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Economics for Management Studies
Iris Au

ABOUT THE COURSE N Coordinator: Ata Mazaheri N Need help for the course? o The TAs are your first option. o TA office: MW 369 o My Office hours Wednesday: 11 1 PM, 4 6 PM Thursday: 2 3:30 PM Friday: 12 1 PM INTRODUCTIONUNEMPLOYMENT AND INFLATION Outline N What is macroeconomics? N Unemploymentunemployment rate & labour force participation rate N InflationCPI & GDP Deflator What is Macroeconomics? N While microeconomics is about a specific market, macroeconomics is about the economy as a whole (i.e. the aggregates). N In macroeconomics, we look at the things like: national income, level of unemployment, inflation rate, the exchange rate, etc. N Macroeconomics is not simply a matter of adding things up, because the dynamics are different! Example 1: Unemployment N A simple microeconomic approach to unemployment: N Question: What is special about the microeconomic approach? N Answer: No unemployment because the quantity demanded = quantity supplied. N We know there is unemployment, and sometimes it can be very serious. o The Great Depression of the 1930s. o Recessions of early 1980s and 1990s. Example 2: InflationPercentage change in the general price level N A microeconomic approach to inflation involves two markets and a shift in demand. Suppose D X and DY;: N Question: What is special about the microeconomic approach? N Answer: No change in overall prices and no inflation. This is not true. N We know there is inflation, and sometimes it can be very serious. o In the 1950s, the 70s and early 80s, inflation in Canada approaching and sometimes exceeding 10% per year. o In other countries it has sometimes been over 100% per year. Sometimes, inflation has gone completely wacky, destroying the currency, with prices changing hourly (hyperinflation). N Question: What do we learn so far? N Answer: Macroeconomics sees things in a different way than microeconomics. We needdifferent way than microeconomics to look at aggregate behaviour. o We have to keep in mind that all behaviour has to have their roots in micro! www.notesolution.com
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