MGEB06H3 Chapter : Week 1 chapter notes

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N macroeconomics the study of the economy as a whole. N macroeconomic issues are also at the center of world politics. N macroeconomists observe that economies differ from one another and that they change over time. N macroeconomic history is not a simple story, but it provides a rich motivation for macroeconomic theory. Case study: the historical performance of the canadian economy. N macroeconomists study how these variables are determined, why they change over time, and how they interact with one another. N model a simplified representation of relation, often using diagrams or equations, that shows how these variables interact. N models have two kinds of variables: endogenous variables and exogenous variables. N market-clearing model (mcm) a model that assumes the prices freely adjust to equilibrate supply and demand. N mcms might not describe economy at every instant, but they do describe equilibrium toward which economy slowly gravitates.

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