ECON 209 Chapter Notes - Chapter 19: National Income And Product Accounts, Nominal Interest Rate, Real Interest Rate
12 Apr 2013
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Document Summary
Macroeconomics: the study of how economy behaves in broad outline w/o dwelling on detail of markets for individual products. Study of determination of economic aggregates like total output, total employment etc. To understand nature of macroeconomics, you must understand nature of short-run fluctuations (business cycles) as well as long run economic growths. Macroeconomics with an explicit basis of microeconomic foundations building on models of economy populated by people who are optimizers; modelling their behaviour allows economists to aggregate choices of these agents and arrive at models for larger picture. Wages and prices are flexible and adjust quickly to clear markets. Macroeconomics based an implicit basis on micro foundations. They construct models using aggregate relationships for consumption, investment and employment which was empirically tested and represents firm and consumer behaviour. Prices and wages change slowly b/c of nature of well-established institutions in labour and product markets like labour unions making market stay in disequilibrium for much longer.
