tài liệu macroeconomics

Loanable funds vốn cho vay and market for loanable funds ....  For long term goals: raise income and the standard of living  generate economic growth measured as a change in real GDP p

Contents

TOPIC 1: The principles of Macroeconomics 4

1 Circular flow diagram 4

2 Positive vs Normative statements 4

TOPIC 2: Measuring a Nation’s Income (GDP) [LR] 5

1 GDP, Real vs Nominal GDP and GDP deflator 5

a GDP (Gross Domestic Product) 5

b The measurement of GDP 5

c How GDP is measured 6

d Real vs Nominal GDP 7

e GDP deflator (chỉ số điều chỉnh GDP) 7

2 GDP and Economic well-being vs Society’s well-being 7

TOPIC 3: MEASURING THE COST OF LIVING [LR] 8

1 CPI, CPI calculation and its limitations 8

a CPI (Consumer Price Index) 8

b CPI calculation 8

c Limitations of CPI 8

2 Inflation 9

3 GDP deflator vs CPI 9

4 Using CPI to correct economics variables for the effect of inflation 9

5 Real vs Nominal interest rate (lãi suất) 10

TOPIC 4: PRODUCTION AND GROWTH [LR] 11

1 Economic growth measurement 11

2 Production Possibility Frontier (PPF) 11

3 Productivity 11

a Production function 12

b Productivity function 12

TOPIC 5: SAVING, INVESTMENT & FINANCIAL SYSTEM [LR] 13

1 Financial system 13

a Financial market 13

b Financial intermediaries 13

2 Saving 13

3 Loanable funds (vốn cho vay) and market for loanable funds 14

a Supply of loanable funds 14

b Demand of loanable funds 14

c Equilibrium of loanable funds 14

4 Government policies and taxes 14

a Policy 1: Taxes and S (affect Supply, ) 14

b Policy 2: Taxes and Investment (affect Demand,  ) 15

c Policy 3: Government budgets – surplus or budget deficit (affecting S, ) 15

TOPIC 6: UNEMPLOYMENT [LR] 16

1 Unemployment in LR (Natural rate of unp.) vs Unemployment in SR (Cyclical rate of unp.) 16

2 The causes of LR unemployment: Frictional/ Structural/ Classical unp 17

a Frictional unemployment (thất nghiệp tạm thời) 17

b Structural unemployment (thất nghiệp cơ cấu) 17

c Classical unemployment (thất nghiệp theo lý thuyết cổ điển) 17

TOPIC 7: The Monetary System 18

1 Money, Money Demand (Md) vs Money Supply (Ms) 18

a The meaning of money 18

b Money Demand (Md) 18

c Money Supply (Ms) 18

2 The functions of money 18

3 Money creation with frictional-reserve banking (ngân hàng hoạt động theo nguyên tắc dự trữ 1 phần) 18

The money multiplier 19

4 How Central Bank controls Ms 19

TOPIC 8: INFLATION: ITS CAUSES AND COSTS [LR] 21

1 Causes of inflation 21

a The classical dichotomy and money neutrality (thuyết lưỡng phân cổ điển/ cổ phần) 21

b The quantity equation 22

2 Costs of inflation 22

TOPIC 9: OPEN-ECONOMY [LR] 23

1 International flow of goods and capitals 23

a Flows of goods (current account)  X, M, NX 23

b Flows of capital/ financial resources (capital account)  NFI 23

c The relationship between flow of goods v flow of capital AND saving v investment 24

2 The prices for international transactions: real vs nominal exchange rate 24

3 Purchasing Power Parity (PPP) 25

1 Aggregate Demand curve 27

a The wealth effect: 27

b Interest rate effect: 27

c Exchange rate effect: 27

2 Aggregate Supply curve 28

a The sticky wage theory 28

b The sticky price theory 28

c Misperceptions theory 28

3 Government responds to the SR fluctuations through AD 30

a Monetary policy (↓r to ↑AD) 30

b Fiscal policy (↑G and ↓T to ↑AD) 30

TOPIC 1: The principles of Macroeconomics

 Scarcity  People make choice  Opportunity cost (give up he alternative one)

