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Summary Macroeconomics Erasmus
Need a Macro Economics Summary for the Economics and Business Economics course at Erasmus University Rotterdam EUR? This will make the exam a breeze!
"With all those graphs and theories in macro economics, I no longer have the overview. I was hoping it wouldn't be so difficult, but this is disappointing. Maybe I should focus more on macro economics"
Do you recognise yourself in the sentence above? Then we at Reken Maar Verslagen have the solution for you.
The subject Macroeconomics (FEB11002) is one of the most difficult subjects in the Bachelor of Economics and Business Economics at Erasmus University Rotterdam (EUR), you may have already experienced this yourself. Topics such as GDP (Gross Domestic Product), Solow's exogenous growth model, growth rates, exchange rates and inflation are generally perceived as very difficult by students. Do you want to get started on this right away so that you complete your macro economics exam at Erasmus University with a good grade? With a summary for the subject macro economics at the Erasmus University Rotterdam (EUR), you will simply pass! Read on below to find out what to expect: we give you some inside info.
Would you like to get started with this right now to finish your Macroeconomics exam at Erasmus University with a good grade? Then click here To order your summary Macroeconomics!
Want to know even more about macro economics or get a brief introduction to the topics within the subject? Then read on below to find out what's in store for you.
Summary Macroeconomics Erasmus University Rotterdam: basic concepts
In the macroeconomics summary, which you here can order, the basic concepts within the subject of macroeconomics will also be explained using examples. Some topics will be a little bit familiar from subjects such as microeconomics or economics in high school, but most will be completely new.
In this article, we are going to introduce some basic concepts. Knowing these basic concepts will get you well on your way to passing macro economics. Would you like to go deeper into it or learn more about other topics? Then order the complete summary macroeconomics here. The basic concepts we will cover are as follows:
- Key concept 1: GDP (Gross Domestic Product)
- Key concept 2: Solow's exogenous growth model
- Key concept 3: The IS curve
- Key concept 4: Taylor's rule
- Key concept 5: Exchange rates
Below, we will go through them with you.
Summary Macroeconomics Erasmus Rotterdam - Key concept 1: GDP (Gross Domestic Product)
GDP is an important indicator of a country's prosperity. GDP depends on both production and income of a country. It gives an indication of the goods and services produced by a country within a single year. Generally, GDP grows in the long term, but in the short term, GDP can fluctuate around a certain trend. While GDP is an indication of a country's wealth, it says nothing about the distribution of this wealth. Want to know more about GDP, like how to read graphs about it or what business cycles are? Answers to these questions and more can be found in the summary Macroeconomics Erasmus Rotterdam of Reken Maar Verslagen!
Summary Macroeconomics Erasmus Rotterdam - Key concept 2: Solow's exogenous growth model
According to Solow's exogenous growth model, three engines drive economic growth, Capital (K), labour (L) and technological development (A). The model assumes the production function F (K, L)and focuses on capital accumulation through savings and investment. The model assumes that the production function has constant returns to scale and decreasing excess returns.
The variables Y (the outcome of the production function) and K (capital) are considered endogenous. The variable for labour L is exogenous and thus considered a constant that is simply assumed. Furthermore, capital is also depreciated at the depreciation rate 𝛿.
The Solow model shows that growth always declines due to decreasing excess returns from accumulable factors of production. This in turn is caused by non-accumulable factors. Accumulable factors of production are factors whose quantity can be adjusted. With non-accumulable factors, this adjustment is not possible. In the Solow model, capital is accumulable and labour is non-accumulable. Indeed, labour has remained constant all the time.
The Solow model is a comprehensive model that contains much more than is described here. A complete explanation of the Solow model can be found in the summary macroeconomics Erasmus Rotterdam of Reken Maar Verslagen. This also covers topics such as the Solow residual, growth rates and the golden rule.
Summary Macroeconomics Erasmus Rotterdam - Key concept 3: The DD-Curve and IS-Curve
The DD-Curve
A tricky part of the final exam of the macro economics course at Erasmus Rotterdam is understanding the DD-Curve and IS-curve. These curves can shift under the influence of various causes. For the exam, it is important to know how these causes shift the curves.
The DD-Curve represents the total demand for goods in a country. Total supply comes from a country's production (Y). The point where total output equals total supply is known as the Keynesian Cross. Thus, in this case, the goods market is in total equilibrium.
The DD curve can move due to external influences, such as increasing government spending. The chart below shows how this works.
The increase in government spending moves the market to point 𝐵. Market eliminates excess demand 𝐴𝐵 by increasing production. As a result, point 𝐴 achieved. However, this is not market equilibrium. The increase in output also increases income and hence aggregate demand. As a result, from point 𝐴 demand plummets again. Again, the market wants to reduce the excess demand by increasing production. This process continues until eventually the new market equilibrium 𝑌 = 𝐷𝐷´ has been achieved.
The IS Curve
The IS Curve shows the relationship between the nominal interest rate and the country's output. It indicates all the points at which the commodity market is in equilibrium. The IS Curve looks as follows.
The IS Curve shows the relationship between the nominal interest rate and the country's output. It indicates all the points at which the commodity market is in equilibrium. The IS Curve looks as follows.
To the right of the IS curve is a supply surplus and to the left of the curve is a demand surplus. The slope of the IS curve is an indicator of how quickly firms adjust their investments to changes in interest rates. When investment is more interest rate sensitive, a smaller fall in interest rates causes a larger increase in output. As a result, the IS curve flattens.
It is important to know all possible reasons for moving the curves, and how they move the curves. This Erasmus Rotterdam macroeconomics summary can help you with this!
