Principles of macroeconomics

Principles of Macroeconomics Principles of Macroeconomics Module Guide K CHANDRA SAKARAN 1 Table of Contents Chapter 1 Measuring the Size of the Economy 7 Learning Outcomes 7 Introduction 8 Gross Domestic Product(GDP) 10 Computing the Real GDP and Nominal GDP 10 GDP deflator and the inflation rate 15 Real GDP and Nominal GDP Growth Rate 16 Real GDP Per Capita 17 Other Ways to Measure the Economy 17 Gross National Product(GNP) 17 Net National Product(NNP) 17 National Income at Factor Cost(NI) 18.

Principles of Macroeconomics Module Guide K CHANDRA SAKARAN Table of Contents Chapter Measuring the Size of the Economy Learning Outcomes Introduction Gross Domestic Product(GDP) 10 Computing the Real GDP and Nominal GDP 10 GDP deflator and the inflation rate 15 Real GDP and Nominal GDP Growth Rate 16 Real GDP Per Capita 17 Other Ways to Measure the Economy 17 Gross National Product(GNP) 17 Net National Product(NNP) 17 National Income at Factor Cost(NI) 18 What are Counted in the GDP and Not Included in the GDP 19 The Importance of Measuring GDP 19 Limitations of GDP as a measure of living standards 21 Chapter Cost of Living 23 Learning Outcomes 23 Introduction 23 Measuring the Cost of Living 24 Cost of Basket 24 Consumer Price Index(CPI) 25 Computing CPI 25 Inflation Rate 25 Limitations of CPI as a Measure of Cost of Living 26 CPI and GDP Deflator 27 CPI versus GDP deflator 27 Correcting Economic Variables for the Effects of Inflation 28 The Importance of CPI 29 Real interest rate 30 Indexation 30 Chapter Production and Growth 31 Learning Outcomes 31 Introduction 31 GDP Purchasing Power per capita(PPP) and economic growth rate between countries 31 Productivity and Living Standards 32 The Production Function 33 The Diminishing Marginal Returns 34 Economic Growth and Public Policy 34 Saving, Investment, and Economic Growth 35 Research and Development And Economic Growth 36 Trade and Economic Growth 36 Health, Nutrition and Economic Growth 37 Education and Economic Growth 37 Chapter Saving, Investment, and Financial System 38 Learning Outcomes 38 Introduction 38 Financial Market 39 The Bond Markets (Public debt securities and Private debt securities) 39 The Banking System 39 Non-Bank Financial Intermediaries 40 Loanable Fund Market 40 The supply of loanable = Saving 40 Saving and Investment 42 The Supply of Loanable Fund Curve 43 Demand for Loanable Fund 45 Other Factors Influencing the Demand for Loanable Funds 47 Changes in future expected profits or business activities 47 Changes in government budget from surplus to deficit 48 Change in the tax 48 The Market of Loanable Fund: Equilibrium and Change in the Equilibrium 48 The Market of Loanable Fund: Equilibrium 48 The market of Loanable Fund: Change in the Equilibrium 50 The Loanable Funds Model 53 Chapter Monetary System 54 Learning Outcomes 54 Introduction 54 Money and the Functions of Money 54 Types of Money 55 Central Bank 56 Money Supply(MS) 57 Commercial Banks 59 Providing Loans 60 Credit Creation Process 60 Central Bank Control the Growth of Money Supply 62 Monetary Tool: Reserve Requirements 62 Monetary Tool : Discount Rate 62 Monetary Tool : Open Market Operations 63 Problems Controlling Money Supply 64 Chapter Money Growth and Inflation 65 Learning Outcomes 65 Introduction 65 The Classical Theory of Inflation 66 Determinants of the Price Level 67 Changes in the price level are caused by two factors: 67 Changes in the Money Market: Changes in the Money Supply 67 Money Market Equilibrium 68 Money Demand (MD) 68 Money Demand Shifters 70 Supply of Money (MS) 70 Money Market Equilibrium: Determination of the Real Rate of Interest 71 Change in the Money Market Equilibrium: Monetary Injection 72 The Effect of Monetary Injection on the Price and the Value of Money 72 Classical Dichotomy and Monetary Neutrality 73 The quantity of Money Theory (Fisher Theory) 74 Velocity 74 The Effect of Monetary Expansion in The long-run 76 Inflation Tax 77 Fisher Effect 77 The Cost of Inflation 77 Menu Costs 78 Shoe leather Costs 78 Misallocation of Resources 78 Wealth Redistribution 79 Tax Distortions 79 General Inconvenience 79 Chapter Unemployment 80 Learning Outcomes 80 Introduction 80 Computing Unemployment 81 Labor Force Participation 83 Types of Unemployment 84 Cyclical Unemployment 84 Remedial Action 85 Natural Unemployment 86 Frictional Unemployment 87 Remedial Action 87 Structural Unemployment 88 Remedial Action 88 Minimum Wage 89 Unionized and Non Unionized Labor Market 89 Efficiency Wage Theory 91 Chapter Open Economy Model (Macroeconomics) 93 Learning Outcomes 93 Introduction 93 Net Export (NX) 94 The Factors Affecting Exports and Imports 95 Financial Resources 96 The Relationship Between NX and NCO 97 Nominal Exchange Rates 99 Nominal exchange rate versus Real exchange rate 99 Purchasing Power Parity (PPP) 100 Implication of