Understanding Economic Activity and Macroeconomics

Posted on Dec 12, 2024 in Economy

Introduction

In one area, there are the following facts:

  • It generated large quantities of goods and services.
  • The company has cash resources to spend.
  • We need to know these resources are spent on.

Applied Economics – Measuring Economic Activity: It is all those operations to produce goods and services using labor and capital to do some intermediate inputs into a production process in order to obtain outputs.

Measuring Economic Activity

To measure economic activity, we need to define, for an understanding of the imbalances in an economy, compared to one another in different countries and regions:

  • Some indicators are economic variables; we report on the economic activity. They can be:
    • Ratio, the ratio of two magnitudes.
    • Proportions, a special case of ratio that measures the weight of an item compared to the total.
    • Index numbers, allow comparison between one or more series to establish the reason for each series with the base year t X 100 / / X 0.
    • Growth rates, measures the increase or decrease experienced by a variable between two periods. X 1 – X 0. 100 / / X 0.
  • The criteria for the different variables relations to interpret.
  • All of this information to be useful will require:
    • That this is available when they make a decision.
    • That this is in sufficient detail.

Macroeconomics

Economic science studies the behavior of individual agents and discusses their interrelationships and the results thereof. There are two large blocks of microeconomics and macroeconomics.

We define microeconomics as the study of the decisions of individual operators at the individual level.

We define macroeconomics as the study of the functioning of the economy as a whole, or put another way, the study of how households and firms make decisions and interact in markets. Study the overall progress of the economy through macro economic variables are calculated from the accounting definition, obtained directly or through statistical estimates, reports the country’s economic situation.

Basic Goals of Macroeconomics

  1. Growth of GDP or output growth.
  2. Achieve low unemployment.
  3. Control of inflation or price stability.
  4. Reduction of the public deficit.
  5. Balance of Payments (BOP).
  6. Stabilize the exchange rate.

Macro Variables

  • With regards to prices:
    • General price level (NGP).
    • Consumer Price Index (CPI).
  • With regards to the production:
    • Gross Domestic Product (GDP).
    • Gross National Product (GNP).
    • Gross National Income (GNI).
    • Personal Disposable Income (PDI).
  • With regard to employment:
    • Unemployment rate.
    • Activity rate.
    • Dependency ratio.

National Accounts of Spain

This consists of a coherent and detailed accounts and tables that provide a systematic, comparable, and comprehensive economic activity in our country. It is a tool that allows a simplified representation of the economy.

The prices have an impact on economic variables because we can assess the economic variable:

  • Prices of the year, would be nominal magnitudes P t. Q t.
  • Prices of one year in common, would be real magnitudes P 0. Q t.

We will be marking to a year in common.

When we say that deflated a variable means that we eliminate the component will eliminate nominal price of real passing.

Macro-Magnitudes Relating to Prices

  • IPI: Industrial Price Index that affects the industrial sector and therefore the ability of competing firms in an international context.
  • IPA: Reflects the average level of agricultural prices. Year after year these have been reduced to fall below the standard of living of the people who depend on the agricultural sector leading to the need for aid, grants, change of activity, job losses.
  • IPC: Calculate the overall price level of goods and services purchased directly by consumers.

The CPI calculation allows us to calculate the inflation rate.

  • Inflation is defined as the continuous and widespread increase in prices of goods and services economy.
  • Deflation is defined as the continuous and widespread decline in the price level of goods and services economy.

A successful economy is to achieve price stability.

Macro-Magnitudes Related to Production

Before we must distinguish between:

  • National, when performed by residents of a country regardless of where they perform this activity.
  • Interior, when performed within the borders of one country by both residents and non-residents.
  • Intermediate consumption, value of goods and services used to produce other goods and services.
  • Final consumption, goods and services used directly for human needs both individual and collective.
    • Private consumption, final consumption made by households or families.
    • Collective consumption or public, value of the goods or services not intended for sale.

Other Concepts to Distinguish the Residence

  • Individuals are considered resident for national accounting person who resides in the country for more than a year.
  • Legal persons, from the time they are constituted, not having to require its activity for at least a year.

GDP, value of final goods and services generated by the production of an economy during a year within the economic territory.