EC202 1nd EditionFinal Exam Study Guide Lectures: 1 - 42Lecture 1 -Macroeconomics: the study of the performance of national economies including the study of the policies used to improve that performance-macroeconomics policies: government actions designed to affect the performance of the economy as a whole-major macroeconomic issues: 1. economic growth and living standards2. labor productivity3. recessions and expansions4. unemployment5. inflation6. international economic independence-standard of living: the degree to which people have access to goods and services that make their lives easier, healthier, safer, and more enjoyable-goods: physical objects-services: work done for people-standard of living depends on: quantities of goods and services produced; number of people who share said goods and services-economic growth: a process of steady increase in the quality and quantity of goods and services the economy can produceLecture 2-average labor productivity = output per employed worker-recessions: slowdowns in economic growth (usually defined as two quarters of negative growth); we are currently in a recession-depressions: severe recessions (ie the Great Depression)-expansions: periods of rapid economic growth-the business cycle: oscillating graph-trough to peak = expansion-peak to trough = recession-reference the lesson 2 powerpoint presentation to see specific graphs of economic expansion/recession of different countries across timeLecture 3-unemployment: the state of being available and willing to work but unable to find suitable work-unemployment rate: the fraction of the labor force (including unemployed and employed people) who are searching but are unable to find work; or who are temporarily out of work but expect that they will return to work shortly-see lesson 2 powerpoint slides to see graphs of United States unemployment trends as a function of time-unemployment influences the national standard of living-the average unemployment rate in the US over the past 20 years is has been 6 percent; it takes an average of 15 weeks to find a job if you are unemployed-unemployment increases during recessions-unemployment decreases during expansionsLecture 4-cost of living: the amount of money that it takes to buy the goods and services that achieve a given standard of living-inflation: a rising cost of living-the rate at which prices in general are increasing over time-imposes a variety of costs on the economy-recently it has been climbing up from a low level-the US inflation rate has fluctuated from 1900 to 2009-the peak was in about 1920 at about 17.5%-the lowest point was in about 1932 at about -11%-inflation rates in different countries in 2009 also varied-the highest was in Iran at about 13%-the lowest was in Japan at about -1.5%Lecture 5-national economies are increasingly interdependent-countries depend on one another for their economies-trade with other countries can be mutually beneficial -the United States depends very heavily on the stability of its economy based on imported goods from other countries and the revenue gained from exporting goods out to other countries-trade imbalances exist when the quantity of goods and services that a country sells abroad differs significantly from the quantity of goods and services its citizens buy from abroad -in other words: exports are not equal to imports-trade deficits exist when imports outnumber exports-in the US from 1960-2008, on average the imports GDP has been above the exports GDP-(GDP means Gross Domestic Product)Lecture 6international flows create political and economic issues-trade impacts jobs-for example, in steel industries, textile industries, and trade agreements (ie North American Free Trade Agreement (NAFTA))-trade imbalances occur when exports and imports differ significantly-trade deficit: occurs when imports are greater than exports-trade surplus: occurs when exports are greater than imports-macroeconomic monetary policy: determination of a nation’s money supply-changes in the money supply affect…-national output-employment-interest rates-inflation-stock prices-international value of the dollar-in the United States these changes are controlled by a central bank called the Federal Reserve System-fiscal policy: decisions that determine the governments budget-expenditures and revenue of the government-deficit: the government spends more than what is collected in taxes-surplus: the government spends less than what is collected in taxes-structural policy: a government policy aimed at changing the underlying structure of the nation’s economy-positive statements: what IS-normative statements: what OUGHT to be-the task of economic science: to discover and catalog positive statements that are consistent with what we observe in the world and that enable us to understand how the economic world works-microeconomics: “ground level”-studies individual units-macroeconomics: “big picture” -studies summations or aggregates-big issues of macroeconomics1. standard of living2. cost of living3. economic fluctuations (recessions and expansions)Lecture 7-GDP: the market value of the final goods and services produced in a country during a given period of time-using market values of different goods and services allows economists to aggregate the quantities of many different goods and services (ie comparing apples to oranges)-market value: a convenient way of adding together many different goods-final good or service: a good or service that is produced for its final user and not as a component of another good or service-end products of the production process-counted in final GDP-intermediate good or service: a good or service that is produced by one firm, bought by another firm, and used as a component of a final good or service-used up in the production of final goods or services-counted indirectly in GDP since their value is already included in the final product value-capital good: long lived good which is itself produced and used to produce other goods and services-example: machinery, plant and equipment, business inventory change-currently, production of final goods is called investment as is counted as a final goodLecture 8-measuring GDP: valuing the output of industries-to measure the value of production of an industry, count only the value that is added bythat industry-value added: the value of a firm’s output minus the value of the intermediate goods it buys from other firms and uses to produce that