PPP 101 Limitations of Purchasing-Power Parity 102 Fixed versus Flexible exchange rates 103 Loanable Fund Market: Open Economy 103 The Market For Loanable Funds 103 The Market For Foreign Currency Exchange 105 Net capital outflow 106 The equilibrium 106 The Impact of a Specific Event on the Major Macroeconomics variables 107 Event :Government budget deficit 107 Event : Trade policy 108 Event Political instability and Capital Flight 109 Event :A decrease in the national saving 110 Topic : Expenditure Multiplier 113 Learning outcomes 113 Aggregate Planned Expenditure(AE) 113 Household consumption expenditure(C) 113 Business Investment (I) 115 Government Spending(G) 115 Export and Import 115 Determination of Equilibrium Real GDP in a 2-Sector Economy 117 Components of AE 120 Aggregate Planned Expenditure 124 Determination of Equilibrium Real GDP in 3-SECTOR ECONOMY 131 Determination of Equilibrium Real GDP in a 4-Sector Economy 137 Determination of equilibrium real GDP 137 Change in the Equilibrium Real GDP 140 Equilibrium Real GDP and the Potential of full employment real GDP 141 Price and Aggregate Planned Expenditure 143 Chapter 10 Aggregate Demand(AD) and Aggregate Supply(AS) 144 Learning Outcomes 144 Aggregate Demand(AD) 144 Aggregate Demand: A Downward Sloping Curve 145 Wealth or Real Income Effect 145 Interest Rate Effect 145 Exchange Rate Effect 146 Other Factors/Determinants of AD: The Shifters 147 A change in consumption 148 Changes in Investment 150 Changes in Government Purchases 151 Changes in the Net Exports 151 Short-run Aggregate Supply (SRAS) 154 Deriving the SRAS and LRAS Curves 155 The Impact of an Increase in the Expected Price on the SRAS 157 Short-run Aggregate Supply(SRAS) – Shifters 158 Long-run Aggregate Supply(LRAS) – Shifters 159 Short-run and long-run equilibrium : Numerical Example 161 Short-run and long-run equilibrium: Numerical Example 162 Short-run and Long-run Equilibrium: A Static Model 163 Event: Households Confidence Level Increases 164 Event: An Increase in the crude oil price 165 Event: Depreciation of a Currency 167 Event: An Economy is currently experiencing a recession 169 The Impact of Demand Policy in The Long-run Equilibrium 171 Chapter 11 The Demand Management Policies and The Aggregate Demand 173 Learning Outcomes 173 The Theory of Liquidity Preference 173 Liquidity for Transactions motive(LT) 173 Precautionary motive 174 Speculative motive 174 Demand for Money Schedule 175 Determination of the Rate of Interest 177 Change in the Money Market Equilibrium: Monetary Injection 178 The Effect of a Change in the Price Level on the Money Demand and Interest Rate 179 Money Supply and Aggregate Demand 180 Fiscal Policy and Aggregate Demand 181 Changes in Government Spending 182 Changes in Taxes 182 Stabilization Policy – Demand Management Policy 184 The Short-run Effect of an Expansionary Monetary Policy 186 Automatic Stabilizer 187 Chapter 12 Unemployment and Inflation Trade-off 188 Learning Outcomes 188 Introduction 188 Short-run Phillips Curve 188 Derive A Short-run Phillips Curve 189 Shifts in the Short-run Phillips Curve – The Importance of Price Expectation 191 Deriving the Short-run Phillips Curve and Long-run Phillips Curve 193 The Impact of an Increase in the Expected Inflation on the SRPC 194 The Other Shifters of the Short-run Phillips Curve – The Supply Shock 195 The Cost of Disinflation 197 Adaptive expectations (Imperfection) 198 Adaptive expectations and Monetarist view of Phillips curve 198 Rational expectations (Perfection) 199 Chapter Measuring the Size of the Economy Learning Outcomes At the end of this topic, you are able to  define the gross domestic product(GDP) and also compute GDP  explain the three approaches to computing the GDP  distinguish between Real GDP and Nominal GDP  compute GDP deflator and inflation rate  compute the Real GDP and Nominal GDP growth rate  compute the real GDP per capita and explain its importance  distinguish between gross domestic product, gross national product(GNP), and net national product(NNP)  explain the importance of measuring GDP  identify and discuss the limitations of GDP as a measure of living standards and quality of life Introduction The economic performance of a country is measured to assess the achievement of the set economic objectives The economic objectives can be long and medium terms, such as economic growth and development, whilst the short-term objective is more towards achieving economic stabilization by responding to unexpected events or shock One of the main economic indicators to measure the economic performance is the calculation of national income The national income of a country can be measured using the output, expenditure or income method The national income (output method) is the total value of final goods and services produced by the various economic sectors in a given time