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Bridget O' Shaughnessy

Lecture # 3 Macroeconomics 1BB3 Date: 12/09/2012 1. Why is economics difficult? a. Express ideas in economics i. English language ii. Algebra/Equations iii.Diagram/Graph b. Translate between each different form of communication 2. Economics is a Social Science a. Social = people b. Science = use scientific method i. Observe ii. Theorize iii.Test theory (If results fail theory, go back to theorize) Natural Experiment 3. Microeconomics Vs. Macroeconomics a. Microeconomics: Individual households & firms and how they interact. b. Macroeconomics: Economy wide phenomena such as interest rates, unemployment, money and growth. 4. Efficiency Vs. Equity a. Efficiency is the size of the pie. Making a bigger pie with the same ingredient. b. Equity is how the pie is divided. 5. Positive Vs. NormativeAnalysis a. Positive: Describe the world as it is. Attempt to Describe the world, doesn’t have to be correct. i. Example: The world is flat. b. Normative: Describe the word as we would like it to be. (Value Judgement) i. Example: It’s a bad thing that the world is flat because we might fall of the edge. c. The difference between positive and normative is that a positive analysis can be given without appealing to your values. 6. Model = Simplification a. Model would be diagrams or equations b. Assumptions c. Variables d. Amap of a city (Strip
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