by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How to Convert Currencies with Exchange Rates?To compare the GDP of countries with different currencies, it is necessary to convert to a “common denominator” using an exchange rate, which is the value of one currency in terms of another currency. We express exchange...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
Why is Tracking Real GDP Important? Real GDP is important because it is highly correlated with other measures of economic activity, like employment and unemployment. When real GDP rises, so does employment.The most significant human problem associated with recessions...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How to Measure GDP?GDP can be measured based upon what is demanded for consumption or based upon what is produced. Since every market transaction must have both a buyer and a seller, GDP must be the same whether measured by what is demanded or by what is produced.GDP...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Nominal GDP Price Index?Nominal GDP Price Index is an index used to convert historical GDP numbers to a present value. It is a price index is a two-digit decimal number like 1.00 or 0.85 or 1.25 (though, for ease of use, it has traditionally been...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the GDP Deflator?GDP Deflator is a price index used to convert the stated level of GDP in an economy into real terms. This means that you are converting the current dollar value to the same dollar value at an earlier time period, so that you can compare the...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How to Convert Nominal to Real GDP?To convert nominal to real GDP, we generally use some form of index number. This puts the current value into real terms – meaning that it subtracts out inflation that has raised the costs of items calculated as part of GDP....
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Problem of Double Counting GDP?We define GDP as the current value of all final goods and services produced in a nation in a year. Final goods are goods at the furthest stage of production at the end of a year. Statisticians who calculate GDP must avoid the...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are the Tools for Macroeconomic Policy?National governments have two tools for influencing the macroeconomy. The first is monetary policy, which involves managing the money supply and interest rates. The second is fiscal policy, which involves changes in...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are Macroeconomic Frameworks?As you learn in the micro part of this book, principal tools that economists use are theories and models (see Welcome to Economics! for more on this). In microeconomics, we used the theories of supply and demand. In macroeconomics, we...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Tradeoff between Incentives and Income Equality?Government policies to reduce poverty or to encourage economic equality, if carried to extremes, can injure incentives for economic output. The poverty trap, for example, defines a situation where...
