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CAS EC 102 (73)
Chapter 1

Chapter 1 Introduction to Macroeconomics.pdf

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Boston University
CAS EC 102
Jay Zagorsky

Chapter 1: Introduction to Macroeconomics Friday, January 17, 2014 5:04 PM - Macroeconomics:Uncontrollableforces that affect the individuals in the economy ○ Jobs and unemployment ○ Prices that measure the cost of living ○ Output of the societyand consumption  Change in output is called economicgrowth I. Fable: Political and EconomicSystems Are Not Linked ○ Economicsystems  Capitalism: Individuals own businesses  Socialist: Gov't owns important businesses and key sectors and individuals own small competitive businesses  Communism:Gov't owns all of the businesses ○ Political and economicsystemsare not linked together  China, India and US have similar economicsystemsbut very different political systems II. Microeconomicsversus Macroeconomics ○ Microeconomicsstudies individual decisions III. Five Key Ideas i. Incentives  Macroeconomicconditions can be changed by altering incentives □ Positiveand negative incentives □ Negative incentives can hurt the society  Driving bans in Mexico City □ Positiveincentives often has large effect  Subsidy for additional children in Quebec  Closely tied to money □ Raising and lowering the price can alter behavior ii. Money  Big and powerful incentive  Money has made societyefficient □ Higher standard of living by simplifying market transactions □ Without money, we would all be looking for "double coincidence of wants" to barter what we have for what we want □ Money makes barter p
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