1、Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-1,CHAPTER 2,Measuring the Macroeconomy,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-2,Questions,What key data do macroeconomists look at? How are key macroeconomic data estimated and calculated? What
2、 is the difference between “nominal” and “real” values? How are stock market values related to interest rates?,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-3,Questions,How are interest rates related to the price level and the inflation rate? How is unemployment related to
3、 total production? What is right-and what is wrong-with the key measure of economic activity, real GDP?,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-4,The Importance of Data,Economists use quantitative data to examine and understand behavior prices quantities values Data
4、can be used in two ways make quantitative forecasts test economic theories,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-5,Most Important Macroeconomic Data,real GDP the unemployment rate the inflation rate the interest rate the level of the stock market the exchange rate,
5、Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-6,Table 2.1 - The Six Key Economic Variables,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-7,The Exchange Rate,The nominal exchange rate is the relative price of two different currencies determined in
6、 the foreign exchange market Example 1.00 equals $1.20 $1.00 equals 0.83,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-8,The Exchange Rate,Domestic exporters earn foreign currency when they export products need to trade the foreign currency for dollars Foreign producers ea
7、rn dollars when U.S. residents import their products need to trade the dollars for foreign currency,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-9,Figure 2.1 - The Market for Foreign Exchange,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-10,The
8、Exchange Rate,The real exchange rate is the nominal exchange rate adjusted for changes in the value of the currency depends on the nominal exchange rate and the price level,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-11,The Exchange Rate,Example 1 nominal exchange rate c
9、hanges from $1.20 = 1.00 to $2.40 = 1.00 price level doubles real exchange rate is unchanged Example 2 nominal exchange rate remains at the same level ($1.20 = 1.00) price level doubles real exchange rate falls by half,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-12,The E
10、xchange Rate,Example 3 nominal exchange rate increases from $1.20 = 1.00 to $2.30 = 1.00 price level remains the same real exchange rate doubles,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-13,The Exchange Rate,To calculate the real exchange rate (), you need three pieces
11、 of information price level in the home country (P) price level abroad (P*) nominal exchange rate (e),Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-14,The Exchange Rate,There are many different currencies in the world many different exchange rates Economists construct an e
12、xchange rate index to represent “the” exchange rate each country receives a weight equal to its share of total U.S. trade,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-15,The Exchange Rate,The exchange rate index is by averaging each countrys current exchange rate relative
13、 to its exchange rate in the base year (1992),Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-16,Figure 2.2 - The Exchange Rate Index, 1992-1998,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-17,The Stock Market,The most representative index of the
14、U.S. stock market is the Standard and Poors Composite Index (S&P 500)The most commonly discussed index of the U.S. stock market is the Dow-Jones Industrial Average,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-18,The Stock Market,Stock market averages are in nominal terms
15、must divide by some measure of the price level to get the real value of the stock market The real value of the stock market is a sensitive indicator of the relative optimism or pessimism of investors can forecast future investment spending,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights
16、 reserved.,2-19,The Stock Market,Investors face a choice between holding stocks and holding bonds stocks are shares of ownership of a corporation entitles you to a portion of the companys profits bonds are debts that the corporation owes you pays periodic interest payments and returns principal to y
17、ou at maturity,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-20,The Stock Market,Rates of return for bonds, the rate of return is the interest rate (r) for stocks, the rate of return is the ratio of earnings per share (Es) to the price paid (Ps) Stocks are risky investors
18、may require a risk premium (s),Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-21,The Stock Market,Investors will hold only stocks if,Investors will hold only bonds if,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-22,The Stock Market,Investors will
19、 hold both stocks and bonds if,This means that the value of a stock is equal to,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-23,The Stock Market,How can we measure Es? newspaper reports what the firms accountants have calculated (Ea) investors are interested in some long-
20、run average of expected future earnings (Es) need an estimate of the relationship between Ea and Es,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-24,Figure 2.3 - Calculating the Value of a Basket of Stocks,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserv
21、ed.,2-25,The Stock Market,provides information on the current level of profits (earnings) whether investors are optimistic or pessimistic the current cost of capital attitudes toward risk,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-26,The Interest Rate,is the price at wh
22、ich purchasing power can be shifted from the future into the present is not a single lump sum, but an ongoing stream of payments made over time is a flow variable,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-27,The Interest Rate,There is a large number of different intere
23、st rates that vary by risk duration tax treatment Published interest rates are nominal interest rates,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-28,Figure 2.4 - The Real versus the Nominal Interest Rate,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserv
24、ed.,2-29,The Price Level,is most frequently measured by the Consumer Price Index (CPI) which is calculated monthly by the Bureau of Labor Statistics is an expenditure-weighted index,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-30,Table 2.5 - Calculating a Price Index for
