ECO 108 Lecture Notes - Lecture 10: Gross Domestic Product, Aggregate Supply, Aggregate Demand
26 Sep 2016
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Document Summary
Microeconomics studies the decisions of individuals and firms, the ways in which these decisions interact, and their influence on the allocation of a nation"s resources and the distribution of income. Macroeconomics looks at how entire economies behave and studies the pressing social problems of economic growth, inflation, and unemployment. Although they focus on different subjects, microeconomics and macroeconomics rely on virtually identical tools. Both use the supply-and-demand analysis introduced in chapter 4. Macroeconomic models use abstract concepts like the price level and gross domestic product that are derived by combining many different markets into one. This process is known as aggregation; it should not be taken literally but rather viewed as a useful approximation. The best specific measure of the nation"s economic output is gross domestic product (gdp), which is obtained by adding up the money values of all final goods and services produced in a given year.
