ECON 201 Chapter Notes - Chapter 6: Fiscal Policy, Monetary Policy, Business Cycle
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Econ 201 chapter 6 macroeconomics basics. Macroeconomics focuses on the behavior of the economy as a whole. It"s more than just the sum of individual actions. Keynesian economics says that government intervention can mitigate economic slumps which are caused by inadequate spending: monetary policy: use changes in quantity of money to change interest rates. This will affect overall level of spending: fiscal policy: changes in tax and government spending (or both) This will also affect overall level of spending. Business cycle: short run alternation between recession and expansion. Peak: expansion to recession point of change. Trough: recession to expansion point of change. Note correlation between real gdp and employment (usually positive) Recessions impact the ability of workers to find and hold jobs: unemployment rate as indicator. Rises sharply during recessions and usually falls during expansions. Recessions mostly are international phenomenons but individual countries can diverge.