Summary: Economics And Policy 1

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• L1: Macroecnomics, Measuring National Output and income

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• When the macroeconomy is doing well, jobs are easy to find, incomes are generally rising, and profits of corporations are high.Define macroeconomics as a study: 

  • Macroeconomics is the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth.
    

• The sluggish economy that continued into 2013 had negative effects on millions of people. Given the large effect that the macroeconomy can have on our lives, it is important that we understand how it works. Define microeconomics as a study: 

  • Microeconomics is the study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices. 
    

• Both microeconomics and macroeconomics are concerned with the decisions of households and firms. How? Explain both:

  • Microeconomics deals with individual decisions, macroeconomics deals with the sum of these individual decisions. 
    

• Macroeconomics deals with the action of the economy as a whole. It has three components. Define these three components: 

  • Households and firms (private sector). 
    
    
  • The government (public sector). 
    
    
  • The rest of the world (foreign sector). 

• Define three major concerns of macroeconomics: 

  • Output growth. 
    
  • Unemployment. 
  • Inflation and deflation. 

• The main measure of how an economy is doing is aggregate output. Define aggregate output: 

  • The total quantity of goods and services produced in an economy is a given period. 
    

  
  
  - Aggregate behaviour is the behaviour of all households and firms. Recessions are periods during which aggregate output declines. A prolonged deep recession is called a depression. 

• Define the term recession in economics: 

  • The period of a business cycle during which total production and total employment are decreasing. 
    

• Define the term economic growth: 

  • The ability of an economy to produce increasing quantities of goods and services. 
    

• Define the term inflation rate: 

  • The percentage increase in the price level from one year to the next. 
    

• The key concept in the national income and product accounts is the s domestic product (GDP). GDP is the most common measure used by economists of overall economic activity in an economy. Define the Gross Domestic Product (GDP): 

  • GDP is the market value of all final goods and services produced in a country during a period of time, typically one year.