ECON1102: Macroeconomics Aggregate saving –

University of New South Wales Private saving –

Public saving –
1 Measuring Macroeconomic Performance Investment – Depends on price of capital goods
Macroeconomic goals - Rising living standards, and real interest
avoidance of expansions/contractions, stable rate (opportunity
inflation, manageable debt, balance of cost).
consumption/saving. Supply of saving Costs of unemployment
GDP – Market value of final goods and services must equal demand Cost Economic Psychologic Social
produced in a country during a given period of time of investment. al
Production method – Sum market values of final Investment Example Not paying tax Self esteem Crime
goods/services produced domestically shifted by change Types of unemployment
Expenditure method – Sum amounts spent on final in technology, Frictional Structural Cyclical
goods/services produced domestically saving shifted by
Looking for Skill mismatch Business cycle
Income method – Sum revenue distributed from changed in government budget deficit
work
sale of final goods/services produced domestically Labour market model – Demand downward
Potential output – Output of an economy at full
Nominal GDP calculated with prices for that year sloping because of diminishing marginal returns to
employment
Real GDP calculated with prices from a base year labour.
Real GDP generally indicates economic well-being but
ignores distribution of wealth, leisure, etc 2 Short-term Economic Fluctuations
CPI – Cost of a basket of goods in current year Business Cycle
divided by cost of basket in base year
Inflation -
Inflation costs – Shoe-leather costs, noise in price
system, distortions of tax system, unexpected
redistribution of wealth, interference with long-run
planning and menu costs Demand shifted by – change in relative price of
output, change in productivity of workers
Supply shifted by – Change in size of working
population

Saving Lifecycle Precautionar Bequest Recession – 2 consecutive quarters of negative real

y GDP growth
Reason Life goals Emergencies Inheritance Okun’s Law –
Real interest rate and inflation –
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