Economics For Engineers - Final 1

Economics for Engineers / Final 1 – Part 1
• Macroeconomic Concerns / Indicators

• Output (Income) Growth
• Unemployment
• Inflation and Deflation
• Budget Balance
• Balance of Payment
• The Components of the Macroeconomy
• The Circular Flow Diagram
• The Role of Governments in the Economy
• The Turkey Economy since 1923
Economics for Engineers 1

Dr. Necmettin ÇELİK
PRINCIPLES OF MACROECONOMICS
TENTH EDITION
CASE FAIR OSTER

Macroeconomic Concerns / Indicators
microeconomics Examines the functioning of individual industries and

the behavior of individual decision-making units—firms and households
macroeconomics Deals with the economy as a whole. Macroeconomics

focuses on the determinants of total national income, deals with
aggregates such as aggregate consumption and investment, and looks at
the overall level of prices instead of individual prices.
Five of the major concerns of macroeconomics are
Output growth
Unemployment
Inflation and Deflation
Budget Balance
Balance of Payment

Output Growth
aggregate output The total quantity of goods and services produced in

an economy in a given period
output (income) growth An increase in the total output of an economy
*recession (durgunluk) A period during which aggregate output

declines. Conventionally, a period in which aggregate output declines for
two consecutive quarters
*depression (daralma) A prolonged and deep recession

Output Growth – Business Cycle
expansion or boom The period in the business cycle from a trough up to a peak
during which output and employment grow.
contraction, recession, or slump The period in the business cycle from a peak down
to a trough during which output and employment fall.
In this business cycle, the economy is

expanding as it moves through point
A from the trough to the peak.
When the economy moves from a

peak down to a trough, through
point B, the economy is in recession.
business cycle The cycle of short-

term ups and downs in the economy.

Unemployment
unemployment rate The percentage of the labor force that is unemployed
A
Voluntary unemployment: It is defined as a situation when workers choose not to work at the current equilibrium wage
rate because of several reasons.
B
Natural Unemployment: There will always be some level of unemployment in all economy.
(% 4,5 - % 5)
Frictional Unemployment: It occurs when workers exchange their jobs or students are looking for first job after
school. It’s partial and temporary.
Structural Unemployment: Structural unemployment is when shifts occur in the economy that creates a mismatch
between the skills workers have and the skills needed by employers.
Technological Unemployment: It caused by technological improvements
Cyclical Unemployment: It's caused by the recession phase of the business cycle. That's when demand for goods and
services fall dramatically, forcing businesses to lay off large numbers of workers to cut costs.
Seasonal Unemployment: It results from regular changes in the season.
Hidden Unemployment: They have “0” marginal effect (contribution) on output process .

Inflation and Deflation
inflation An increase in the overall price level
hyperinflation A period of very rapid increases in the overall price level.
stagflation A situation of both high inflation and high unemployment.
deflation A decrease in the overall price level.

The Circular Flow Diagram
Households receive income from firms and

the government, purchase goods and services
from firms, and pay taxes to the government.
They also purchase foreign-made goods and

services (imports).
Firms receive payments from households

and the government for goods and services; they
pay wages, dividends, interest, and rents to
households and taxes to the government.
The government receives taxes from

firms and households, pays firms and households
for goods and services—including wages to
government workers—and pays interest and
transfers to households.

The Three Market Arenas
We divide the markets into three broad arenas:
(1) The goods-and-services market
(2) The labor market
(3) The money (financial) market

The Three Market Arenas
Goods-and-Services Market
Firms supply to the goods-and-services market. Households, the

government, and firms demand from this market
Labor Market
In this market, households supply labor and firms and the government
demand labor.
Money Market
Households supply funds to this market in the expectation of earning
income in the form of dividends on stocks and interest on bonds.

The Role of the Government in the Macroeconomy
fiscal policy Government policies concerning taxes (T) and spending

(G)
Contractionary Fiscal Policy

Expansionary Fiscal Policy
monetary policy The tools used by the Federal Reserve to control

the quantity of money, which in turn affects interest rates.
Contractionary Monetary Policy

Expansionary Monetary Policy

Measuring National Output and National Income – Part 2
Gross Domestic Product

Calculating GDP
The Expenditure Approach
The Income Approach
Nominal versus Real GDP
Calculating Real GDP
Calculating the GDP Deflator
The Problems of Fixed Weights
Limitations of the GDP Concept
GDP and Social Welfare
The Underground Economy
Gross National Income per Capita

Gross Domestic Product
gross domestic product (GDP) The total market value of all final goods
and services produced within a given period by factors of production
located within a country.
GDP is the total market value of a country’s output
final goods and services Goods and services produced for final use.
intermediate goods Goods that are produced by one firm for use in further
processing by another firm.

