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Chapter 1

Macroeconomics Chapter 1 pdf-1.pdf

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University of Guelph
ECON 1100
Eveline Adomait

Macroeconomics Chapter 1 Economics is the study of how people make choices under conditions of scarcity and the results of those choices for society. • the main problem in today’s society is there is a rising amount of scarcity • economics is split into two categories: 1. Microeconomics - study of individual choices under scarcity and the implications of these choices for the behavior of prices and quantities in individual markets 2. Macroeconomics - study of the performance of national economies and the policies that governments use to try to improve that performance until 1930’s there was no distinction between these two categories • • Alfred Marshall (1842- 1924) was an economist of the nineteenth and twentieth centuries who published “The Principles of Economics” (1890) and whose influence on economics continues to this day • John Keynes (1883- 1946) was a British economist whose “General Theory of Employment, Interest and Money” (1936) is widely regarded as the seminal work that strongly influenced today’s developments • during the 1930’s, previously accepted theories could not satisfactorily explain why many of the leading capitalist economies failed to recover from depressed output and high unemployment • Macroeconomics was thus started to begin thinking of the economy as a whole • economists learn from and contribute to the other social sciences • “Economics is the queen of the social sciences” • models are based on assumptions are are often expressed in mathematical equations, or with a combination of words, tables and graphs • an economic model is a representation of an economic reality that highlights the particular variables and the relationships among them a rational decision maker is someone with clear objectives who behaves logically to • achieve those objectives Adam Smith (1723- 1790) was a Scottish economist who wrote “The Wealth of • Nations” (1776) which is probably one of the most influential economics book ever written • economists generally recognize that the assumption is not always realistic and have explored the consequences of making other assumptions about human behavior in certain settings Macroeconomics Chapter 1 • Alfred Marshall focuses more on rational decision making and is classified into neoclassical economics • John Keynes theories take a broader view, arguing that i
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