StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Intermediate macroeconomics - Assignment Example

Cite this document
Summary
Business cycle undergoes four basic stages namely recession, trough, recovery and peak or boom. Recession refers to periods of contracting economic activities…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER94.9% of users find it useful
Intermediate macroeconomics
Read Text Preview

Extract of sample "Intermediate macroeconomics"

Intermediate macroeconomics Business cycle refers to the fluctuations in the economic activities taking place in the economy over a period of time. Business cycle undergoes four basic stages namely recession, trough, recovery and peak or boom. Recession refers to periods of contracting economic activities characterized by low production and unemployment level. Trough is a period of stagnant economic growth. Recovery is the above-average economic growth period while the peak marks the highest level of economic growth in which the economy is at full employment.

NBER defines recession as a significant decline in economic activities over a given period of less than few months expressed in real GDP or income level. The cycle can be illustrated graphically as shown below.Potential output is the total production of output that is possible when all the factors of production are fully and efficiently employed. For example when the unemployment rate is about 5% since a 0% unemployment rate cannot be achieved in real economic conditions. Actual output is the real physical output that has actually been produced in the economy.

Output gap is therefore expressed as the difference between the potential output and the real output. Large output gap is an indication of increased unemployment rate. The neo-classical theory uses output gap to explain business cycle.The IS is a curve that traces the interest rate (r) and the output level (y) that keeps the product market in equilibrium. It can be derived using the following equation.Y=c[y-t(y)]+i(r)+g dy=c’(dy-I’dy)+I’dr =c’dy-c’I’dy+I’dr dy-c’(1-i’)dy=I’dr dy(1-c’(1-i’)d=I’dr dy=I’dr/1-c’(1-i’) dy/dr=I’/1-c’(1-i’)The expenditure multiplier explains the amount o change in output due to a unit change in government expenditure while tax multiplier explains the amount of change in output due to a unit change in tax rate.

The LM is a curve that traces the output(y) and the interest rate (i) that keeps money market in equilibrium. It can be derived by the following equationm/p=l(r)+k(y) i’dr = -k’dy dr/dy=k’/l’If the sensitivity of money demand to the interest rate increases, the LM curve shifts to the left indicating an increase in interest rate as well as a decrease in output level.

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Intermediate macroeconomics Assignment Example | Topics and Well Written Essays - 250 words”, n.d.)
Retrieved from https://studentshare.org/macro-microeconomics/1635357-intermediate-macroeconomics
(Intermediate Macroeconomics Assignment Example | Topics and Well Written Essays - 250 Words)
https://studentshare.org/macro-microeconomics/1635357-intermediate-macroeconomics.
“Intermediate Macroeconomics Assignment Example | Topics and Well Written Essays - 250 Words”, n.d. https://studentshare.org/macro-microeconomics/1635357-intermediate-macroeconomics.
  • Cited: 0 times

CHECK THESE SAMPLES OF Intermediate macroeconomics

GDP Gauges the Status of a Countrys Economy

On the contrary, the intermediate goods and services are those that can be used in the production of the final goods and services.... This is due to the fact that expenditures on intermediate goods and services are included in the market value of expenditures that are made on the final goods and services (Mankiw 89).... Therefore, including both intermediate and final goods and services using the expenditure approach will lead to double counting thus and exaggeration of the true market value of GDP....
7 Pages (1750 words) Essay

Intermediate Microeconomic problem set section A & B

SECTION A 2.... Define dominant strategy equilibrium and Nash equilibrium.... Argue that the dominant strategy equilibrium is a special case of Nash Equilibrium.... A dominant strategy is a tactic that gives higher payoffs no matter what an opponent does.... Thus, dominant strategy equilibrium is a point where the players pick the best strategy in response to the dominant strategies picked by the dominant player (Kelly, 2003)....
4 Pages (1000 words) Coursework

The influence of macroeconomic conditions on market participants

This paper talks about the influence of the macro-economic factors on the economic performance of a firm.... While a company can control almost all of its micro-economic factors and use it to its advantage, without the full recognition of the macro-economic factors, the firm never succeed.... hellip; Management, financial sources, ability to advertise and communicate with its customers plays an important role in the activity of every organization....
7 Pages (1750 words) Essay

Sonys Business Strategy for the PlayStation Portable

This study "Sony's Business Strategy for the PlayStation Portable "provides an overview of Sony's business strategy for PSP by using fundamental microeconomic concepts.... This study discusses how critical it is for companies to primarily consider factors of demand.... hellip; With the launch of PlayStation Portable (PSP) in September 2005, Sony has reaped enormous gains as it sold more than 185,000 units in UK shops just four days after its release....
6 Pages (1500 words) Case Study

Current Macroeconomic Situation in the United States

macroeconomics.... This extension will add extra $267 billion to the program through which the Federal Reserve Bank sells some of its intermediate-term bonds with an aim of purchasing long-term bonds.... Gross domestic product is the total monetary value of services and goods produced within the country's borders, within a specified time usually one year....
2 Pages (500 words) Essay

Inter-Temporal Choice Consumer Model

The inter-temporal choice model, framed by Irving Fisher is a representation of the behaviour and the choice of consumption of the rational consumers over two time horizons which would ensure that the satisfaction of the consumers are optimised over the entire lifetime.... Thus… choice of an individual consumer over a period of time can be referred to as the inter-temporal choices that the individuals would make throughout the life time....
4 Pages (1000 words) Essay

Summarizing the main arguments of the case study: Trends in Labor Force Participation

"intermediate macroeconomics.... One of the current trends in business labor force is where the organizations are adopting a technique whereby they are practicing group based forms of work design rather than the workers working individually.... The organization assigns tasks to multifunctional teams in order to… This trend enables the organizations, to be able to engage its workers in higher complexity of work and also can enable the organization to adjust further it concepts methods, strategies and the skills of its workforce....
1 Pages (250 words) Essay

Major Issues in Microeconomics

Coal-seam mining affects the water table and subsequently the agriculture and with associated health costs. b) Sometimes, market outcome differs from… Market failure may occur when there is a negative externality that imposes an external cost on the society.... The efficient level of coal gas mining for the society is lower than the market quantity....
6 Pages (1500 words) Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us