NOTES:

Macroeconomics:
- Fiscal policy: taxes (direct → taken from the person directly: income,
or indirect → vat) and government spending
- Monetary policy: interest rates

Policies: instruments governments have to achieve macroeconomics

Income tax: the higher the income the more the higher the tax percentage

Inflation: percentage increase of prices in a economy

Economic growth: increase in a country’s real GDP over time

↳ more output: more goods and services

Gdp rising: economy expanding

↳ market value of all finished (that will not be sold again) good and services produced within
a country in a year
↳ all producer goods that are going to be part of another good are intermediate goods
↳ old things sold this year don’t count → only things produced that year count
↳ measures market value
↳ illegal activities are not counted (drugs/black market)
↳ capital goods are counted → used to make but it isn’t PART of it
↳ production within the country
—> if it increases but at less percentage, increasing at a decreasing rate

Intermediate goods: goods that become part of other goods

Real GDP:
more goods and services → higher GDP (we want that)
- it uses the same set of prices → how much would gdp have changed if prices hadn’t
changed → using prices of a base year
- used to compare economy over time
- real gdp lowers → unemployment falls
- takes into account inflation
- compare output, not money
- GDP → adjusted for inflation

GDP:
- Domestic→ take into account the outputs inside a country that are produced in the
country, even if it is produced here by foreign companies
- GDP: expenditure approach → what happens to all the goods and services that get
produced?
- 1st: household/ consumer sector
 - 2nd: business/firms → capital goods/investment
- 3rd: government → services and goods for the public → transfer payments
are not included (because there is no output)
- 4th: foreign → net (exports-imports) exports → ex. soja in Arg
- GDP formula: Consumption + Investments + Government spending + Net exports
- It is a flawed indicator, because…
→ Less leisure. Country A can produce the same GDP as country B, but country A
does it in half the time, so they have more leisure time, better standard of living.
→ Inequality of income, GDP per capita tells you the income per person, but not how
it is distributed. It doesn’t tell you who gets how much.
→ Safety
→ Freedom of speech
→ Taxes
→ Health/education
→ Happiness
→ Inflation/currency
→ Black economy (parallel market)
→ Do it yourself
→ Environmental impact, produce the same but one contaminates much more.
→ Quality of goods produced

GNP:
- National → everything produced by people from a country in the whole world, like the
production of all argentinians in the world

NDP:
- Net domestic product
- Measure the NEW output, not what is being replaced.
- Deducting depreciated items.

Nominal GDP: Real GDP Per capita Economic growth:

higher prices → higher ↳ average output per Important:
GDP person - Less
unemployment
- Less poverty
- Better standard of
living

Recession: GDP fall for at least 6 months

EXPANSION PERIOD:
→ Real GDP goes up (more goods and services produced), Unemployment goes down,
Inflation goes up (because prices go up as there is higher demand), Expenditure on capital
goods goes up (because there is more demand and more output).
PEAK: Expansion finishes and starts to fall.

CONTRACTION: Fall in Real GDP. Negative percentage change in GDP. Can happen in 1 or 2
months.

RECESSION: contraction/falling GDP that lasts at least 6 months.

→ Real GDP goes down (less goods and services produced), Unemployment goes up,
Inflation goes down (because prices go down as there is less demand), Expenditure on
capital goods goes down (because there is less demand and less output).

TROUGH: Ends the recession and begins the expansion.

CAUSES of economic growth → IMPORTANT

→ More quantity or quality of factors of production:
- More land → QUANTITY: + extension of land, new resources → helps increase output
→ QUALITY: better planning of plant usage, irrigation and fertilizer of land

- More labor→ QUANTITY: → encouraging working, inmigration, extending the retirement

age
→ QUALITY: (how to make them more productive) training, education (improving the
human capital) (when you think better, you are more productive), improving their
health

- More capital→ QUANTITY: new machines, buildings

→ QUALITY: innovative machines, improving education in a country to have research
and development of technology

- More entrepreneurship→ that combines/organizes these resources in a productive

and efficient way to have more output

→ Institutions: essential to achieve higher outputs

- Good legal systems → property rights are respected → more investment
- Good property system
- Good education system
- Good political stability
- Good banking system → people deposit money because they know they will get it
back
- Good infrastructure → TRANSPORT (railroads, airports, harbors)(without them
materials can’t move around), FACTORIES
↳helps increase consumer confidence

→ Incentives
- Less taxes and financial help (grants) → more production of goods and services

CONSEQUENCES of economic growth = more output

→ Benefits:
 - More and new jobs
- Higher incomes → higher standard of living → people can buy more goods and
services
- More tax revenues → more expenditure or income or business profit→ they collect
more vat or income tax or taxes paid by firms → to spend in infrastructure
- Rising wealth → reduces poverty
- Higher profit → more investment

→ Risk:
- more income → more demand → if supply is not able to match demand prices go up
- rising inequality
- risks of environmental damage
- overuse of resources

ACTIVITIES:

Research nº1:
1. List the 5 countries with the highest real GDP in the world.
1) China
2) USA
3) India
4) Japan
5) Germany

2. List the 5 countries with the lowest real GDP in the world.
1) Tokelau
2) Niue
3) Saint Helena, Ascension
4) Tuvalu
5) Wallis and Fortuna

3. List the 5 countries with the highest real GDP pc in the world. Are they the same than in 1? Why?
Because these countries are lower in population, but very rich. They have large GDp and small
population, so real GDp very big.
1) Liechtenstein
2) Monaco
3) Luxembourg
4) Singapore
5) Ireland

4. List the 5 countries with the lowest real GDP pc in the world. Are they the same than in 2? Why?
Could be due to less output (poor) and more people.
1) Burundi
2) Somalia
3) Central African Republic
4) Congo
 5) Niger

5. Identify the country with the highest and lowest real GDP pc by region…

North America:
- Highest= United States
- Lowest= Saint Pierre and Miquelon
South America:
- Highest= Brazil
- Lowest= Falkland Islands (Islas Malvinas)
Europe:
- Highest= Lichtenstein
- Lowest= Kosovo
Oceania:
- Highest= Australia
- Lowest= Tokelau
Africa:
- Highest= Seychelles
- Lowest= Burundi
Central Asia:
- Highest= Russia
- Lowest= Kyrgyzstan

6. Which are the countries with the highest and lowest rates of economic growth in the world? Find
out the possible reasons why this is so.

North America:
- Highest rates= Greenland (7.70%)
- Lowest rates= Mexico (-0.30)
South America:
- Highest rates= Falkland Islands (Islas Malvinas) (25.50%)
- Lowest rates= Venezuela (-19.67%)
Europe:
- Highest rates= Faroe Islands (5.90%)
- Lowest rates= Isle of Man (-8.60%)
Oceania:
- Highest rates= Northern Mariana Islands (28.60%)
- Lowest rates= Palau (-3.70%)
Africa:
- Highest rates= Libya (64.00%)
- Lowest rates= South Sudan (-5.20%)
Central Asia:
- Highest rates= Tajikistan (7.10%)
- Lowest rates= Russia (1.34%)