 Opportunity cost = giving up the best alternative to obtain some items

 Microeconomics = the study of how households and firms make choices, how they interact in the markets and how the government attempts to influence their choices

 Macroeconomics = the study of the economy as a whole, including topics such as inflation,

unemployment and economic growth

1 Circular flow diagram

2 Positive vs Normative statements

Positive statement/ phân tích thực chứng

- P.S are claims that attempts to describe the world

as it is

- P.S are statements about facts

e.g minimum wage laws create unemployment

- P.S cho bitết những gid đang thực sự xảy ra

- Nó có thể được chứng minh là đúng hoặc sai

- Nó có thể được kiểm chứng từ thực tế

Normative statement/ phân tích chẩn tắc

- N.S are claims that attempt to prescribe how the world should be

- N.S depends on both facts and value (recommendations, advice, views) e.g the minimum wage should be raised

- N.S cho biết chúng ta nên làm gì

- Nó phụ thuộc vào giá trị và cả nhật biết của mỗi

cá nhân

- Nó rất khó có thể kiểm định được là đúng hoặc sai

Provision of labor, land & capital

Input for production

Markets for GvS

Markets for resources

MACROECONOMICS IN LONG RUN: What is important to an economy in the long run?

 The answer is growth

 For long term goals: raise income and the standard of living  generate economic growth (measured

as a change in real GDP per capita)

 Standard of living = Real GDP per capita

TOPIC 2: Measuring a Nation’s Income (GDP) [LR]

1 GDP, Real vs Nominal GDP and GDP deflator

a GDP (Gross Domestic Product)

 GDP = is the most basic measure of how an economy is performing (tells the size of the

 “GDP is the market value” = output is valued at market prices

 “… of all final …” = it records only the value of final goods, not intermediate goods (the value is counted only 1)

 “… goods and services…” = it includes both tangible (hữu hình) goods (food, clothing, car) and intangible (vô hình) services (haircuts, housecleaning, doctor visit)

 “… produced…” = it includes the GvS currently produced, NOT transactions involving goods produced in the past

 “… within a country…” = it measures the value of the production within the geographic confines (biên giới) of a country

 “… in a given period of time” = it measures the value of production that takes place within a specific interval of time, usually a year or a quarter (3 months)

NOTE: some important definitions:

 Final goods and services

 Those GvS that are not produced for either resale or for use in the production of other goods; But are produced for consumption

 Intermediate GvS

 Those GvS that are produced by 1 firm for use by another firm to produce a final good (or another intermediate good); produced for further production

 Value added = VA (giá trị gia tăng)

 The difference between the value of the total GvS and the value of the intermediate goods

(giá trị SL GvS của doanh nghiệp (doanh thu) – giá trị của HH trung gian từ doanh nghiệp khác)

 GDP only includes all items produced in the economy and sold legally in the market

 GDP excludes most items that are produced and consumed at home and that never entered the

marketplace

c How GDP is measured

3 approaches to measure GDP: - The expenditure approach

- The income approach (GDP = total income)

- The value-added approach

GDP = total income = total expenditure

1/ The expenditure approach (GDP= total expense on the economy’s output of GvS)

Y (GDP) = C + I + G + NX = C + I + G+ X – M Consumption ( C ) = The spending by households on GvS with the exception of new housing (không tính

Investment ( I ) = The spending on capital equipment (vốn tư bản), inventories and structures, including

household purchases of new housing (bao gồm mua nhà mới)

[by firms/ households] Government purchases ( G ) = The spending on GvS by local, state and federal governments Goods does

NOT include transfer payments (khoản chuyển giao thu nhập) because they are not made in exchange for currently produced GvS

Net export (NX) = Exports (X) – Imports (M)

2/ The value-added approach (GDP= the sum of value added of all producers)

- Real GDP is nominal GDP adjusted for changes

in the prices level

Nominal GDP (GDP danh nghĩa)

