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Chapter

Econ 102 - Macroeconomics - Beginning Only

4 Pages
217 Views

Department
Economics
Course Code
ECON 102
Professor
Robert Gateman

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September 2010 Econ 102 Jess GiangChapter 19what macroeconomics is all aboutMacroeconomics studies how the economy behaves in a broad outlineIt considers economic aggregates like total output total investment total exports price level etc and how govt policies inuence these aggregates Gives the big picture doesnt dwell on little detailsIt is important because it affects the health of industries in which people work and the prices of goods that we purchaseConsiders 2 different aspects of the economyShortrun uctuations of macroeconomic variableslike output employment ination and how govt policy can inuence these variablesConcerns study of business cyclesLongrun trends of the same variablesconcerned with explaining how investment and technological change affects our material living standard in the longrun Key macroeconomic variablesNational productthe value of a nations total production of goods and servicesAll wealth produced belongs to someone ie A rm produces 100 of ice cream that 100 ultimately becomes income for the rms workers and bossesThus national product is equal to national income National incomeGDPthe nal market value of all goods and services produced in the economy during a dened period of time usually from AprilAprilFinalnot double countedMarket Valuewhat the market will pay for itGoods and servicesmaterial goods and services like teachers teachingProduced in the economymust be produced in the scal year of its GDPAggregating measuring total outputMultiplies theof units of each good produced by the price at which each unit is sold to come up with a dollar value of production for each goodAdding up these values for all the different goods produced gives the current dollar value of national output equal to total national income aka nominal national income NNINNI is affected by change in quantity or price that the unit is sold forReal national incomeMeasures value of current output in constant dollars using a set of prices from a base period specic time period used as a benchmark in measuring dataThe price is held constant so that changes in RNI from year to year reect only changes in quantityUsed to gure out what percentage of NNI change was due to quantity changeEcon notesAs prices increases the demand for money Md increases moves to the right bc you need more money to buy the same thingsWhere MdMs is the new interest rate Increase Md means people sell bonds to acquirebidding down the price of bonds implying a higher bondyield or higher irate Eventually irate rises to a point where ppl no longer want to sell bonds Increase in Ms WHEN YOURE ALREADY AT POTENTIAL causes irates to go down investment goes up AE goes up causes AD to move right entering an inationary gapWhen you have an inationary gap YY what will happen to the SRAS SRAS will move left bc workers are being paid overtime since theyre producing above normal implies excessive demand for labour which increases wages unit costs increase SRAS shifts left back to Y at a higher price levelchain back
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