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ECN204 Lectures 1-5 Guide

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Ryerson University
ECN 204
Amy Peng

Lecture 1 Macroeconomics examines J whole economy, subdivisionsaggregates Microeconomics examines J individual units (household, firmindustry) & decision making process Production Possibilities Model Assumptions: full employment & productive efficiency, fixed resources, fixed technology, 2 goods (consumer & capital) Law of Increasing opportunity costs J opportunity cost increases with amount produced, shape steeper Optimal Allocation when, Marginal Cost = Marginal Benefit, MC = MB Lecture 2 Ch 2&5 Circular Flow Diagram Gross national product (GNP) J measures total income earned by domestic citizens - GNP = GDP + net income from abroad Gross Domestic Product GDP J market value of final goods & services produced in country during given time period - Market Value J price * quantity - Final J consumed by ultimate user, end products of production process, total final sales = GDP o Intermediate goodsservices J used up in production of final goodsservices - Domestic J made inwithin country Expenditure Approach to GDP GDP = C + I + G + NX Investment = net investment + depreciation Net Exports = Export J Import Government Expenditure = transfer payments Consumption Nominal GDP J based on prices when output was produced GDP Deflator = nominal GDP real GDP * 100 Real GDP J based on prices in some reference (base) year Real GDP = nominal GDP price index * 100
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