25、Fruit: An Example,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-31,The Consumer Price Index,Price index formula,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-32,The Consumer Price Index,In the base year, the price index will equal 100,Copyright 2
26、002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-33,The Consumer Price Index,In the subsequent year, the price index will equal 138,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-34,Kinds of Index Numbers,Laspeyres index uses relative expenditure levels in a fi
27、xed base year as weights example: Consumer Price Index Paasche index uses current, variable expenditure levels as weights example: GDP deflator,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-35,Kinds of Index Numbers,All price indices are imperfect the Laspeyres index overs
28、tates the effects of price increases based on a fixed market basket does not take into account that consumers substitute relatively cheaper goods for relatively more expensive goods when prices rise (substitution bias),Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-36,Kinds
29、 of Index Numbers,All price indices are imperfect the Paasche index understates the effects of price increases does take account of substitution does not take into account the fact that substituted items are less-valued than the items they replace,Copyright 2002 by The McGraw-Hill Companies, Inc. Al
30、l rights reserved.,2-37,The Inflation Rate,is a measure of the rate of change in the price level over time is a flow variable can be measured using different price indices Consumer Price Index (CPI) GDP deflator,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-38,Figure 2.5 -
31、 Different Measures of U.S. Inflation, 1960-2000,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-39,The Unemployment Rate,is the fraction of people who want a job are looking for a job cannot find a job is calculated using the Current Population Survey monthly survey by the
32、Bureau of Labor Statistics,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-40,The Unemployment Rate,Individuals are classified into one of four categories those who are employed those who are out of the labor force and do not want a job currently those who do want a job curr
33、ently, but have given up looking for one those who do want a job and are currently looking for one,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-41,The Unemployment Rate,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-42,Figure 2.6 - The U.S. Unemp
34、loyment Rate since 1950,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-43,The Unemployment Rate,is a stock variable may underestimate the real experience of unemployment discouraged workers workers who are part-time for economic reasons vary by demographic group,Copyright 2
35、002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-44,Figure 2.7 - U.S. Unemployment Rates by Demographic Group, 1960-2000,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-45,Okuns Law,describes the relationship between unemployment and output in the U.S.,implies t
36、hat a 1 percentage-point fall in unemployment is associated with an extra 2.5 percentage points of growth in real GDP,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-46,Figure 2.8 - Okuns Law,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-47,Real GD
37、P,is calculated by adding up the value of all final goods and services produced in the economy is a flow variable includes final goods and services purchased by consumers firms the government,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-48,Nominal versus Real GDP,Nominal
38、GDP measures current output using current-year prices changes in nominal GDP can occur from changes in either output or pricesReal GDP measures current output using prices from a base year changes in real GDP can only occur if output changes,Copyright 2002 by The McGraw-Hill Companies, Inc. All righ
39、ts reserved.,2-49,Nominal versus Real GDP,Example,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-50,Base Year Nominal GDP = $10.00 Real GDP = $10.00Current Year Nominal GDP = $13.10 Real GDP = $11.50,Nominal versus Real GDP,Copyright 2002 by The McGraw-Hill Companies, Inc.
40、All rights reserved.,2-51,More on GDP,Intermediate goods are goods sold to a firm for use in further production are excluded from GDP Changes in inventories are counted as part of investment Imputations are made for goods and services not sold through markets,Copyright 2002 by The McGraw-Hill Compan
41、ies, Inc. All rights reserved.,2-52,Components of Real GDP (Y),Consumption (C) Investment (I) residential structures non-residential structures producers durable equipment changes in business inventories Government purchases (G) Net exports (NX),Copyright 2002 by The McGraw-Hill Companies, Inc. All
42、rights reserved.,2-53,Table 2.8 - Components of GDP, Third Quarter of 2000,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-54,What Is and Is Not in GDP,Included in GDP (but should not be) replacement of worn-out or obsolete capital government purchases which could be counted
43、 as intermediate goods Not included in GDP (but should be) household production depletion of scarce natural resources “bads”,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-55,Figure 2.9 - Labor Force Participation Rates by Gender, 1948-1996,Copyright 2002 by The McGraw-Hill
44、 Companies, Inc. All rights reserved.,2-56,Chapter Summary,Because goods and services are bought and sold with prices attached, economists have a lot of quantitative data to work with The real exchange rate is the relative price at which two countries goods exchange for each other calculated by adju
45、sting the nominal exchange rate for changes in the price levels of the two countries,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-57,Chapter Summary,The level of the stock market reflects the variables which affect investment current profits investors optimism or pessimis
46、m the real rate of interest attitudes toward risk The real interest rate is calculated by subtracting the inflation rate from nominal interests rates,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-58,Chapter Summary,The most-commonly seen measure of the price level is the C
47、onsumer Price Index (CPI) the inflation rate is the rate of change in the CPI Unemployment and output are linked through Okuns law a 1 percentage-point decrease in the unemployment rate leads to a 2.5 percent increase in output,Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.,2-59,Chapter Summary,Real GDP is the most commonly-seen measure of the overall level of economic activity calculated using prices from a base year What is and what is not included in GDP is the result of economists beliefs in the 1940s and 1950s about what would be possible to measure easily,
