-expenditure/Sort spending into consumption, investment, government purchases and net exports, then add. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/value-added/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/value-added/Adding the value each stage of production adds, or adding everyone's income, gives the same total as final spending. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/gdp-limits/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/gdp-limits/GDP per person helps compare living standards, but it leaves out work at home, leisure, the environment and how income is shared. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/real-gdp/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/real-gdp/Real GDP values output at base-year prices, so it grows only when production grows. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/gdp-deflator/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/gdp-deflator/The deflator is nominal GDP divided by real GDP, times 100, and it turns nominal values into real ones. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/labor-force/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/labor-force/The labor force is everyone working plus everyone without a job who is looking for one. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/unemployment-rate/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/unemployment-rate/Divide the number unemployed by the labor force, not by the whole population. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/types-unemployment/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/types-unemployment/The natural rate is frictional plus structural unemployment; cyclical unemployment comes from recessions. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/price-index/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/price-index/A price index compares the cost of a fixed basket of goods with its cost in a base year, set to 100. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/inflation-rate/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/inflation-rate/The inflation rate is the percent change in a price index from one period to the next. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/real-values/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/real-values/Divide a dollar amount by the price index over 100 to compare dollars from different years. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/costs-of-inflation/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/costs-of-inflation/Unexpected inflation helps borrowers and hurts lenders and people on fixed incomes; all inflation brings menu costs and shoe-leather costs. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/business-cycle/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/business-cycle/Real GDP moves through expansion, peak, contraction and trough around its long-run trend. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/aggregate-demand/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/aggregate-demand/AD slopes down because of the wealth, interest-rate and exchange-rate effects, not because buyers switch to other goods. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/ad-shifters/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/ad-shifters/A change in consumption, investment, government purchases or net exports at every price level shifts AD. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/mpc-mps/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/mpc-mps/MPC is the share of an extra dollar of income that is spent, MPS the share that is saved, and MPC + MPS = 1. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/spending-multiplier/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/spending-multiplier/New spending becomes someone's income and is partly spent again, so GDP rises by 1/(1 − MPC) times the first change. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/tax-multiplier/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/tax-multiplier/A tax cut raises GDP by MPC/MPS times its size, less than the same increase in government purchases. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/sras/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/sras/SRAS slopes up because wages and some prices are slow to adjust; input prices, productivity and supply shocks shift it. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/lras/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/lras/LRAS is vertical at full-employment output, which resources and technology set, not the price level. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/ad-as-equilibrium/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/ad-as-equilibrium/Where AD meets SRAS, output may sit below full employment (a recessionary gap) or above it (an inflationary gap). Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/ad-as-shocks/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/ad-as-shocks/A demand shock moves the price level and output the same way; a supply shock moves them in opposite directions. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/self-adjustment/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/self-adjustment/Over time, wages and other input prices adjust and SRAS shifts until output returns to full employment. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/fiscal-policy/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/fiscal-policy/Raising spending or cutting taxes pushes AD right to close a recessionary gap; the reverse closes an inflationary gap. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/fiscal-policy-size/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/fiscal-policy-size/Divide the output gap by the right multiplier to find the change in spending or taxes needed. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/tax-structures/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/tax-structures/Marginal and average tax rates, and what happens to the average rate as income rises. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/automatic-stabilizers/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/automatic-stabilizers/Progressive income taxes and programs like unemployment insurance cushion recessions without any new law. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/deficits-debt/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/deficits-debt/A deficit is one year's shortfall; the debt is the running total of past deficits minus surpluses. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/financial-assets/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/financial-assets/When market interest rates rise, the prices of existing bonds fall. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/real-interest-rate/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/real-interest-rate/The real interest rate is about the nominal rate minus the inflation rate. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/money-functions/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/money-functions/Money is a medium of exchange, a unit of account and a store of value. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/money-supply-measures/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/money-supply-measures/M1 holds the most liquid forms of money; M2 adds less liquid ones such as small time deposits. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/bank-balance-sheets/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/bank-balance-sheets/Assets (reserves, loans, securities) equal liabilities (deposits) plus owners' equity; reserves split into required and excess. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/money-creation/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/money-creation/When banks lend out excess reserves, new deposits appear; the simple money multiplier is 1 divided by the reserve ratio. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/money-market/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/money-market/The demand for money and the supply the central bank provides set the nominal interest rate. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/fed-tools/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/fed-tools/Open market operations, the discount rate, reserve requirements and the interest rate paid on reserves. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/ample-reserves/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/ample-reserves/When banks hold plenty of reserves, the Fed steers the federal funds rate mainly through the interest rate it pays on reserves. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/monetary-policy/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/monetary-policy/Lower interest rates raise investment and consumption, shifting AD right; higher rates do the reverse. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/loanable-funds/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/loanable-funds/Saving supplies and borrowing demands loanable funds, and together they set the real interest rate. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/policy-mix/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/policy-mix/Combine two policies' effects on output, the price level and interest rates, and spot which result is uncertain. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/short-run-phillips/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/short-run-phillips/In the short run, lower unemployment comes with higher inflation; an AD shift moves the economy along the curve. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/long-run-phillips/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/long-run-phillips/In the long run, unemployment returns to its natural rate whatever the inflation rate, so the curve is vertical. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/quantity-theory/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/quantity-theory/MV = PY: in the long run, money growing faster than output raises prices. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/crowding-out/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/crowding-out/Government borrowing can raise the real interest rate and reduce private investment. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/schools-of-thought/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/schools-of-thought/Classical, Keynesian, monetarist and newer schools agree on much and differ on how fast markets adjust and how active policy should be. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/productivity/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/productivity/Output per hour of work rises with physical capital, human capital and technology. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/rule-of-70/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/rule-of-70/At a growth rate of g percent a year, a quantity doubles in about 70/g years. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/growth-policy/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/growth-policy/Policies that build physical capital, skills and technology shift LRAS and the PPC outward. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/balance-of-payments/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/balance-of-payments/The current account and the capital and financial account record a country's dealings with the rest of the world, and they balance each other. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/exchange-rates/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/exchange-rates/An exchange rate is the price of one currency in terms of another; a currency appreciates when it buys more of the other. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/forex-market/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/forex-market/Demand for dollars comes from foreigners buying U.S. goods and assets; supply comes from Americans buying foreign ones. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/forex-shifts/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/forex-shifts/Tastes, relative incomes, relative price levels and relative interest rates shift the demand for and supply of a currency. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/net-exports-exchange/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/net-exports-exchange/A stronger currency makes exports dearer abroad and imports cheaper at home, lowering net exports and AD. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/capital-flows/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/capital-flows/A higher real interest rate draws in foreign financial capital, which raises demand for the currency. Macroeconomics · Economics Ladderhttps://teddyrookbook.com/economics/macroeconomics/saving-investment-identity/Mon, 01 Jan 0001 00:00:00 +0000https://teddyrookbook.com/economics/macroeconomics/saving-investment-identity/Private saving plus the government's budget balance equals domestic investment plus net exports. Macroeconomics · Economics Ladder