period It is important to ensure that double counting is avoided This can be done by taking the value of final goods and services The value of intermediate goods should be excluded Alternatively, double counting can be avoided by totaling valued added of the goods in an industry Value added is obtained by deducting the expenditure incurred on intermediate goods such as raw materials produced by an industry For example, the car industry purchased various forms of raw materials worth $10 million and produced cars worth $18 million The national income is $18million, that is the value of the final goods or it can be obtained by totaling the value added at various stages of production The total value added is equal to $10 million plus $8 million, which is equal to $18 million GDP (Output based) = The total market values of final goods and services The income method is the calculation of national income by summing up all the incomes received by the factors contributing to the production activity Income is received by the factors can be in the formed of wages (labor services), rent (land), interest (capital) and profits(entrepreneurs) Transfer payments are payment received without any production contribution It is excluded in the calculation of national in order to avoid double counting Examples of transfer payments are the unemployment benefits, scholarships, given by the government to the recipients without any productive contribution from the recipients GDP (Income based) = Compensation of employees + Net interest + Rental income+ Corporate profits + Proprietors’ income Compensation of employees is wages and salaries paid to workers for their labor services Net interest is the interest households receive on loans they make less the interest households pay on their own borrowing Where else rental income is the payment for the use of land and other rented resources As for the corporate profits, it involves distributed profit (dividends) and undistributed profits or retained profit Finally, proprietor’s income is the income earned by the owner-operator of a business, which includes compensation for the owner’s labor service, the usage of the owner’s capital, and profit Finally, we could also calculate the national income using the expenditure approach The expenditure approach requires the summation of expenditure of the households, firms, government and the external sector The household consumption of the goods and services, investment expenditure on capital goods by the firms, government expenditure and the net export expenditure are the four components of expenditures GDP (Expenditure based) = Household consumption (C) + Investment (I) + Government expenditure(G) + [Export(X) – Import(M)] GDP (Expenditure based) = C + I + G + NX The Short-run Effect of an Expansionary Monetary Policy The increase in the money supply will cause the equilibrium interest rate to decline from r1 to r2, as shown in the figure below Households will increase spending and will invest in more new housing Firms too will increase investment spending This will cause the aggregate demand curve to shift to the right as shown in the figure below Figure The increase in aggregate demand will cause an increase in both output and the price level in the short run The price level increases from P1 to P2 and the real GDP increases from Y1 to Y2 186 Automatic Stabilizer In macroeconomics, automatic stabilizers are the changes in the fiscal policy to boost the aggregate demand during the economic slowdown without the government taking any deliberate action It is a feature of the structure of modern government budgets, particularly income taxes and welfare spending act to raise the real GDP and employment The tax system is one of the most important automatic stabilizers When an economy experiences a recession, household income and business profits tend to fall Income tax depends on the amount of income households earned and profit tax depends on the business profits Householders and businesses earn lower income and profit, hence pay lower income tax and profit tax This tax cut stimulates aggregate demand and reduces the magnitude of this economic downturn Government spending is also an automatic stabilizer More individuals become eligible for transfer payments, such as unemployment benefits during a recession These transfer payments provide additional income to the recipients, stimulating spending 187 Chapter 12 Unemployment and Inflation Trade-off Learning Outcomes At the end of this topic, you are able to  explain a short-run trade-off between inflation and unemployment, but not in the long run  draw a graph of a short-run Phillips curve and long-run Phillips curve  demonstrate the relationship between a shift in the short-run aggregate supply curve and a shift in the short-run Phillips curve  identify and discuss the short-run cost of reducing