Econ 301 Money and Banking Weekly Detailed Course Outline

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Econ 301 Money and Banking Weekly Detailed Course Outline Powered By Docstoc
					Welcome to
PMBA0608: Economics/Statistics
Foundation

 Session 2: August 26
   Assignment 1 is posted: Due on or
    before September 2
   Next time we will meet on Wednesday,
    September 6 at 19:30-22:45
   Before next class, please study
     Chapters 1 through 4 of Mankiw
     Chapters 1 through 3 of Mendenhall,
      Beaver & Beaver
What is statistics?

statistics is the
 science of learning
 from data
What are the uses of statistics in
your line of work?
 How much should your company spend on
  advertising?
 Should your company increase the price of
  good and services it produces?
 Should shoplifting detection devices be
  hidden or should their presence be made
  obvious?
 What will the rate of inflation be next year
Here is the question of my interest
these days
 What are the factors significantly
  increase the probability of an
  individual’s participation in Brazilian
  shadow (underground) economy?
Population/Sample
 Problem: I don’t have the resources to
  study the behavior of every individual who
  lives in Brazil. (population size = N)
 Solution: Study the behavior of a
  representative gorup (sample size = n).
 Here we are referring to sets of objects on
  which measurements are to be taken.
Another distinction between
population and sample
 There is a population of
  characteristics each individual poses
  (N characteristics)
 I will look at of a sample of these
  characteristics (n characteristics)
 Here are we are referring to a set of
  measurements themselves.
What is the difference between
descriptive versus inferential
statistics?
1. Descriptive Stat.
   Organizes/summarizes/ aggregates
    describes to understand better.


2. Inferential Stat.
   Uses sample information to draw
    conclusions or make a prediction about
    the population.
In my study
1. I will use descriptive statistics to
   summarize my sample.
2. But my main goal is to use inferential
   statistics to use sample information
   to predict the probability of a
   Brazilian participating in the shadow
   market.
Is this descriptive to inferential?
The Size of Shadow Economy
(as a percentage of GDP in 1999-2000)


       45
       40
       35
       30
       25
       20
       15
       10
        5
        0
            USA    Brazil   Average Average
                            OECD South and
                                    Central
                                    America
Is this descriptive to inferential?
(Source: http://www.forecasts.org/djia.htm)
       Dow Jones Industrial Average Stock Index
       Past Trend, Present Value & Future Projection
Five elements of statistical problem
1. Definition of objective
2. Design of experiment or sampling
   procedure
3. Collection and analysis of data
   (descriptive stat.)
4. Make inferences about the
   population. (inferential stat.)
5. Measurement of the goodness of
   inference.
Thinking like an economist
(Mankiw Chapter 2)
1. Casual observation: There seems
   to be a lot of unofficial
   (underground) employment in Brazil.
   Theory: The more complicated and
    costly the employment laws the bigger
    the size of underground employment.
   Does this theory always hold?
What if at the same time that employment
laws become more complicated, law
enforcement becomes more effective too?

 Then underground employment may
   or may not grow.
2. Building a model
   (mathematical/graphical)
      Assumption: All else remains constant
3. Theory: All else constant, the more
   complicated and costly the
   employment laws the bigger the
   size of underground employment.
4. Testing the theory: More
observation
 Here is where ________ statistics
   comes handy.
 What if the minimum wage is
   lowered by 10%?
 Here is where _______statistics
   comes handy.
5. Prediction: Underground
   employment will shrink by 5%.
Economic resources (factors of
production)
 Are scarce
 Categories
1. Labor
  •   Anyone who is hired to use his
      mental/physical ability to produce a good or a
      service
2. Capital
  •   Produced means of further production
3. Land
     Natural resources
4. Entrepreneur
  •   Anyone who plans production and takes a risk
Circular Flow Model
 Shows how money as well as real goods,
  services and resources flow through the
  economy
 Most important assumptions
   No government
   No international trade
   No financial institutions
   Only 2 sectors in the economy:
     households and firms
   Only 2 markets: goods and factors of
    production
Circular Flow Model

                                                  Expenditures
    Revenue
                              Market for
                              goods and
                              services       goods &
              goods &
              services                       services
                                                          Households
   Firms
                 Factors of                factors of
                 production                production


       Cost                   Market for                Income
                              factors of
                              Production

				
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posted:9/29/2012
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