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Intro to Macro Final Prep.docx

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Department
Economics
Course
ECO1102
Professor
Claude Théorêt
Semester
Winter

Description
Introduction to MacroeconomicsMeasuring a nations income Ch 5 Ten Principles of EconomicsEconomics Study of how society managers its scarce resourceso Management of societys resources is important because resources are scarceMicroeconomicso Study of how households and firms make decisions and interact in specific markets Macroecnomicso Study of economywide phenomena such as Inflation increases in pricesUnemployment persons willing but unable to find jobs Economics growth increased GDP per capitaEfficiencyo Society gets the most that it can from its scarce resources Equityo Benefits from using resources to produce goods and services are distributed fairly among members of society Marginal changeso Small incremental adjustments to an existing plan of actiono People are able to evaluate changes through this Market economyo An economy that allocates resources thorugh the decentralized decisions of many firms and households as they interact in markets for goods and serviceso Households decide what to buy and who to work foro There are entities that specialize in the production of certina goods and services and are much more efficient at producing them Market failureo Occurs when markets fail to allocates resources efficiently When markets fail or break down governments can intervene to promote efficiency and equity Principle 8 The standard of Living Depends on a Countrys production o Standards of living may be measured by comparing Personal incomes The total market value of a nations production its GDPPhilips Curve illustrates the tradeoff between inflation and unemploymento If you have lower inflation then you have higher unemploymne t o Its a short run tradeoff Macroeconomic Policy Changes o Decrease unemploymento Stimulate economic growtho Stabilise the economy cycleo Stabilise priceso Reduce budgetary deficitso Balance trade and capital flows If you want the GDP to be very high tomorrow you must cut back on your consumption todayUse these resources to produce investment goodsThe cost today is not consumer as much use resources to produce roads Chapter 5 Textbook Economys Income and ExpenditureWhen judging whether the economy is doing well or poorly it is natural to look at the total income that everyone in the economy is earning The GDP does two things at oncetotal income of everyone in the economy and the total expenditure on the economys output of goods and servicesIt can measure these tw things because in essence they are the same For an economy as a whole the income must equal expenditure because every transaction has a buyer and a seller You can compute the GDP in two waysadding up total expenditure by househodlds or by adding up total income which would include wages rent and profitIn the above diagram households buy goods and services from firms and firms use their revenue from sales to pay wages to workers rent to landownders and profit to firm ownersGDP equals the total amount spent by households in the markets for goods and servicesIt also equals the total qages rent and profit paid by firms in the markets for factors of production
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