1 Introduction to Macroeconomics 3 9 13 Random Notes Basic things to assess an economy GDP Literacy rate and inflation rate Fiscal policy is a policy implemented by the Federal Government A monetary policy is implemented by the Federal Reserve The policies are used to deal with the fluctuations in the economy the business cycles What is economics Economics Basics As defined by Alfred Marshall also known as the Welfare definition of economics economics or political economy is a science or study of mankind which studies human behavior in ordinary business of life It examines that part of individual action which is most closely connected with the attainment and with the use of material requisite of well being The key word is material well being So economics is concerned is using economic resources to achieve and improve our material well being The stages to improve our material well being are Production through Economic Resources Consumption of goods and services including necessities and luxuries Satisfy human desires Economic Resources Generically economic resources are the land labor capital and entrepreneurial ability that are combined to produce outputs that meet human needs 2 Hence economic resources include 1 Labor It may be skilled unskilled or manual Any mental or physical exertion counts as labor The professor teaching in class is also considered labor because he is working for NYU He is exerting physical and mental effort for the University 2 Land It may underground or ground level Hence everything from property to mining counts as land commodity 3 Capital Goods Basically includes machinery and raw materials utilized to produce the 4 Entrepreneurs Inspired by the writings of Joseph Schumpeter to call someone an entrepreneur the person must produce product innovation or process innovation A coffee vendor is undertaking risk and is compiling the other 3 factors of production but that does not make him an entrepreneur because he is not producing product or process innovation Product and Process Innovation Product Innovation There is said to be product innovation when a new and unique product is produced The said product does not exist in the current market and is something completely different from what people have or used before For example the first iPhone was a new invention a smart phone the likes of which hadn t seen before Hence Steve Jobs was an entrepreneur when he introduced the iPhone to the market Process Innovation May be of two types 1 Technological Change A new technology made to greatly improve the process of producing an existing commodity For example the Steam Engine Before the steam engine the engines would only work vertically and hence their use was very limited After the steam engine which ran in a cyclical motion the use of engines expanded to almost every field not just mining Hence this was a huge technological change 2 Organizational Change When the designing of the process of producing a commodity is greatly improved or changed it is considered an organizational change There is usually no new innovation just a change in the process of making an existing good For example the Assembly Line The Assembly Lines first used in the Artillery industry and not Automobile industry completely revolutionalised the production process Hence this was an organizational change Difference between Technological Change and Product Innovation Even though in both product innovation and technological change a new product is invented the difference between the two is that in product innovation the commodity produced is to be used by the consumers and in technological change it is to be used by the producers 3 In certain cases some goods may be seen as both consumer and producer goods like computers In this case wherever the innovation has taken place and is being used on the producer or consumer end will subsequently be categorized as Technological Change or Product Innovation