Scribd
Upload
80 views

Lecture 27 - Intro To Macro

Uploaded by

Himan Jit
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
80 views

Lecture 27 - Intro To Macro

Uploaded by

Himan Jit
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 19

PART IV CONCEPTS AND PROBLEMS IN MACROECONOMICS

Chapter

20
Introduction
to Macroeconomics
INTRODUCTION TO MACROECONOMICS

microeconomics Examines the functioning of


individual industries and the behavior of
individual decision-making units—business
firms and households.

macroeconomics Deals with the economy as a


whole. Macroeconomics focuses on the
determinants of total national income, deals with
aggregates such as aggregate consumption and
investment, aggregate demand and supply, and
looks at the overall level of prices instead of
individual prices.

© 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair
INTRODUCTION TO MACROECONOMICS

- What determines nation’s long-run economic growth?


- What causes nation’s economic activity to fluctuate?
-What causes unemployment?
-What causes prices to rise?
-How does being a part of a global economic system
affect nations’ economies?
-Can government policies be used to improve economic
performance?

© 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair
MACROECONOMIC CONCERNS

Three of the major concerns of macroeconomics are:

■ Inflation

■ Output growth

■ Unemployment

© 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair
MACROECONOMIC CONCERNS

INFLATION AND DEFLATION

inflation An increase in the overall


price level.

hyperinflation A period of very rapid


increases in the overall price level.

deflation A decrease in the overall


price level.

© 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair
MACROECONOMIC CONCERNS

OUTPUT GROWTH: SHORT RUN AND LONG RUN

business cycle The cycle of short-term


ups and downs in the economy.

aggregate output The total quantity of


goods and services produced in an
economy in a given period.

© 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair
MACROECONOMIC CONCERNS

recession A period during which


aggregate output declines.
Conventionally, a period in which
aggregate output declines for two
consecutive quarters.

depression A prolonged and deep


recession.

© 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair
THE U.S. ECONOMY SINCE 1900:
TRENDS AND CYCLES

expansion or boom The period in the


business cycle from a trough up to a
peak, during which output and
employment rise.

contraction, recession, or slump The


period in the business cycle from a peak
down to a trough, during which output
and employment fall.

© 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair
THE U.S. ECONOMY SINCE 1900:
TRENDS AND CYCLES

EXPANSION AND CONTRACTION: THE


BUSINESS CYCLE

In this business cycle, the


economy is expanding as it
moves through point A from
the trough to the peak.

The economy is in recession


when it moves through point
B from a peak down to a
trough.

FIGURE 5.3 A Typical Business Cycle

© 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair
MACROECONOMIC CONCERNS
UNEMPLOYMENT

unemployment rate The percentage of the labor


force that is unemployed.

FIGURE 5.6 Unemployment Rate, 1970 I–2005 II

© 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair
THE U.S. ECONOMY SINCE 1900:
TRENDS AND CYCLES

THE U.S. ECONOMY SINCE 1970

FIGURE 5.5 Real GDP, 1970 I–2005 II

© 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair
GOVERNMENT IN THE MACROECONOMY

There are three kinds of policy that a government


has used to influence the macroeconomy:

1. Fiscal policy

2. Monetary policy

3. Growth or supply-side policies

© 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair
GOVERNMENT IN THE MACROECONOMY

FISCAL POLICY
fiscal policy Government policies concerning taxes and
expenditures (spending).

MONETARY POLICY
monetary policy The tools used by the central bank to
control the quantity of money in the economy.

GROWTH POLICIES
supply-side policies Government policies that focus on
stimulating aggregate supply instead of aggregate demand.

© 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair
THE COMPONENTS OF THE MACROECONOMY

Macroeconomics focuses on four groups:

(1) households and


(2) firms, which together compose the private sector,
(3) the government (the public sector), and
(4) the rest of the world (the international sector).

© 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair
THE COMPONENTS OF THE MACROECONOMY

THE CIRCULAR FLOW DIAGRAM

circular flow A diagram showing the income


received and payments made by each sector of the
economy.

© 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair
THE COMPONENTS OF THE MACROECONOMY

FIGURE 5.1 The Circular Flow of Payments


© 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair
THE COMPONENTS OF THE MACROECONOMY

THE THREE MARKET ARENAS

Another way of looking at the ways households,


firms, the government, and the rest of the world
relate to each other is to consider the markets
in which they interact.

The three market arenas are:

1. Goods-and-services market
2. Labor market
3. Money (financial) market

© 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair
THE METHODOLOGY OF MACROECONOMICS

AGGREGATE DEMAND AND AGGREGATE SUPPLY

Macroeconomic behavior is the sum of all the microeconomic


decisions made by individual households and firms.

aggregate demand The total demand for goods and


services in an economy.

aggregate supply The total supply of goods and services


in an economy.

© 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair
THE METHODOLOGY OF MACROECONOMICS

FIGURE 5.2 The Aggregate Demand and Aggregate Supply Curves

© 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy