[EC140] - Midterm Exam Guide - Ultimate 60 pages long Study Guide!

• School: WLU
• Department: Economics
• Course: EC140
• Professor: Ken Jackson

Document Summary

Microeconomics is the study of the decisions of individuals and how they interact in an economy. Macroeconomics is the study of aggregated economic outcomes such as inflation, unemployment, or economic growth. Measuring (cid:448)alue of (cid:862)output(cid:863) (cid:272)ou(cid:374)ts so(cid:373)e output (cid:373)ore tha(cid:374) o(cid:374)(cid:272)e (cid:894)dou(cid:271)le (cid:272)ou(cid:374)ti(cid:374)g(cid:895) Basic ans(cid:449)er: for (cid:373)ost purposes, this does(cid:374)"t (cid:373)atter. Savings may be positive or negative = (cid:1827)+(cid:4666)1 (cid:1828)(cid:4667) (cid:1851) (cid:1827)=(cid:1851) Equals 1-b in our desired savings function. Justification of this assumption: choice of investment related to long run factors, not driven by current income. Given our modelling of c and i. Once we add trade/government/taxes to the model, that wo(cid:374)"t (cid:271)e the (cid:272)ase. People buy consumption goods from disposable income, yd. All disposable income spent on consumption or savings. Consumption is divided into autonomous and induced components (cid:1829)=(cid:1827)+(cid:1828) (cid:1829)=3(cid:882)+(cid:882). 8. Wide variety of factors can shift the consumption function: changes in household wealth, changes in interest rates, expectation about the future.