the rate of inflation  explain the relationship between actual unemployment rate to the natural unemployment rate, actual inflation rate, and the expected inflation rate  explain the sacrifice ratio  distinguish between adaptive expectation and rational expectation  explain why more than rational expectations are needed to reduce inflation costlessly Introduction Inflation and unemployment are two key macroeconomic variables that have always been the government concern Price stability and full employment are two important macroeconomic objectives A.W Phillips was able to prove the existence of a negative relationship between inflation and unemployment The tradeoff between inflation and unemployment was found to exist only in the short-run Short-run Phillips Curve The short-run Phillips curve shows that in the short-term, there is a tradeoff between inflation and unemployment The curve suggested that changes in the level of unemployment have a direct and predictable effect on the level of price inflation The accepted explanation was that a fiscal stimulus, an increase in the AD, would trigger the following sequence of responses:  An increase in the demand for labor as government spending generates growth  The pool of unemployed will fall 188  Firms must compete for fewer workers by raising nominal wages  Workers have the greater bargaining power to seek out increases in nominal wages  Wage costs will rise  Faced with rising wage costs, firms pass on these cost increases in higher prices Derive A Short-run Phillips Curve This process can be explained using the AD-AS analysis Assume the economy is in a stable equilibrium, at you An increase in government spending will shift AD from AD to AD1, leading to a rise in income to Y1, and a fall in unemployment, in the short-run The Phillips curve shows the combinations of inflation and unemployment that arise in the short run due to shifts in the aggregate-demand curve 189 250 200 B 150 Price Level(Price 140 105 Index) 100 AD A SRAS AD1 50 120 160 200 100 300 400 Real GDP($million) SRPC 45 40 35 30 Inflation 25 rate(%) 20 15 10 A SRPC B 10 Unemployment rate(%) Assume that the initial equilibrium is at point A, where the level of the AD is low and it intersected with SRAS The price index was 105, indicating a 5% inflation rate and the real GDP was $120 million with an unemployment rate of 8% An expansionary demand policy is used (monetary and fiscal) to raise the level of spending, causing the AD curve to shift to the right to AD1 The new short-run equilibrium is at point B The new equilibrium real GDP is $160 million and the price index has risen to 140 The increase in the AD has also increased the employment in the economy, causing the unemployment rate to fall to 4% 190 The SRPC is derived using the inflation rate and the unemployment rate details Initially, the inflation rate was 5% and the unemployment rate was 8% (point A) With an increase in the aggregate demand has caused the unemployment rate to fall to 4%, whilst the inflation rate has risen to 40% (point B) The short-run Phillips curve is obtained by connecting point A and point B The negative slope of the SRPC indicating a negative relationship between unemployment rate and inflation rate An expansionary demand policy will involve a movement upward along the SRPC, whilst a contractionary demand policy will involve a movement downward along the SRPC An increase in the money supply will increase the government spending, or a decrease in taxes will increase the aggregate demand This will move the economy to a point on the Phillips curve with lower unemployment and higher inflation A decrease in the money supply will decrease the government spending, or an increase in taxes will lower aggregate demand This will move the economy to a point on the Phillips curve with higher unemployment and lower inflation Shifts in the Short-run Phillips Curve – The Importance of Price Expectation Assume that the economy starts from an equilibrium position at point A, with inflation currently at zero, and unemployment at the natural rate of 8% (NRU 8%) Secondly, given the public’s concern with unemployment, assume the government attempts to expand the economy quickly by way of a fiscal (or monetary) stimulus so that AD increases and unemployment fall 191 The stimulus AD resulting in the economy to move to B, and there is a fall in unemployment to 3% (at U1) as jobs are created in the short term Having more bargaining power, workers bid-up their nominal wages As the wage costs rise, prices are driven-up to 2% (at P1) The effects of the stimulus to AD quickly wear out as inflation erodes any gains by households and firms Real spending and output return to their previous levels, at the NRU What happens next depends upon whether the price inflation has been understood and expected – in which case there is no money