ECN 204 Chapter 5: Chapter 5.docx

• School: Ryerson University
• Department: Economics
• Course: ECN 204
• Professor: Christos Shiamptanis

Document Summary

Microeconomics: study of how households and firms make decisions and how they interact in markets. Macroeconomics: study of the economy as a whole, including inflation, unemployment, and economic growth: explain economic changes that affect many households, firms, and markets simultaneously. Gross domestic product (gdp): measures the total income of a nation: single measure of a society"s economic well-being. People with higher income= higher standards of living. Gdp measures two things: total income of everyone in the economy, total expenditure on the economy"s output of goods and services. For an economy as a whole, income must equal expenditure: every transaction has two parties, a buyer and a seller, transaction contributes equally to the economy"s income and to its expenditure. Income flows through the markets for the factors of production. To compute gdp add up all expenditures, or add up all the income. Harder with real economy lots of different things that wouldn"t make this work: eg.