LECTURE 1.docx

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School
McGill University
Department
Economics (Arts)
Course
ECON 209
Professor
Mayssun El- Attar Vilalta
Semester
Winter

Description
ECON 209 LECTURE 1 CHAPTER 19 – What Macroeconomics is All About  • Macroecon: long­run trends (economic growth) or short­run fluctuations (business  cycle); gov’t policy is relevant for both 19.1 Key Macroeconomic Variables Output and Income • National product – measure of nation’s overall lvl of economic activity • Production of output = income Selling products = wages, profits, inputs  • National product   = national income • Nominal national income = aggregate income that does not take inflation or national  debt into account • Real national income (Y) = taking inflation into account; purchasing power  • Gross domestic product (national income) = measures of national income • Real GDP = quantity of total output produced by the nation’s economy over the period  of a year ­ Rising trend = long­run economic growth ­ Short­run fluctuations show business cycle • Potential output = what economy is capable to produce if all resources were employed  at the normal lvls of utilization = full employment output • Output gap = diff. b/w potential output and actual output = Y­Y* YY* = inflationary gap (in long-run, it hurtstheeconomy) *Full employment DOESNOT MEAN theemployment rateis zero. Why national income matters?  • Long­run trend in real per capita national income = determinant of improvements in  society’s overall standard of living  ­ Economic growth makes living better materially  • In short­run: ­ Recessionary gap ­> unemployment, suffering, lost output and    Economic waste ­ Inflationary gap ­> high inflation rates Employment, Unemployment, and the Labour Force • Employment = # of workers (15+) who hold jobs • Unemployment = # who are not employed but are actively looking for one • Labour force = total # of employed + unemployed • Unemployment rate = (# of people unemployed/# of people in the labour force) x 100 • When potential output = real output (Y = Y*) = full employment  However some unemployment exists: ­ Fictional: natural turnover in the labour market ­ Structural: mismatch b/w jobs and workers ­ Seasonal  • Unemployment rate when Y = Y* = natural rate of unemployment or NAIRU Discussion Questions • Unemployment rate increase even during booms (total employment is rising) because  the labour force is increasing at the same time.  • Unemployment can be a personal tragedy, but at the national level, it means the  economy is not using all the resources that are available; thus implying national waste.  • Employment insurance is necessary because we need to take workers that are  unemployed due to fictional, seasonal, or structural unemployment into account. Productivity = measure of output per unit of input • Measured as GDP per worker/pe
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