illusion – or whether it is not expected – in which case, money illusion exists If workers have bid-up their wages in nominal terms only, they have suffered from money illusion, falsely believing they will be better off – in this case, the economy will move back to point A at the NRU, but with inflation only a temporary phenomenon However, if they understand that price inflation will erode the value of their nominal wage increases, they will bargain for a wage rise that compensates them for the price rise The SRAS shifts to the left as wage increases, causing the price level to continue to rise, but the unemployment returns to the natural unemployment rate as the real GDP moves back to the natural output level The economy will move back to the NRU (with unemployment at 8%), but this time carrying with it the embedded inflation rate of 2% and the economy will move to point C The economy will shift to SRPC2 (which has a higher level of expected inflation – i.e 2%, rather than 0%) Any 192 further attempt to expand the economy by increasing AD will move the economy temporarily to D However, in the long-run the economy will inevitably move back to the NRU The conclusion drawn was that any attempt to push unemployment below its natural rate would cause accelerating inflation, with no long-term job gains The only way to reverse this process would be to raise unemployment above the NRU so that workers revised their expectations of inflation downwards, and the economy moved to a lower short-run Phillips curve In the long run, the level of unemployment is always equal to the natural unemployment rate The demand policy, in the long run, has no influence on the unemployment, only affecting the inflation rate There is no long-run tradeoff between unemployment and inflation, hence the long run Phillips curve is vertical at the natural unemployment rate The vertical Phillips curve occurs because, in the long run, the aggregate supply curve is vertical as well Thus, increases in aggregate demand lead only to changes in the price level and have no effect on the economy’s level of output Thus, in the long run, unemployment will not change when aggregate demand changes, but inflation will Deriving the Short-run Phillips Curve and Long-run Phillips Curve unemp rate  natural rate  a (actual inflation  expected inflation) The change in the unemployment rate changes in response to a change in inflation is determined by the variable a, which is related to the slope of the short-run aggregate-supply curve The relationship between actual unemployment rate to the natural rate of unemployment, the actual inflation rate, and the expected inflation rate is as shown in the above equation  The unemployment rate equal to the natural unemployment rate if the actual inflation and expected inflation are the same  The unemployment rate is greater than the natural unemployment rate if the actual inflation is less than the expected inflation  The unemployment rate is smaller than the natural unemployment rate if the actual inflation is greater than the expected inflation 193 Assume a = 0.5 , natural rate of unemployment(UN) = 6% and the expected inflation = 5% Natural rate of unemployment (%) Expected Actual Inflation (%) Inflation a Unemployment rate (%) (%) 6 0.5 5.5 5 0.5 6.0 0.5 6.5 0.5 8.5 The Impact of an Increase in the Expected Inflation on the SRPC Assume that the expected inflation = 6% , and a = 0.5 , natural rate of unemployment(UN) = 6% Natural rate of unemployme nt (%) Actual Inflation (%) 6 6 Expecte d a Inflatio n (%) 5 5 Unemployment rate (%) New Expected inflation(%) New unemployment rate (%) 4.5 5.5 6.5 8.5 6 6 6 6.5 0.5 0.5 0.5 0.5 0.5 194 LRPC Inflation rate (%) SRPC 0 SRPC1 10 Unemployment rate(%) Explanation An increase in the expected inflation rate will cause the SRPC to shift to the right to SRPC1 The Other Shifters of the Short-run Phillips Curve – The Supply Shock A supply shock is an unexpected event that changes in the supply of a product or commodity, resulting in a sudden change in its price Supply shocks can be negative (decreased supply) or positive (increased supply); however, they are almost always negative and rarely positive A supply shock is an event that suddenly increases or decreases the supply of a commodity or service or of commodities and services in general This sudden change to the SRAS (shift to the left or right) will affect the equilibrium price of the good or service or the economy's general price level A decrease in the aggregate supply will shift the short-run Phillips Curve (SRPC) to the right, and it includes an increase in the expected inflation Example of a negative supply shock is an increase in the price of oil and damage to crops from a hurricane 195 The above figures represent the impact of a negative supply shock causing the SRAS to shift to the left to SRAS2 As a result, there