ECON 102 Chapter Notes - Chapter 19: Interest Rate, Nominal Interest Rate, Aggregate Demand

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18 Apr 2013
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ECON 102 Full Course Notes
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ECON 102 Full Course Notes
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There are two different aspects to the economy: Short-run behaviour of variables: we call this fluctuation trend the business cycle. Long-run behaviours of the same variables: this slowly fluctuating trend explains how investment and technological change affect out living standard over long periods of time we call this economic growth. There are two ways of looking at/studying the economy: looking at microeconomic foundations firms, workers and consumers are optimizers. Economists look at the choices these people make regarding work effort, consumption, and investment. The aggregate choices of these optimizing people result in the macroeconomic model. Wages and prices are very flexible and adjust to economic changes. The economy find equilibrium quickly after change: looking at the relationships of consumption, employment and investment between firms and consumers of the economy. Wages and prices are not flexible and adjust slowly to economic changes the economy can be in disequilibrium for long periods of time.

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