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Introduction
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MACROECONOMICS: INTRODUCTION
Introduction
societies choose to use the scarce resources that nature and previous generations have provided. (Karl Case,
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MACROECONOMICS: INTRODUCTION
Introduction
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MACROECONOMICS: INTRODUCTION
Introduction
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MACROECONOMICS: INTRODUCTION
Introduction
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MACROECONOMICS: INTRODUCTION
Microeconomics VS Macroeconomics
Microeconomics
Micro derived from the Greek word MIKROS which means SMALL.
Macroeconomics
Macro derived from the Greek word MAKROS which means LARGE.
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MACROECONOMICS: INTRODUCTION
Microeconomics
Microeconomics deals with
the behavior of individual components of the
economy, economy, such as firms, households or individuals, and the economic relationships among them.
When Consuming
How we choose what to buy; how much we buy
When Producing
How we choose what to produce; how much to charge
Microeconomics vs Macroeconomics
is the foundation of macroeconomic analysis looks at the individual units. It sees and examines the trees. Macroeconomics looks at the whole or the aggregate. It sees and analyses the forest.
MACROECONOMICS: INTRODUCTION
Microeconomics
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Introduction
y Microeconomics examines the behavior of
whole; it examines the behavior of economic aggregates such as aggregate income, consumption, investment, and the overall level of prices.
y Aggregate behavior refers to the behavior
Introduction
Macroeconomists often reflect on the microeconomic principles underlying macroeconomic analysis, or the microeconomic foundations of macroeconomics.
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MACROECONOMICS: INTRODUCTION
Introduction
Connections to microeconomics: Macroeconomic behavior is the sum of all the microeconomic decisions made by individual households and firms. We cannot understand the former without some knowledge of the factors that influence the latter.
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MACROECONOMICS: INTRODUCTION
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MACROECONOMICS: INTRODUCTION
Resources
Resources, or inputs, refer to anything
provided by nature or previous generations that can be used directly or indirectly to satisfy human wants. Capital resources Human resources Natural resources
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Economic Resources
Economic Resources
Also
Includes
all natural, artificial, and human resources that are used in the production of goods and services categories Land, Labor, Capital
MACROECONOMICS: INTRODUCTION
General
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Economic Resources
Economic Resources
Land natural resources covering
anything found on the surface or under land. It includes water, forests, minerals, and other natural resources found in the air, soil, and sea.
MACROECONOMICS: INTRODUCTION
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Economic Resources
Economic Resources
Labor composed of all human
physical and mental abilities and qualities used in production of goods and services.
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MACROECONOMICS: INTRODUCTION
Economic Resources
Economic Resources
Capital includes produced goods,
such as machines, buildings, and computers, etc., that are used as factor inputs for further production.
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MACROECONOMICS: INTRODUCTION
Goods directly satisfy the wants or needs of the ultimate purchaser or consumer. Example: food, clothing, cellphones
Capital
Goods (real capital) indirectly satisfy consumer wants or needs through their use in production of consumer goods. Example: tractors, textile looms, machine tools
MACROECONOMICS: INTRODUCTION
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Their prices are zero because of their unlimited quantity. Example: air
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MACROECONOMICS: INTRODUCTION
Scarce Resources
Scarce Resources
Goods or resources are considered scarce. scarce. Scarcity is considered to be the basic problem of economics. Since all resources are limited in their availability, and societys desires for them are unlimited, there must exist some process in determining what, how, how much, and for whom to produce.
MACROECONOMICS: INTRODUCTION
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Scarce Resources
Scarce Resources
Scarcity results from a combination of two factors: Quantities of goods are limited Desire for goods is unlimited
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MACROECONOMICS: INTRODUCTION
Method of Economics
assumption, assumption, economists study the relationship between two variables while the values of other variables are held unchanged.
MACROECONOMICS: INTRODUCTION
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MACROECONOMICS: INTRODUCTION
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Methods of Economics
Normative economics, also called policy economics,
economics, analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe courses of action.
Macroeconomics Concerns
Inflation is an increase in the overall price level. Hyperinflation is a period of very rapid increases in the overall price level. Hyperinflations are rare, but have been used to study the costs and consequences of even moderate inflation. Deflation is a decrease in the overall price level. Prolonged periods of deflation can be just as damaging for the economy as sustained inflation.
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Introduction
Aggregate output is the total quantity of goods and services produced in an economy in a given period.
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MACROECONOMICS: INTRODUCTION
Introduction
The unemployment rate is the percentage of the labor force that is unemployed. The unemployment rate is a key indicator of the economys health. The existence of unemployment seems to imply that the aggregate labor market is not in equilibrium.
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MACROECONOMICS: INTRODUCTION
Introduction
There are three kinds of policy that the government has used to influence the macroeconomy:
1. Fiscal policy 2. Monetary policy 3. Growth or supply-side policies
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MACROECONOMICS: INTRODUCTION
Introduction
Fiscal policy refers to government policies concerning taxes and spending. Monetary policy consists of tools used by the Federal Reserve to control the quantity of money in the economy. Growth policies are government policies that focus on stimulating aggregate supply instead of aggregate demand.
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Introduction
y The circular flow diagram shows the
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MACROECONOMICS: INTRODUCTION
Introduction
y Everyones expenditure is someone elses receipt. Every transaction must have two sides.
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MACROECONOMICS: INTRODUCTION
Introduction
Transfer payments are payments made by the government to people who do not supply goods, services, or labor in exchange for these payments.
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MACROECONOMICS: INTRODUCTION
Introduction
Households, firms, the government, and the rest of the world all interact in three different market arenas: 1. Goods-and-services market 2. Labor market 3. Money (financial) market
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MACROECONOMICS: INTRODUCTION
Introduction
Households and the government purchase goods and services (demand) from firms in the goods-and services market, and firms supply to the goods and services market. In the labor market, firms and government purchase (demand) labor from households (supply). The total supply of labor in the economy depends on the sum of decisions made by households.
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Introduction
In the money marketsometimes called the financial markethouseholds purchase stocks and bonds from firms. Households supply funds to this market in the expectation of earning income, and also demand (borrow) funds from this market. Firms, government, and the rest of the world also engage in borrowing and lending, coordinated by financial institutions.
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Introduction
Treasury bonds, notes, and bills are promissory notes issued by the government when it borrows money. Corporate bonds are promissory notes issued by corporations when they borrow money.
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MACROECONOMICS: INTRODUCTION
Introduction
Shares of stock are financial instruments that give to the holder a share in the firms ownership and therefore the right to share in the firms profits. Dividends are the portion of a corporations profits that the firm pays out each period to its shareholders.
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MACROECONOMICS: INTRODUCTION
Introduction
y Aggregate demand is the total demand for goods and services in an economy.
Aggregate supply is the total supply of goods and services in an economy. Aggregate supply and demand curves are more complex than simple market supply and demand curves.
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MACROECONOMICS: INTRODUCTION