- Nominal GDP values the production of GvS at current prices

Nominal GDP=  P x Q

e GDP deflator (chỉ số điều chỉnh GDP)

 The GDP deflator measures the overall price level in an economy compared to some previous years

 It tells us the rise in nominal GDP that is attributed to (quy cho, cho là) a rise in prices rather than

a rise in the Q produced

 It is the tool to convert Nominal GDP to Real GDP

2 GDP and Economic well-being vs Society’s well-being

 GDP is the best single measurement of the economic well-being of a society

 HOWEVER, GDP is NOT a perfect measure of the happiness/ quality of life (living standard/ society’s well-being) Because some things, such as leisure time and a clean environment, aren’t measured by GDP

NOTE: To know whether the economy is doing well or poorly, look at GDP PER CAPITA and how it changes over time

TOPIC 3: MEASURING THE COST OF LIVING [LR]

1 CPI, CPI calculation and its limitations

a CPI (Consumer Price Index)

 CPI is a measure (chỉ số đo lường) of the overall cost of GvS bought by a typical consumer

 CPI is used to monitor changes in the cost of living over time

 When CPI , the typical family has to spend more dollars to maintain the same standard of living

b CPI calculation

Steps in calculating CPI:

1/ Fix the basket: determine which GvS are the most important to the typical consumer

2/ Find the price: find the prices of each of the GvS in the basket for each point in time (find P and year) 3/ Calculate the basket’s cost: use the data on the Ps to calculate the cost of the basket of GvS at different

times

4/ Choose the base year and compute the index: designate (chỉ định) 1 year as the base year, making it the

benchmark (tiêu chuẩn) against which other years are compared

 Substitution bias (độ lệch thay thế)

 Introduction of new goods

 Unmeasured quality changes

 CPI overstates the true living cost (CPI usually estimates the inflation rate higher than the actual rate

by around 1%/ year)

2 Inflation

 The inflation rate is the percentage change in the price index from the preceding (có trước) period

 Inflation refers to a situation in which the economy’s overall price level is rising

 CPI is a measure (chỉ số đo lường) of the overall cost of GvS bought by a typical consumer

 Similarity: both are used to measure the overall price level (the change in price)

GDP deflator (overall economies)

- Reflects the prices of all GvS produced

domestically

- Compares the P of currently produced GvS to

the P of the same GvS in the base year

CPI (consumption)

- Reflects the prices of all GvS bought by customers

- Compares the price of a fixed basket to the price

of the basket in the base year

 Import consumer goods: include CPI

Exclude GDP deflator

 Capital goods (truck, …): include GDP deflator (if produced domestically)

Exclude CPI

 The basket: CPI uses fixed basket

GDP deflator uses the P of GvS that year

4 Using CPI to correct economics variables for the effect of inflation

 We can find the 2008 purchasing power equivalent (true value) of a $20,000 salary in 1980 e.g CPI1980=82, CPI2008=189, value of dollars in 1980= $20,000

 the salary in 2008 is higher than that in 1980

5 Real vs Nominal interest rate (lãi suất)

 Interest represents a payment in the future for a transfer of money in the past

Nominal interest rate

- It is the interest rate usually reported and not

corrected for inflation It’s the interest rate that a

bank says

Real interest rate

- It is the interest rate that is corrected for the effect of the inflation

Real int rate = Nominal int rate – inflation

TOPIC 4: PRODUCTION AND GROWTH [LR]

1 Economic growth measurement

 The growth rate (the % change) in Real GDP or Real GDP per capita from 1 period to another:

 To find out how many years it would take for GDP to double, we use the rule of 70

If an economy grows at X% / year, output will double in

years

2 Production Possibility Frontier (PPF)

 PPF represents the maximum possible combinations of GvS that can be produced with a given quantity of factors of production and given technology

 To achieve the greatesr possible satisfaction of society’s material wants given scarce resources:

 Full employment

 Full production: Allocative efficiency (based on the D, only 1 1 point on PPF)

