Macro Book Notes Chapter 5 all WHAT MACROECONOMICS TRIES TO EXPLAIN I macroeconomic goals A economic growth increase in production of goods and services over a long period of time 1 GDP gross domestic product the total quantity of goods and services produced in a country over a year B low unemployment 1 employment and the business cycle a business cycle uctuations in the GDP around its long term growth trend 1 economic growth expansion long run upward trend of GDP 2 contraction recession downward trend of GDP a depression a long lasting recession b positive correlation between employment and GDP C stable prices 1 high in ation leads to a decline in the power of currency a b c d leads to breakdown of the monetary system leads to bartering leads to less time producing goods and services leads to a decline in the average standard of living 2 sometimes to decrease in ation output needs to decline and unemployment needs to rise a i e government creates a recession II 3 some in ation is good too much de ation is just as bad as too much in ation the macroeconomic approach methodology of economics A use three step process but applied to all markets simultaneously B models would be complex unreliable if we address all variables in all markets so we a aggregate 1 aggregation the process of combining different things into a single category i e looking at the auto industry as a whole instead of Toyotas Fords etc separately in macro we lump into two main categories 1 consumption goods all the goods and services that households buy b a i e pizza couches haircuts medical care 2 investment goods all the capital purchased by businesses a i e factories machinery computers trucks c sometimes we lump all goods into output or real GDP and all workers into labor III macroeconomic controversies A The General Theory of Employment Interest and Money by John Maynard Keynes 1936 1 argued against classical laissez faire economics 2 ten years later everyone agreed that the economy doesn t do well on its own B why do disagreements occur between economists 1 many of them have different ideologies a geographic location b ethnic background c how they were raised d income
View Full Document
Unlocking...