Urasai is sasiuvinio

  1. Characteristics of utility function
    • 1. more prefered to less
    • 2. consumers like diverstiy
    • 3. consumption and leisure are normal goods
  2. Macroeconomics
    branch of econ that deals with the performance/structure/behaviour of economy as a whole.
  3. Model
    system of equations that shows dynamics of economy
  4. Players of economy
    • households(want to max utility)
    • firms(max profits)
    • governement (exogenous and taken as given)
  5. GDP
    • Gross domestic product
    • quatity of all goods and services produced at a given time within our borders
  6. GDP calculating approuaches
    • 1. Product (add value of all production-avoid double count)
    • 2. Expenditure (measure spending on final goods within nation)
    • 3. Income (sum total of incomes of individuals during 1 year)
  7. Y=C+I+G
  8. Us borrowing from ROW bacause:

    domestic income=gdp+income outside US+transfer payments+interest rates-taxes
  9. S^p=y^d-C
    private savings= domestic income-consumption
  10. S^g=T-TR-INT-G
    govnt savings=taxes-transfer payents-intersts on debt-govnt spending
  11. Government deficit
  12. Total national savings
  13. Current acount

    • S<I CA debt
    • S>I CA surplus
  14. Normative economics
    looks at outcomes of econ behaviour and asks if they are good or bad and if outcomes could be better
  15. Positive economics
    an attempt to understand behaviour of econ systems without judging if outcomes are good or bad
  16. Happiness = Utility

    consumption and leisure determines hapiness, the more of both, the happier
  17. Characteristics of utility function
    • 1.more prefered to less
    • 2.consumers like diversity
    • 3.conumption and leisure are normal goods
    • income up=consumption up, leisure up
    • U(C,L)=lnC+lnL
    • Same U if L up and C down
  18. Slope of indiference curve means?
    marginal rate of substitution between C and L
  19. Consumption?
    • C=W*N^s+Pi-T
    • consmpt=wage income+nonwage income-taxes
  20. Firm production function
    • Y=zF(K,N^d)
    • output=productivity*(capital,labor demand)
  21. Cobb Douglass
  22. Wage goes down, what happens to wealth, leisure and consumption?
    W down = WE down = L down, C down

    • leisure is cheaper
    • prefering more leisure for work
  23. Laffer Curve
    • When you have high taxes  and lower them, then tax revenue may be higher than old one with high taxes.
    • Revenue go up when taxes are low and you increase them.
  24. Tax rebates
    People may want to work less because they get more money.
  25. future value of 1000$
  26. present value of 1000
  27. Today Vs Tomorrow consumption

    • Y=income
    • T=taxes
  28. Wealth up? C and C'?
    up and up
  29. Tax rebate affect on taxes
    T down, T' up
  30. What direct r?
    Tax policy
  31. Ricardian equvalence theorem
    • timing of taxes not impact consumption
    • exacpt when borrowing constrained
    • distorcianary taxes
  32. No taxes for short period on income and sales
    Everybody would want to work more
  33. If R up, then cost of consumption up and people consumer less
  34. N^s up tai Y up ir savings up
  35. Consume today vs tomorrow
    U(C,C')=U(C)+BettaU(C')              0<Betta<1

    Betta=impatience factore, the bigger, the more important future Saviours have high B
  36. Income savings and borrowing relationships
    • C=Y+B    ka gaunu+ka pasiskolinau
    • Y'=C'-b(1+r) ka gaunu-grazinu skola
  37. K'=
    • K'=dersired capital stock
    • I=gross investment
    • K=existing capital stock
    • 8=depreciation of capital (avg 10-12% per year)

    firm chooses K'
  39. Firms profit
    • Profit=revenue-cots
    • Profit=zF(K,N)-WN-I
    • Future profit=Z'F(K'N')-W'N'-I'
  40. Econ Crisis
    G/Y= goes UP

    • Government spending is higher than income
    • Productivity down nes banks stop lending and firms cannot have normal business...
  41. C=consumption
    d=depreciation rate
    r=interest rate
    s=savings rate
    • w=wage
    • y=income
    • z=productivity
    • CA=current account surplus
    • D=deficit
  42. INT=interest paid to the government
    NFP=net factor payments
    NX=net exports
    S^p=private savings
    S^g=government savings
    Y^d=disposable income
Card Set
Urasai is sasiuvinio