Productive efficiency (at any point on PPF)

NOTE:

Inside PPF curve (C): inefficient

Outside PPF curve (D): unachievable

3 Productivity

 Productivity refers to the amount of GvS produced for each hour of a worker’s time

 Productivity is the key role in determining living standards and economic growth for all nations

 The input used to produce GvS are called the factors of production It includes:

 The equation says that the productivity depends on K/L, H/L, N/L, A

 In order to  productivity: - invest in factors of production

- diminishing returns and the catch up effect

 Diminishing returns:

As the stock of capital , the extra output produced from an additional unit of capital 

 The catch-up effect:

It refers to the property whereby countries that start off poor tend to grow more rapidly than countries that start off rich

Productivity determinants

TOPIC 5: SAVING, INVESTMENT & FINANCIAL SYSTEM [LR]

 The economy grows by investment And investment is come from saving

1 Financial system

a Financial market

 Savers can directly provide funds to borrowers

 Markets (cách huy động vốn): Bond market (thị trường nợ/ trái phiếu)

Stock market (thị trường vốn/ cổ phiếu)

 A bond is a certificate of indebtedness that specifies obligations of the borrowers to the holder of the bond

Terms: the length of time until maturity

Credit risk: the probability that the borrower will fail to pay some of the interest

Tax treatment: the way in which tax laws treat the interest on the bond

 A stock/ share is a claim to partial ownership in a firm

The sale of a stock to raise money is called Equity Financing

Shares offer both higher risk and potentially higher returns

b Financial intermediaries

 Savers can indirectly provide funds to borrowers

 2 important intermediaries: Banks

Private saving: S= Y – C – T (tax  revenue for government, household)

Public saving: S= T – G, government budget: T = G  =0, balanced budget

T > G  >0, budget surplus

T < G  <0, budget deficit

==> I = S

3 Loanable funds (vốn cho vay) and market for loanable funds

 Financial market coordinates the economy’s S and I in the market for loanable funds

 Market for loanable funds have 2 variables: Real interest rate (%)

Quantity of loanable funds

a Supply of loanable funds

 Supply of loanable funds comes from people who have extra income they want to save and lend out [households]

 Là 1 đường dốc lên từ trái sang phải  Với mức lãi suất thực tế cao hơn thì người cho vay sẵn long cho vay nhiều hơn [saving people]

b Demand of loanable funds

 Demand of loanable funds comes from households/ firms that wishes to borrow to make

investment

 Là 1 đường dốc xuống từ trái sang phải  Với mức lãi suất càng cao thì người đi vay cảm thấy chi phí để vay vốn đắt hơn và sẽ vay ít đi [investment people]

c Equilibrium of loanable funds

 The equilibrium of the S and D for loanable funds determines the real interest rate

 The real interest rate represents the amount that borrowers pay for loans and the amount that savers receive on their saving

4 Government policies and taxes

 Government policies affect S and I

a Policy 1: Taxes and S (affect Supply,  )

 T : Under income tax, the future payoff from current saving

Under consumption tax,  the incentive to save (income that is saved is not taxed)

 T :  incentive for households to save at any given interest rate

D1

Q D2 R1

b Policy 2: Taxes and Investment (affect Demand,  )

 An investment tax credit increases the incentive to borrow

 If a change in tax laws encourages greater investment, the result will be greater interest rates and greater saving (Q increase from Q1 to Q2, nhìn vào đường Supply)

An  in D of loanable funds

 r , Q

c Policy 3: Government budgets – surplus or budget deficit (affecting S,  )

 G > T = budget deficit

 Accumulation of past budget deficit is called the government debt

 Government borrowing to finance its budget deficit REDUCES Q of loanable funds

 The fall in investment is referred as crowding up

 budget deficit DECREASES S of loanable funds

When G borrows more to  expenditure:

 B = the intermediate step for A to become C

(new equilibrium)

 in the same rate, from A to B = shortage

  R1 to R2 to solve the problem