is a decrease in the equilibrium real output and an increase in the price level The co-existence of unemployment and inflation is known as stagflation The higher unemployment and inflation rate will shift the SRPC to the right to PC2 Examples of favorable shocks to aggregate supply include improved productivity and a decline in oil prices Either shock shifts the aggregate-supply curve to the right, increasing output and reducing the price level, moving the economy from point A to point B As a result, the Phillips curve shifts to the left, as the figure shows 196 The Cost of Disinflation Any attempt to reduce inflation leads to recession The amount of output lost through cold turkey and gradualism is explained with the help of sacrifice ratio The sacrifice ratio is an economic ratio that measures the costs associated with slowing down economic output to change inflationary trends It is the ratio of cumulative percentage loss of GDP (due to disinflationary policy) to the reduction in inflation that is actually achieved Sacrifice Ratio = Loss of the level of output/Every percentage fall in the rate of inflation Due to a disinflation policy (contractionary demand policy, aggregate demand (AD) falls and therefore output falls There is a loss of output Example The inflation rate is decreased from 10% to 4% over years at the cost of output 10%, 8% and 6% below the potential output (full employment) in the first, second and third year, respectively 197 Total loss of GDP = 24% (10 + + 6) % Decrease in Inflation Rate = (10 – 4) % = 6% Sacrifice Ratio = 24/6 = That is 4:1 It implies for every 1% of the decrease in inflation rate 4% of GDP has to be sacrificed Thus, the sacrifice ratio is the cost of fighting inflation or the cost of disinflation Adaptive expectations (Imperfection) This is an economic theory which gives importance to past events in predicting future outcomes A common example is for predicting inflation Adaptive expectations state that if inflation increased in the past year, people will expect a higher rate of inflation in the next year A simple formula for adaptive expectations is Pe = Pt -1 This states people expect inflation will be the same as last year The adaptive expectations hypothesis is the theory that people base their expectations of inflation on past inflation rates Adaptive expectations and Monetarist view of Phillips curve  Initially, at short-run Phillips Curve I (SRPC), inflation expectations are 2% (Point A) 198  However, if there is an increase in demand (expansionary fiscal or monetary policy), then inflation increases to 3.5%, but workers price expectation has not changed (Point B)  But as the workers then realized the higher inflation rate, changes their price expectation from low to high price expectation Workers would then demand higher wages, causing the cost of production to increase, and hence shifting the SRAS to the left, resulting in a higher inflation and unemployment The unemployment rate will be equal to the natural unemployment rate This causes the short-run Phillips curve to shift to the right to SRPC2 Therefore, with higher inflation expectations, we now get a worse trade-off between inflation (3.5%) and unemployment (6%) – shown at point C by SRPC Rational expectations (Perfection) This theory says that people use all available information, past and current, to predict future events If inflation was higher than normal in the past, people will take that into consideration, along with current economic indicators, to anticipate its future performance  Initially, at short-run Phillips Curve I (SRPC), actual and expected inflation was 2% and the unemployment is equal to the natural unemployment rate of 6% (Point A)  However, if there is an increase in demand (expansionary fiscal or monetary policy), then inflation increases to 3.5%, but workers price expectation immediately changed to higher price expectation Workers demand higher wages, causing the cost of production to increase, and hence shifting the SRAS to the left, resulting in a higher inflation and unemployment remained 199 unaffected This causes the short-run Phillips curve to shift to the right to SRPC2 Therefore, with higher inflation expectations (3.5%) and the unemployment rate (6%) – shown at point C by SRPC 200 ... of goods and services Prices of goods and services Cost of the basket Consumer price index Simple Illustration Assume a basket of goods and services consists of 10 loaves of bread and units of. .. Importance of Measuring GDP The significance of measuring the GDP of an economy can be explained by the following reasons  GDP is needed to measure the standard of living of people of a nation... is the "average" output of the economy per person measured in a base year prices This ratio is often used as a measurement of standard of living in comparisons over time of one country, or between