Tutorial sheet 1 Flashcards
(6 cards)
How do the concepts of output, price, and income differ in macroeconomics versus microeconomics?
Microeconomics looks at the specific price of a good while Macro looks at the average prices like cross price index, Microeconomics output looks how at how much goods/services a firm or person can produce whereas Macro looks at the production of the economy (GDP) and Micro looks at an individual income whereas Macro looks at the national income in a country.
Why is Macroeconomics important?
Macroeconomics is super important because it helps us understand how the entire economy works. Looking at economic growth, inflation, unemployment and national income.
If GDP gap = Y – Y*
a) What is Y?
b) What is Y*?
Y is the real GDP and what the economy is producing while Y* is the potential GDP and what the economy could be producing the normal rate of utilization of inputs.
a) Why is the value the same regardless of the approach used to measure GDP?
Expenditure approach – adds up total spending on final goods/services.
Income approach – adds up all income earned from producing goods/services (wages, profits, rent etc).
Output (Value-added) approach – adds up the value added at each stage of production.
They’re all looking at the same economic activity from different angles.
Money spent by consumers (expenditure) becomes income for workers and businesses, which came from producing goods (output). So it’s the same money just moving around the economy in different roles.
Identify
two economic activities and two economic ‘bads’ in your country that are not measured
by GDP.
Informal work like selling food or doing hairstyles at home without a license and also casual housework are two economic activities not recorded. Environmental degradation and crime is not measured by GDP
How do macroeconomists use GDP to compare the living standards of citizens of
different countries?
They use Real GDP per capita which is real GDP divided by the population comparing the economic output per person.
