EC140 Macro-Economics Notes – Final Exam Cheat Sheet

Summary:

The EC140 Macro-Economics Notes cover various topics related to economics, including income, GDP, exchange rates, unemployment, inflation, savings, and macroeconomic models. It begins by explaining the difference between nominal and real income, with nominal income representing current income and real income representing constant income measured using base-year prices. The text also discusses nominal GDP and introduces the GDP deflator, which relates real GDP to nominal GDP and is used to measure inflation. It explores the impact of exchange rates on inflation and describes different types of unemployment, such as cyclical, frictional, and structural unemployment.

The text further discusses the concept of potential output, which represents the maximum real GDP an economy can produce when all resources are fully employed. It also explains the output gap, which is the difference between actual GDP and potential GDP. Inflationary and recessionary gaps are discussed, with inflationary gaps occurring when actual GDP exceeds potential output and recessionary gaps occurring when actual GDP falls short of potential output.

The text touches on savings, investment, and the relationship between consumption and income. It explains the multiplier effect, where changes in autonomous spending lead to larger changes in overall GDP. The importance of money and its functions as a medium of exchange, store of value, and unit of account is also discussed. The role of the central bank in controlling the money supply and conducting monetary policy is highlighted.

Furthermore, the text covers topics related to government deficits and debt, the balance of payments, and the foreign exchange market. It discusses fiscal policy and its impact on aggregate demand, as well as the relationship between interest rates and investment. The text provides insights into the workings of the foreign exchange market and the factors that affect exchange rates.

Overall, the text provides a comprehensive overview of key macroeconomic concepts and their interconnections. It emphasizes the importance of understanding factors such as income, GDP, unemployment, inflation, savings, and government policies in analyzing and predicting economic trends.

Excerpt:

EC140 Macro-Economics Notes