EC250 Chapter Notes - Chapter 1: Macroeconomic Model, Business Cycle, Dependent And Independent Variables
Document Summary
Macroeconomics: study of the economy as a whole; how variables are determined and interact. Uses scientific method: forms and tests (empirical testing) the hypothesis (which sets the existence of a cause & effect relationship between independent variables & 1 dependent variable) Understanding past & present performance, forecasts of future, evaluating the effects of policies. Note: must use given historical data to develop theories (unlike scientists, who can experiment) Basic principles of macroeconomics don"t change; principles must be applied with flexibility. Real gdp: measures total income of economy, adjusted for price level. Grows (unsteadily), implying a higher standard of living 11x higher in 2009 then 1900. Business cycle: periods of unsteady growth are recessions if mild, and depressions if severe. Inflation rate: measures how quickly prices are rising as % change in p from year before. Unemployment rate: measures fraction of labour force that"s out of work and looking for jobs.