Gross Domestic Product versus Gross National Product
GDP is the value of output produced by factors of production located

within a country.
gross national product (GNP) The total market value of all final goods
and services produced within a given period by factors of production
owned by a country’s citizens, regardless of where the output is
produced.
GNP = GDP + NFI (Net Factor Income)

NFI: payments from foreign countries for factors of production - payments to foreign countries
for factors of production
GDP > GNP

GDP < GNP

Calculating GDP
expenditure approach A method of computing GDP that measures the total

amount spent on all final goods and services during a given period.
income approach A method of computing GDP that measures the

income—wages, rents, interest, and profits—received by all factors of
production in producing final goods and services.

The Expenditure Approach
There are four main categories of expenditure:
Personal consumption expenditures (C): household spending on

consumer goods
Gross private domestic investment (I): spending by firms and

households on new capital, that is, plant, equipment, inventory, and
new residential structures
Government consumption and gross investment (G)
Net exports (EX  IM): net spending by the rest of the world, or
exports (EX) minus imports (IM)
GDP = C + I + G + (EX  IM)

Other Topics
Nominal versus Real GDP
Nominal GDP = [PA (current year) X QA] + [PB (current year) X QB]
Real GDP = [PA (base year) X QA (current year)] + [PB (base year) X QB (current year)].
3,000,000,000
2,500,000,000
2,000,000,000
1,500,000,000
1,000,000,000
500,000,000
0
2009 2010 2011 2012 2013 2014 2015 2016
GDP (Nominal) GDP (Baseyear_2009)

Real GDP Growth Rate in Turkey
12
Decline Trend
10
6 Real Gdp
Linear (Real Gdp)
0
2010 2011 2012 2013 2014 2015 2016

Other Topics
GDP versus Social Welfare
Economic Growth versus Economic Development
The Key Indicators of Economic Development

High Income per capita
High Life Expectancy
Low Infant Mortality Rate
High Quality in Public Services (High Accessibility etc.)
The Number of Hospital per capita etc.
High Literacy Rate - High Qualified Education System
The Number of School per capita etc

Research Homework
-Examine and explain the Human Development Index

and Its Main Components
(Give information about Turkey’s rank and relative status in the world)
Link:
http://hdr.undp.org/en/composite/HDI
-Examine and explain the Sustainable Development

Goals (2015-2030) identified by UN (17 Goals)
Link:
https://www.un.org/sustainabledevelopment/sustainable-development-goals/


Economics For Engineers - Final 1

Uploaded by

Copyright:

Available Formats

You might also like

Economics For Engineers - Final 1

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Economics For Engineers - Final 1

Uploaded by

Copyright:

Available Formats

Economics for Engineers / Final 1 – Part 1

• Macroeconomic Concerns / Indicators

Economics for Engineers 1

CASE FAIR OSTER

microeconomics Examines the functioning of individual industries and

macroeconomics Deals with the economy as a whole. Macroeconomics

Five of the major concerns of macroeconomics are

Economics for Engineers 3

aggregate output The total quantity of goods and services produced in

output (income) growth An increase in the total output of an economy

*recession (durgunluk) A period during which aggregate output

*depression (daralma) A prolonged and deep recession

Economics for Engineers 4

In this business cycle, the economy is

When the economy moves from a

business cycle The cycle of short-

Economics for Engineers 5

Technological Unemployment: It caused by technological improvements

Seasonal Unemployment: It results from regular changes in the season.

Economics for Engineers 6

inflation An increase in the overall price level

hyperinflation A period of very rapid increases in the overall price level.

stagflation A situation of both high inflation and high unemployment.

deflation A decrease in the overall price level.

Economics for Engineers 7

Households receive income from firms and

They also purchase foreign-made goods and

Firms receive payments from households

The government receives taxes from

Economics for Engineers 8

We divide the markets into three broad arenas:

(1) The goods-and-services market

(2) The labor market

(3) The money (financial) market

Economics for Engineers 9

Firms supply to the goods-and-services market. Households, the

Economics for Engineers 10

fiscal policy Government policies concerning taxes (T) and spending

Contractionary Fiscal Policy

monetary policy The tools used by the Federal Reserve to control

Contractionary Monetary Policy

Economics for Engineers 11

Gross Domestic Product

Economics for Engineers 12

GDP is the total market value of a country’s output

Economics for Engineers 13

GDP is the value of output produced by factors of production located

GNP = GDP + NFI (Net Factor Income)

GDP > GNP

Economics for Engineers 14

expenditure approach A method of computing GDP that measures the total

income approach A method of computing GDP that measures the

Economics for Engineers 15

There are four main categories of expenditure:

Personal consumption expenditures (C): household spending on

Gross private domestic investment (I): spending by firms and

Government consumption and gross investment (G)