Textbook Notes (362,766)
Canada (158,052)
Economics (359)
ECON 102 (143)
Ying Kong (6)
Chapter 19

Chapter 19.docx

14 Pages
Unlock Document

University of British Columbia
ECON 102
Ying Kong

TEXTBOOK NOTES 1/20/2013 2:12:00 PM INTRODUCTION - There are two different aspects to the economy:  Short-run behaviour of variables o We call this fluctuation trend the business cycle  Long-run behaviours of the same variables o 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: 1. 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 2. Looking at the relationships of consumption, employment and investment between firms and consumers of the economy  empirically tested  wages and prices are not flexible and adjust slowly to economic changes  the economy can be in disequilibrium for long periods of time MACROECONOMIC VARIABLES Output and Income - the production of output generates income - all economic value produced, ultimately belongs to someone in the form of an income claim on that value ($100 of something is produced, $100 of income is generated and belongs to the producer)  NATIONAL PRODUCT = NATIONAL INCOME - Nominal national income is measured by multiplying the dollar value a product by every unit of that product sold - Nominal national income can change if quantity of product increases, or value of that product increases - Real national income measures change in quantity  measure value of ind outputs at the prices of a base period - comparing real national income from different years tells you the changes in real output - a recessionary gap occurs when actual output is less than potential output (YY*)  the output gap measures the market value of production in excess of what the economy can produce on a sustained basis  Y* can exceed Y when workers work overtime  Causes upward pressure on prices - an upward economic trend can be caused by increases in:  labour forces  capital stock  level of technological knowledge TERMINOLOGY OF A BUSINESS CYCLE - Trough  characterized by unemployed resources  low output level  substantial amount of unused productivity  business profits are low to negative  firms are unwilling to invest b/c future looks so bleak - Recovery  moves economy out of the trough  rundown or obsolete equipment it replaced  rise in employment, income, consumption  investments begin to be made b/c they don’t seem so risky  production increases by using the unused capacity and labour force Peak  Existing capacity used to a high degree  Labour shortages develop  Particularity in categories of key skills  Shortages of essential raw material Recession  Significant slow down after a peak  Downturn in economic activity  fall in GDP for 2-3 successive quarters  Fall in output, employment and household income  Profits drop  financial difficulty for firms  Investments become risky again Depression  Deep and long lasting recession Slump  Falling half of the cycle Boom  Rising half of the cycle - recessions (Y
More Less

Related notes for ECON 102

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.