Aggregate measures total quantity Stock a quantity at a point in time Flow Variable Rate C Consumption Expenditure durables, non

, non durables, services T Net Taxes. Households pay takes, receive transfer paments and interest (bonds) TR Transfer Payments Social security INT Interest Spr Private Savings G Government Purchases NX Net Exports Net Revenue revenue - costs of inputs. Paid out as income to factors of production employees, corporate profits, proprietors Income (owners of unicorporated businesses), Interest, Rental payments NFIA Net Factor Income from Abroad foreign dividends NUT Net Unilateral Transfers money home by immagrants and foreign aid CA Current Account international transactions involving purchases/sales of goods and services (NX), NFIA and NUT FA Financial Account International transactions involving purchases/sales of assets (real and financial), including purchases/sales of official international reserves (euros, gold) by the countrys central bank Capital import or export from abroad GDP value of goods and services within the border of a country. Calculated with NIPA (incomes). Add the value of depreciation; production for the purpose of replacing depreciation is not included. The value of physical capital that was used up during production is a cost of production. Add taxes of production, business transfer payments, and profits of government enterprises (profits go to gov not households). GNP value of goods and services by domestically-owned factories regardless of their location NI National Income NNP Net National Product Real or Constant Dollars Value calculated from base year, as if prices havent changed Nominal or Current Dollars Value calculated at current prices P - Price Level Average of Prices measured by Price Index Can be CPI, GDP deflator, or PCE CPI captures spending patterns of 87% us pop base year basket (Non-Flexible, Consumption goods only) In 1965, the CPI was 18.3 (base year 2000). .183 $1965 = 1 $2000 GDP Deflator Ratio of nominal GDP to real GDP. Flexible weight (price changes year to year), Consumption and Investment goods i - Nominal Interest Rate Premium paid by a borrower for using the lenders funds for some period of time. r - Real Interest Rate Premium received by a lender after depreciation of the dollar due to inflation. If inflation is unexpectedly high, borrower gains (greater depreciation) and lender loses. Vice Versa Employed did work for pay, did 15 hours of unpaid work, temporarily absent from their jobs, paid or not. Unemployed have looked for work last 4 weeks, currently available for work, expecting to be recalled Long term unemployed unemployed for 15 weeks or more Cyclical Unemployment unemployment associated w/ the BC. Positive near trough, zero on trend, negative near peak. Natural Rate of Unemployment what the unemployment rate would be if cyclical unemployment were zero. BC Business Cycle Fluctuations of real GDP Severity of Recession Duration and Trend Growth Rate of Real GDP Long run growth rate of real GDP determined by countrys capital accumulation and technological change. MPL MPK are always diminishing. Technological Change shifts Production Fxn and Labor demand graph up Productivity Function real GDP worker hour as a function of capital per worker hour MPL = Wage/P MPL as a function of Labor forms Labor demand Curve. Take MPL at specific points of labor on production function and plot them on another axis where x = labor and y = Wage/P

Fiat Money Something used as money, but has no value. Paper money Money Supply (M) quantity of money in US economy made up of currency (held outside banks by households and firms) and bank deposits (not including government owned) M1 Currency in hands of public + value of checking deposits M2 M1 + savings deposits, time deposits, and money market mutual funds Formulas: T = Taxes paid TR Firms: Y (Income paid by firms) = C + I + G Households: Y (Households receive from firms) + NFIA + NUT = C + Spr + T CA = (NX + NFIA + NUT) Sgov = T - G Spr = I + (G-T) + CA also can be written as, Spr = Y + (NFIA + NUT) - T - C Where Y = C + I + G + NX National Saving = Spr + Sgov = CA + I CA + FA = 0 GDP + NFIA = GNP. NI + Statistical Discrepancy = NNP, NNP + Depreciation = GNP, GNP-NIFA = GDP Growth Factor = Y1/Y2 Growth Rate = (Y2-Y1)/Y1 Geometric mean Rad(GR1*GR2) then multiply by 100 for Output vs base year multiply current output level by previous gdp to get current real gdp GDP Deflator = Nominal GDP/Real GDP * 100 CPI Cost of basket at current prices/Cost of basket at base year prices * 100 Inflation (pi) = (Pt P(t-1))/(Pt-1) * 100 Real Wage = Nominal Wage/P i ~ pi + r. Also, r = (1+i/1+pi) - 1 Employment rate = employment/labor force - procyclical Unemployment rate = unemployment/labor force *100 counter cyclical (variable moving opposite Real GDP) Labor force participation rate = labor force/civilian working age population * 100 strongly procyclical Employment to population ratio = labor force participation rate * employment rate Natural Rate of Unemployment = Frictional unemployment + Structural unemployment/ labor force Cyclical Unemployment = measured unemployment (frictional + structural unemployment) IMPORTANT: When Unemployment Rate = Natural Rate, economy is at Full Employment. At Full Employment, economy produces Potential GDP or Full-Employment Output which is the same as Trend Real GDP (straight line) So, Unemployment Rate = Natural Rate Full Employment Percentage Deviation from Trend = (Actual GDP Trend GDP)/ Trend GDP * 100 Production Function: Y (Output) = AK.3L.7 Where K = Capital Stock, L = Unemployment, and A is a constant representing technology and efficiency. Note K+L=1 must hold. If K or L = 1, no longer any diminishing returns; returns become constant MPL = change in Y/change in L or d/dl Y (treat k and a as constants) = MPL (MPK is same process) One - Third Rule for every 3% increase in capital per worker hour, there is a 1% increase in output per worker hour. EX: Captial grew 9%, Worker hour grew 7%. How much of this increase was due to capital and how much was due to tech change? 9%*1/3 = 3%. --> 7%-3% = 4%. --> 3% Capital, 4% Tech. MPL = Wage/P Banks: Reserve to deposit ratio = R/D Households: Currency to deposit ratio = C/D FED: MB (Money Base) = R+C