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Econ 104 Week 1 Notes (Larudee)

by: Samantha Creamer

Econ 104 Week 1 Notes (Larudee) Econ 104

Marketplace > University of Massachusetts > Economcs > Econ 104 > Econ 104 Week 1 Notes Larudee
Samantha Creamer

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these notes cover the first two lectures on the first two classes 1.1 what is macro 2.1 how do markets work
Macro Economics
Mehrene Larudee
Class Notes
econ 104, Week 1. Notes, Larudee, Umass Econ 104, Macroeconomics
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This 2 page Class Notes was uploaded by Samantha Creamer on Tuesday February 2, 2016. The Class Notes belongs to Econ 104 at University of Massachusetts taught by Mehrene Larudee in Winter 2016. Since its upload, it has received 27 views. For similar materials see Macro Economics in Economcs at University of Massachusetts.


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Date Created: 02/02/16
Macro Class #1   January 20th, 2016  Week 1    Why should we keep unemployment low  ● distribute resources more equally  ● satisfying work   ● confidence in ability    Keynes and the Great Depression  ● Do free markets if interrupted, then put resources back to work?  ●  Restore full employment?  ● The depression made clear that the answer was NO.  ○ income of households, firms  ■ spending by households and firms  ● output employment (in firms)  Income (of household, firms) REPEAT    High levels of income equals high level of spending which means high level of outs put and high  level of output.    ● Do free markets if interrupted, then put resources back to work?    Keynes​: the economy can get stuck at low economic activity, high unemployment.  Then it takes an injection of government spending to restore full employment.  ● There are serial unemployment rates in the US (due to how we measure it)    Macro Class #2   January 25th, 2016  Week 1    Lecture 2.1  Economy and society; markets, supply and demand, the circular flow, equilibrium  I. Markets: How do they work?    A. Actors, motives, options, payoffs, interaction  ● Economics is a “decision science”: Look at  ● Who is making the decisions (actors)  ● What are their motives (goals, objectives)  ● What are their options…  ● ...and how large is their benefit or payoff from choosing each option, measured in terms of their goals?  ● How do different actors’ decisions interact?  ● Microeconomics​studies decision­making by individuals, households, and firms.  ● Macroeconomics​ sudies concepts and issues that involve the whole economy.   B. One single market: supply and demand  ● A single market’s actor are those interested in buying or selling a single product (say, pizzas), over some  range of prices.  ● •The sellersare often callesuppliers.  ● •The buyers​ are often calldemanders​.     C. What is equilibrium?  ● In general, an equilibrium is a situation in which there are no forces causing the system to move away from  equilibrium.  ● In an economic​ situation, equilibrium​ is a situation in whino one has a reason to change the  economic decisions they are making ​ (how much to produce and sell, how much to buy, etc.)    D. What is stable equilibrium?  ● Definition of STABLE EQUILIBRIUM:If the system is near equilibrium, it tends to move toward  equilibrium.  ● 1.Monopoly​ : one seller, chooses the price (e.g., cable providers)  ● 2.Markets for financial assetPeople buy assets because they think their price will rise. Rarely happens  with goods.  ● 3. Labor markets:​ Equilibrium, but not with supply = demand.   II.  The whole economy     A. Circular Flow Diagram     B. Equilibrium in the whole economy  What does equilibrium mean here?  Demand goes full circle. Supply goes full circle, but could be different amount.  Excess demand​ ? Then take items from inventory (produced last year) to meet demand.  Excess supply​? Then add that to inventory.  Aggregate demand ​ (total value of goods & services demanded) =aggregate supply  ➔       The economy is in EQUILIBRIUM             and inventories are unchanged.                     


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