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Econ: What are Aggregate Consistency Conditions? 2 Views


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What are Aggregate Consistency Conditions? Aggregate consistency conditions are parameters under which a macroeconomic and microeconomic aggregate measurement can be compared and correlated under like conditions for the sake of qualifying a theory. An example would be measurements in comparing purchasing and driving habits for an aggregate of automobiles with an aggregate of SUVs. Couples and families might qualify as some consistent parameters whereas unmarried single drivers might not.

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Transcript

00:00

And finance Allah Shmoop What are aggregate consistency conditions All

00:07

right people You want to prove something Coke is better

00:11

than Pepsi Superman can beat up the Hulk or the

00:15

rate of growth of the money supply has only a

00:16

tangential influence on real economic variables For the first two

00:20

of those arguments Yeah good luck We're sure you've heard

00:23

opinions on what those things are like Yeah but to

00:25

make an argument like the last one well you need

00:27

to lay out some formal rules You'll need an economic

00:30

model to explain your position which is where aggregate consistency

00:34

conditions actually come in Any time you want to go

00:37

about proving something in a formal way you have to

00:39

start with basic groundwork Everyone has to be clear about

00:43

the rules which means you have to start out by

00:45

saying some duck kind of facts You kill its first

00:49

rule of geometry reads things equal to the same thing

00:52

are equal to each other That's a big right But

00:55

the dust off leads to well bigger things Euclid starts

00:59

by stating those things that are obviously true Then he

01:03

combines those things using logic to figure out other things

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that are just is true but well probably not as

01:09

obvious like Start with things equal to the same thing

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are equal to each other and then you end by

01:16

being able to build the Parthenon or land a spaceship

01:19

on the moon or Mars or something like that While

01:21

aggregate consistency conditions work the same way they fall into

01:25

the duck kind of category But they provide important building

01:28

blocks when you're trying to prove something in economics specifically

01:32

aggregate consistency conditions layout the quantities That must be true

01:37

when you add up all the actions of all the

01:39

participants in a market it's a way of defining relationships

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and checking that an economic model makes sense Like say

01:46

you want to make a baseball model You're designing a

01:48

computer program to prove Superman would make a better catcher

01:52

than the Hulk You are a really big fan of

01:54

comic books Clearly First though some aggregate consistency conditions for

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the model you got it Consider those things But one

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example might be the total number of hits given up

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by pitchers must equal the total number of hits recorded

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by batters Pitchers pitch batters bath There's no other way

02:12

for a batter to get a hit then to smack

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a ball pitched by a picture All the hits collected

02:17

by hitters have to come from pitches thrown by pictures

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Everything checks out the aggregate consistency Conditions outlined seemingly obvious

02:25

statements that formed the logical basis for how the system

02:28

works The rule here formalizes a key relationship between pitchers

02:32

and hitters in mathematical terms Okay back to con three

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Big aggregate consistency conditions that come off and economic models

02:40

here Ready Write these down One total production equals total

02:44

consumption In other words someone makes it Someone uses it

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right They produce it They consume it too Total dollars

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lent or loaned equals total dollars borrowed OK next up

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three total amount of currency held by market participants equals

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the total amount of currency put into a system There's

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so many shares in a trading in a given name

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Well then there's so many shares traded and given name

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Yeah you're all kind of a A five Put together

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a few of these rules and you're well on your

03:13

way to forming an economic model Then when you're done

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you can sit back relax and enjoy a cool refreshing 00:03:18.615 --> [endTime] Pepsi O or Coke Yeah either way huh

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