ECN 204 Chapter Notes - Chapter 6: Demand Shock, Nominal Rigidity, Business Cycle
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27 Feb 2016
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Explain why economists focus on gdp, unemployment , and inflation when assessing the health of an entire economy. Discuss why sustained increases in living standards are historically resent phenomena. Identify why saving and investment are key factors in promoting rising living standards. Describe why expectations, shocks and sticky prices are responsible for short-run fluctuations in output and employment. Characterize the degree to which various prices in the economy are sticky. Explain why the greater flexibility of prices as time passes causes economist to use different macroeconomic models for different time horizons. Assessing the health of the economy: performance and policy. Macroeconomics studies the behaviour of the economy as a whole. Short-run fluctuations in output and employment (referred to as business cycle) Sometimes growth proceed rapidly and sometimes proceeds slowly. May turn out negative for a while so that output and living standards decline (referred to be a recession)