Summary Macroeconomics Erasmus Rotterdam - Key concept 4: Taylor's rule
The DD and IS Curve described above fall under the study of the commodity market. Using Taylor's rule, we study the money market. In this market, the central bank trades with households and firms so that the demand for money equals the supply. As with the goods market, we look at the relationship of interest rates and output where the goods market is in equilibrium. The central bank sets the short-term interest rate. Here it uses Taylor's rule:
𝑅(𝑛) = 𝑅(𝑜) + 𝑎 ∗ ( 𝜋 - 𝜋𝑤) + 𝑏 ∗ (𝑌 - 𝑌𝐿)/𝑌𝐿
𝑹(𝒐) = The neutral market interest rate present when inflation and economic growth have their desired levels
𝑹(𝒏) = The newly formed market interest rate
𝒂 and 𝒃 = Variables greater than 𝟎
𝝅 = Current inflation
𝝅𝒘 = The desired inflation rate. For the ECB, this is 2%
𝒀 = Current economic growth
𝒀𝑳 = Economic growth when the economy is operating at sustainable levels. Trend output.
Since there is no inflation in the short term, a simplified version of Taylor's rule can be used:
𝑅(𝑛) = 𝑅(𝑜) + 𝑏 ∗ (𝑌 - 𝑌𝐿)/𝑌𝐿
With this simplified version, we can create a TR Curve.
The TR Curve can shift due to 2 causes. A change in trend output and central bank monetary policy. How these can shift the TR-Curve can be found in the complete summary macroeconomics Erasmus Rotterdam, which you can find here you can order!
Summary Macro
Economics Erasmus Rotterdam - Key concept 5: Exchange rates
The exchange rate is a subject that I'm sure you've already had a bit of
familiar with. Within macroeconomics, there is an important distinction
made between the nominal exchange rate (S) and the real exchange rate (R).
The nominal
exchange rate
The nominal exchange rate is the exchange rate you already know,
namely the value of foreign currency divided by domestic currency.
For in the Netherlands, that would be the foreign currency divided by the euro.
S = $/€
When 𝑆 increases, the
relative value of the euro increases (appreciation) and the value of the dollar increases
off (depreciation). You are then able to get more dollars for the same
amount of euros.
The real
exchange rate
The real exchange rate measures how many times a particular commodity is in
can be bought abroad for the value of a single purchase of the
well inland.
Delta = S*P€/P
Here, S is the nominal exchange rate, P€ the price of a domestic good in euros and P the price of the same good abroad in the relevant currency. An example of using the real exchange rate is comparing the price of a Big Mac in different countries.
Grab a pen and some paper and join the next practice question! Lots of practice with the exchange rates helps well with mastery.
A country's long-term real exchange rate will appreciate if:
A: That country's net debt relative to the rest of the world increases or its non-price competitiveness increases.
B: That country's net debt relative to the rest of the world decreases or its non-price competitiveness decreases.
C: That country's net debt relative to the rest of the world increases or its non-price competitiveness decreases.
D: That country's net debt relative to the rest of the world decreases or its non-price competitiveness increases.
The answer to this old exam question is D. Would you like to know how we arrived at this answer or would you like more practice with exchange rates and inflation? Then buy here your complete summary of macroeconomics Erasmus Rotterdam!
Summary Macroeconomics Erasmus Rotterdam: Exam structure
For the subject of macroeconomics at Erasmus Rotterdam, your final 30% mark consists of an interim test and 70% of your final exam. The interim test consists of a set of open questions, while the final exam in macroeconomics Erasmus Rotterdam contains 20 multiple-choice questions on the following topics:
- Introduction
- National Accounts
- Economic growth
- Labour market
- Budget constraints
- Consumption and Investment
- Money Demand and Money Supply
- Macroeconomic balance
- Inflation
- Macroeconomic balance with inflation
- Financial markets
- The exchange rate
- Demand policy
- Fiscal policy and public debt
- Supply policy
Summary Macroeconomics Erasmus Rotterdam, everything you need to succeed
As you have read, the subject is in macro many new, to many unfamiliar, topics. This makes it a difficult subject because there is little you can build on previous experience. Frequent practice is therefore extremely important. But while practising, try to actually grasp the theory behind it. However, do you find this difficult? No problem!
The summary of Reken Maar offers you a helping hand in this. The above topics and all other subjects in the subject are discussed and explained in more detail using examples and practice exercises. Order your summaries here. On behalf of the whole of Reken Maar, we wish you good luck in preparing and taking the exam!
Do you find Macroeconomics interesting? What can you become with it?
Macroeconomics is a field of study that examines the aggregate behaviour of economic agents at the country level. By economic agents, you should think of consumers, government, businesses and foreign countries. These economic agents influence each other through markets. Macroeconomics examines the ways in which agents influence each other through their behaviour in these markets and when this behaviour is optimal.
Since macroeconomics deals a lot with government or bank policies, most jobs will also be available in such agencies. Examples of jobs dealing with macroeconomics are:
- Strategic advisor (Government)
- Coordinating economist (Government)
- Sector Economist
- Senior Policy Advisor on Purchasing Power and Income
- Business Developer/Trader
- Financial sector analyst
- Budget advisor
- Financial Risk Analyst
- Associate, Debt & Capital advisor
Because we speak from experience and know what it is like to complete this course successfully, we have gathered all the necessary knowledge and information to successfully complete this course in a Summary Macroeconomics specifically and only for students of the Economics and Business Economics programme at Erasmus University Rotterdam.
