Economics Blue chapters

Dennys Zenklusen 1

GDP -> Gross domestic product

definition:
how much money a country has in it's economy, economic growth. measures national
income.

Problems:
- It doesn't measure the quality of life nor the black market.
- population changes have to be taken into account, for example if the GDP rises 3% and
the population grows, does that mean everyones better off?

real GDP:
GDP - inflation ex. (GDP) 6% - 3% (inflation) = 3% -> the real GDP

GDP per capita:
GDP per person -> GDP : Population = GDP per capita

Economic growth

Benefits:
- increased income: increases in GDP mean that on average people have more
income
- more leisure time: as the economy grows it is possible that working hours
decrease because factories get much more efficient or so.
- greater life expectancy: as people earn more money they can afford better health
support which lets them live longer.
- better public services: a growing economy means that the government is able to
collect more taxes.

Problems:
- Regional differences: not everyone benefits the same from economic growth, for
example people in big cities can then take advantage off all the new better public
services, which people who live far away from the city cant.
- enviromental damage: as people have more money they can afford more cars and
more flights which releases more enviromental damaging gases than before.
- unsustainable growth: economic growth uses up more non-renewable resources
such as oil, gas, gold and iron ore.
- Inflation: if the economy grows to fast it may overheat, this can cause inflation.

Economic cycle Recovery

Boom Downturn









2



Depression & Recession

Inflation

Inflation is measured by the CPI -> Consumer price index
so basically its measured by comparing grocery bills.

demand pull inflation:
This means that theres an increase in the aggregate (=overall) demand.
This happens when:
- taxes have been decreased
- interest rates go down
- increase in gov. spending









Cost push inflation
costs to businesses go up.
like with the U.S oil embargo. This basicalli means that if a country doesnt receive
anything anymore then the prices for that specific product go up in that country.

Money supply inflation
-overall increase in money supply such as the weimar republic where Germany has
printed alot of money, which has lost worth that way.












Unemployment

A person who doenst have a job but is looking for one is considered unemployed.
Economics Blue chapters
Dennys Zenklusen 3

types of unemployment
- cyclical







-structural -> The structure of the economy changes for example when someones skill
are not used anymore in an economy. For example when a hurricane or so wipes out a
region with industries in it, then the worker of that firm are unemployed


-technological -> when you get replaced by a machine or a computer.

-frictional -> an actor for example brat pitt, when he finished a movie hes basically
unemployed until he starts the next one.

-seasonal -> for example a ski instructor, he has a job in the winter but hes unemployed
in the summer season.





Fiscal Policy

government policy on how to deal with a budget ( mostly taxing or borrowing )

Expansionary fiscal policy

taxing spending

They do that for economic growth and lower unemployment

Constractionaring fiscal policy

taxing spending

The only reason to do this is to decrease inflation











4
Monetary policy

this is to control demand and the interest rate

loose monetary policy

interest rates

tight monetary policy

interest rates


Macroeconomic objectives

what are we trying to do?
- low inflation
- low unemployment
- economic growth
- balance of payments
- protect the enviroment

Macroeconomic policy

How do we do that?

Fiscal -> demand (- taxing & spending)
monetary -> demand