ECO102 Lecture 01
Pre-Lecture
Lecture
- Macroeconomics is about short run disequilibrium.
- Theory about government behaviour.
- When the economy is doing poorly, the govt spends more money to stimulate, or vice versa.
- If you know what the govt is going to do to manipulate consumers, then you can't be manipulated by understanding macroeconomics.
- Since WW2 (MOC) countries band together to manipulate the economy.
- Graunt:
- He was able to predict the population.
- He got a measure of life expectancy.
- Church records gave him birth records.
- Tombstones gave him life expectancy.
- He was able to forecast population.
- Graunt's contribution to statistics :: Forecasted population and life expectancy using church records and tombstones
- Three ways to measure and Economy
- Double counting problem
- Value Added in Macroeconomics
- GDP
- NDP
- Home Production
- Double counting is avoided by using :: The value added method
- GDE
- GDI
- Ex:
- GDE = GDI
- Demonstrate that GDI = GDE = 60
- Household consumption goes into GDE
- Europe involves illegal activites into GDP
- Numbers would be
higher if they included them. - Europeans look at relative prices for legal countries then ported them over. Look at arrest records to try to estimate based on the sample from the other countries.
- The method was somewhat accurate relative to the studies.
- When Italy added illegal activites, they boosted their GDP
- Then everyone else did it, so order went back.
- Numbers would be
- Domestic GDP
- Produced in canada
- National GNP
- Produced by a canadian
- Difference between GDP and GNP :: GDP is location-based (within borders), GNP is ownership-based (by nationals)
- Ex:
- Luxembourg
- Most people working there, don't live there.
- They have a high GDP but not a high GNP.
- GDP = GDE = GDI
- Ex:
- Inventory is investment spending
- When a firm produced but didn't sell.
- You produce
of stuff not sold, is inventory in 2025 - Sell in 2026
, so Inventory but GDE - Purchase in one year, might be use in subsequent years.
- Income Inequality
- Follows a Normal Distribution
- Bottom half of canada in income is
of the income. - Top
of income has of the income. - RP10 Ratio
is inequality a bad thing? - Wage is price times marginal product
- Example:
- 4 person household
- When average and median are equal, dataset is not skewed.
percentile - The richest are
times richer than the poorest.
- Ex:
- Gini Coefficient
- Big means inequal distribution
- Small means equal distribution
- Vertically we have cumulative percentage of income
- Horizontally we have the cumulative percentage of population.
- Axes of a Lorenz Curve :: Vertical: Cumulative % of Income, Horizontal: Cumulative % of Population
- Ex Gini Coefficient:
- Distribution of incomes
people, a band of income -
\begin{document} \begin{tikzpicture}[x=0.06cm, y=0.06cm] % Draw grid for better readability \draw[very thin, gray!20] (0,0) grid (100,100); % Draw axes \draw[thick, ->] (0,0) -- (110,0) node[right] {Cumulative \% of Population}; \draw[thick, ->] (0,0) -- (0,110) node[above] {Cumulative \% of Income}; % Draw the Line of Equality (45-degree line) \draw[thick, blue, dashed] (0,0) -- (100,100) node[midway, above left, rotate=45] {Line of Equality}; % Plot the Lorenz Curve based on the provided data points % Points: (0,0), (60,30), (90,60), (100,100) \draw[very thick, red, mark=*] plot [smooth, tension=0.7] coordinates { (0,0) (60,30) (90,60) (100,100) }; % Add labels for the specific data points \filldraw[black] (60,30) circle (1.5pt) node[below right] {(60, 30)}; \filldraw[black] (90,60) circle (1.5pt) node[below right] {(90, 60)}; % Legend box \matrix [draw, fill=white, below left] at (90,90) { \node [blue, dashed, label=right:Equality] {}; \\ \node [red, label=right:Lorenz Curve] {}; \\ }; % Boundary lines for the 100% square \draw[thin, gray] (100,0) -- (100,100) -- (0,100); % Axis ticks \foreach \x in {0, 20, 40, 60, 80, 100} { \draw (\x, 1) -- (\x, -1) node[below] {\small \x}; \draw (1, \x) -- (-1, \x) node[left] {\small \x}; } \end{tikzpicture} \end{document} - Calculate the areas underneath (B)
- Areas:
- A+B:
- B:
- A+B:
- Does this economy look like it's equal?:
- No
- Compare to other country figures:
- South africa has a gini of
- We have
- Much less disparity than south africa.
- Canada has gini of
- South africa has a gini of
- Outcomes of education
- Median income for university graduates is
bands but otherwise is bands - Using the quartiles is necessary for a good analysis.
- Median income for university graduates is