Managing at the Crossroads: Business, Government, and the International Economy - MaC BGIE
Nestor Azcona nazcona@babson.edu
Session 1: March 26, 2012
Economic indicators
Session 2: March 28, 2012
Real GDP and Nominal GDP
Nominal GDP is computed using current prices
Nominal GDP(2004) = P(2004) * Q(2004)
Nominal GDP(2006) = P(2006) * Q(2006)
Real GDP is computed using constant prices
Real GDP(2004) = P(2005) X Q(2004)
Real GDP(2006) = P(2005) X Q(2006)
Base year = 2005
Business cycles:
http://en.wikipedia.org/wiki/Real_business_cycle_theory
Procyclical: In business cycle theory and finance, any economic quantity that is positively correlated with the overall state of the economy is said to be procyclical.[1] That is, any quantity that tends to increase when the overall economy is growing is classified as procyclical. Quantities that tend to increase when the overall economy is slowing down are classified as 'countercyclical'.
http://en.wikipedia.org/wiki/Procyclical
Countercyclical: An economic or financial policy is called 'countercyclical' (or sometimes 'activist') if it works against thecyclical tendencies in the economy.[1] That is, countercyclical policies are ones that cool down the economy when it is in an upswing, and stimulate the economy when it is in a downturn.[2]
http://en.wikipedia.org/wiki/Countercyclical
Leading indicators: http://en.wikipedia.org/wiki/Leading_indicators
Inflation: Inflation is directly related to nominal interest rates. Lenders are going to ask for more interest. Lenders are concerned with the REAL interest rate. If the lenders are worried about the inflation they will incorporate that in the interest rate.
(when inflation is high)
Nominal Interest Rate = Real interest rate + expected inflation rate + (real interest rate X expected inflation rate)
Session 3: April 2, 2012
Money and Economic Activity
Quantity of money - Interest rates - Aggregate spending - Production (real GDP)/unemployment
If you don't control your own money, you don't control your interest rate. You give up your currency you give up the control of your economy in a way.
Monetary base:
Session 8: April 13, 2012
Increase in GDP does not "cause" an increase in the value of teh currency.
Balance of payment
MGE Survival Guide: Top-10 Student Mistakes
Nestor Azcona nazcona@babson.edu
Session 1: March 26, 2012
Economic indicators
- Economic Growth (GDP)
- Inflation Rate (CPI)
- Unemployment rate
Labor Distribution:
Total population
Civilian Non-Institutional Population - Children, Soldiers & inmates
Labor force - Not in the Labor Force
Employed - Unemployed
Types of unemployment:
Frictional unemployment:Frictional unemployment exists because both jobs and workers are heterogeneous, and a mismatch can result between the characteristics of supply and demand. Such a mismatch can be related to skills, payment, worktime, location, attitude, taste, and a multitude of other factors. New entrants (such as graduating students) and re-entrants (such as former homemakers) can also suffer a spell of frictional unemployment. http://en.wikipedia.org/wiki/Frictional_unemployment
Structural unemployment: Structural unemployment is a form of unemployment resulting from a mismatch between demand in the labour market and the skills and locations of the workers seeking employment. Even though the number of vacancies may be equal to, or greater than, the number of the unemployed, the unemployed workers may lack the skills needed for the jobs, or they may not live in the part of the country or world where the jobs are available. http://en.wikipedia.org/wiki/Structural_unemployment
Cyclical unemployment: Cyclical or Keynesian unemployment, also known as deficient-demand unemployment, occurs when there is not enough aggregate demand in the economy to provide jobs for everyone who wants to work. Demand for most goods and services falls, less production is needed and consequently fewer workers are needed, wages are sticky and do not fall to meet the equilibrium level, and mass unemployment results.
GDP and GNP
Excluded from GDP:
- intermediate goods
- black market
- non-market
- used goods
What do you count in GDP
GDP = C + I + G + Ne
C: consumption
I: Investment
G: Govt. expenses
Ne: Net Exports
Session 2: March 28, 2012
Real GDP and Nominal GDP
Nominal GDP is computed using current prices
Nominal GDP(2004) = P(2004) * Q(2004)
Nominal GDP(2006) = P(2006) * Q(2006)
Real GDP is computed using constant prices
Real GDP(2004) = P(2005) X Q(2004)
Real GDP(2006) = P(2005) X Q(2006)
Base year = 2005
Business cycles:
http://en.wikipedia.org/wiki/Real_business_cycle_theory
Procyclical: In business cycle theory and finance, any economic quantity that is positively correlated with the overall state of the economy is said to be procyclical.[1] That is, any quantity that tends to increase when the overall economy is growing is classified as procyclical. Quantities that tend to increase when the overall economy is slowing down are classified as 'countercyclical'.
http://en.wikipedia.org/wiki/Procyclical
Countercyclical: An economic or financial policy is called 'countercyclical' (or sometimes 'activist') if it works against thecyclical tendencies in the economy.[1] That is, countercyclical policies are ones that cool down the economy when it is in an upswing, and stimulate the economy when it is in a downturn.[2]
http://en.wikipedia.org/wiki/Countercyclical
Leading indicators: http://en.wikipedia.org/wiki/Leading_indicators
Inflation: Inflation is directly related to nominal interest rates. Lenders are going to ask for more interest. Lenders are concerned with the REAL interest rate. If the lenders are worried about the inflation they will incorporate that in the interest rate.
(when inflation is high)
Nominal Interest Rate = Real interest rate + expected inflation rate + (real interest rate X expected inflation rate)
Session 3: April 2, 2012
Money and Economic Activity
Quantity of money - Interest rates - Aggregate spending - Production (real GDP)/unemployment
If you don't control your own money, you don't control your interest rate. You give up your currency you give up the control of your economy in a way.
Monetary base:
Session 8: April 13, 2012
Increase in GDP does not "cause" an increase in the value of teh currency.
Balance of payment
MGE Survival Guide: Top-10 Student Mistakes
