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PUBLIC POLICY II
MACROECONOMICS
REFERENCES
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MACROECONOMICS
Eighth Edition
N. Gregory Mankiw
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PART I
Introduction
Chapter One
The Science of
Macroeconomics
ECONOMICS
The scientific study of people and their
institutions from the point of view of how they
go about producing and consuming goods and
services and how they face the problem of
making choices in a world of scarce resources.
Microeconomics
Microeconomics is concerned with the production
and consumption decisions of consumers and
producers and with the allocation of scarce
resources among industries. It focuses on how
decisions are made by individuals and firms and the
consequences of thoseversus
decisions.
Macroeconomics
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MACROECONOMIC
CONCERNS
Three
growth
Unemployment
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INFLATION AND
DEFLATION
Inflation
level.
Hyperinflation is a period of very rapid
increases in the overall price level.
Hyperinflations are rare, but have been
used to study the costs and consequences of
even moderate inflation.
Deflation is a decrease in the overall price
level. Prolonged periods of deflation can be
just as damaging for the economy as
sustained inflation.
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OUTPUT GROWTH:
SHORT RUN AND LONG RUN
business cycle is the cycle of short-term
ups and downs in the economy.
The main measure of how an economy is doing
is aggregate output:
Aggregate output is the total quantity of
goods and services produced in an economy
in a given period.
The
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OUTPUT GROWTH:
SHORT RUN AND LONG RUN
A recession is a period during which aggregate
output declines. Two consecutive quarters of
decrease in output signal a recession.
A prolonged and deep recession becomes a
depression.
Policy makers attempt not only to smooth fluctuations
in output during a business cycle but also to increase
the growth rate of output in the long-run.
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UNEMPLOYMENT
unemployment rate is the
percentage of the labor force that is
unemployed.
The unemployment rate is a key indicator
of the economys health.
The existence of unemployment seems to
imply that the aggregate labor market is
not in equilibrium. Why do labor markets
not clear when other markets do?
The
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GOVERNMENT IN THE
MACROECONOMY
There
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GOVERNMENT IN THE
MACROECONOMY
Fiscal
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THE COMPONENTS OF
THE MACRO ECONOMY
circular flow
diagram shows the
income received and
payments made by each
sector of the economy.
The
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THE COMPONENTS OF
THE MACROECONOMY
Everyones
expenditure is
someone elses
receipt. Every
transaction must
have two sides.
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3 MAJOR STATSTICS IN
MACROECONOMICS
I.
II.
III.
THATS ALL
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