New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

Week 1 Macroeconomics Overview

Star Star Star Star Star
1 review
by: ana corina ojea

Week 1 Macroeconomics Overview 222-004

Marketplace > University of Navarra > Economcs > 222-004 > Week 1 Macroeconomics Overview
ana corina ojea
University of Navarra

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

This note covers an overview. International Trade and Imbalances, Inflation and Deflation, Difference between Macro and Micro, Business Cycle. Pain of Recession. Long-run economic growth.
Principles of Macroeconomics
Martin Rode
Class Notes
Economics, Macroeconomics, nternational Trade and Imbalances, Inflation and Deflation, Difference between Macro and Micro, Business Cycle. Pain of Recession. Long-run economic growth.
25 ?




Star Star Star Star Star
1 review
Star Star Star Star Star
"Yes YES!! Thank you for these. I'm such a bad notetaker :/ will definitely be looking forward to these"

Popular in Principles of Macroeconomics

Popular in Economcs

This 3 page Class Notes was uploaded by ana corina ojea on Thursday February 4, 2016. The Class Notes belongs to 222-004 at University of Navarra taught by Martin Rode in Winter 2016. Since its upload, it has received 21 views. For similar materials see Principles of Macroeconomics in Economcs at University of Navarra.


Reviews for Week 1 Macroeconomics Overview

Star Star Star Star Star

Yes YES!! Thank you for these. I'm such a bad notetaker :/ will definitely be looking forward to these



Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 02/04/16
MACROECONOMICS. Chapter 6 Krugman book To this day, the effort to understand economic slumps and find ways to prevent them is at the core of Macroeconomics. Other subjects include, Long- run economic growth, inflation,open-economy macroeconomics. Micro vs. Macro The distinguishing feature between Micro and Macro is that Macro encompasses behavior of the economy as a whole. Microeconomics focuses on how decisions are made by individuals and firms and the consequences of those decisions. (Weighing costs and benefits) Macroeconomics examines the overall behavior of the economy. How the actions of all the individuals and firms in the economy interact to produce a particular economy-wide level of economic performance. Ex. Rubber-necking traffic jam. This shows how the behavior of the macroeconomy is greater than the sum of individual actions and market outcomes. PARADOX OF THRIFT. very interesting. When business and families think there is going to be a rough time they begin to spend less and as a consequence businesses lay off workers. As a result, families and businesses may end up worse than if they had not tried to cut off their spending responsibly. The same happens in the opposite direction. The effect is similar when printing more paper money. People seem rich, but if everybody has, we are back were we started. Macroeconomics is interested in policies. At first economists regarded economy as self-regulated where unemployment problems could be corrected without government intervention with the invisible hand. But this changed with the great depression and now after Keynes book was published Keynesian economics states that economic slumps happen because of inadequate spending and they can only be corrected with government intervening with policies. MONETARY AND FISCAL POLICIES. monetary policies use changes in the quantity of money to alter interest rates and affect overall spending. Fiscal policy uses changes in government spending and taxes to affect overall spending. The BUSINESS CYCLE The uneven pace of the economy's progress, its ups and downs, is one of the main preocupations of Macroeconomics. Recessions or Contractions: periods of economic downturn when output and employment are falling. Expansions: or recoveries are periods of economic upturn when output and employment are rising. Business cycle: short-run alternation between recessions and expansions. Business cycle peak: the point at which economy turns from expansion to recession. Business cycle trough: The point at which economy turns from recession to expansion. THE PAIN OF RECESSION The most important effect of a recession is its effect on the availability of workers to find and hold jobs and make it difficult to find new ones. This, hurts the standard of living of many families, there is a rise in the number of people living below poverty line, people lose their houses because thay can't afford mortgage payments and fall in health insurance coverage. Also, recession is bad for firms. Recessions differ in depth and duration. The Great Depression was the worst recession in history. (43 months) from 1929 to 1933. This helped economist search for solutions on how these things happen and how to prevent them. Government uses Keynesian policies to this day when recession strikes. Long-Run Economic Growth Why are the vast majority of Americans today able to afford conveniences that many Americans lacked in 1955? The answer is long-run economic growth: the sustained rise in the quantity of goods and services the economy produces. Part of the long-run increase in output is accounted for by the fact that we have a growing population and workforce. But the economy's overall production has increased by much more than the population. Long-run economic growth is fundamental to many of the most pressing economic questions today. Responses to key policy questions, like the country's ability to bear the future costs of government programs such as Social Security and Medicare. In figure 6-7 we can see a graph with a little loop that is the great depression and a big peak concerning WW2 which production increased thanks to artillery. Long-run growth is an even more urgent concern in poorer, less developed countries. In these countries,which would like to achieve a higher standard of living, the question of how to accelerate long-run growth is the central concern of economic policy. The business cycle and long-run models are not the same since similar to the paradox of thrift , what is good in the long-run can be bad in the short-run and vice versa. Tale of Two Countries: Argentina and Canada at the beginning of the 20 century same economically. Many have achieved long-run but not equally well and this is an example. Economic Stagnation: unchaging living standards. (This happened in the US around 1800 since long-run is relatively a modern phenomenon). The Causes of Inflation and Deflation. Supply and Demand can only explain why a particular good or service has become more expensive relative to other goods and services. It can't explain the changes in the overall level of prices. So, what causes the overall level of prices to rise or fall? In the short-run movements to inflation are related to the business cycle. When the economy is depressed and jobs are hard to find, inflation falls. When economy booms, inflation rises. In the long-run, the overall level of prices is determined by changes in the money supply. Hyperinflation for instance, occurs when government prints more money to pay its bills. A rising overall level of prices is called inflation. A falling overall level of prices:deflation. Price stability: when the overall level of prices changes slowly or not at all. The Pain of Inflation and Deflation. Inflation discourages people from holding cash because it loses value over time. It happens backward with deflation. However deflation can deepen a recession since holding onto cash instead of investing can bring problems. Price stability is the goal. Consumer Price Index: the most widely used measure of the cost of living. International Imbalances Open economy: an economy that trades goods and services with other countries. A country runs a trade deficit when the value of goods and services bought from foreigners is more than the value of goods and services it trades to them. A country runs a trade surplus when the value of goods and services it buys from the rest of the world is smaller than the value of good and services it sells abroad. Important: there is no simple relationship between the success of an economy and whether it runs trade surpluses or deficits. International trade is the result of comparative advantage. Countries export they are relatively good at producing and import goods they are not good at producing. One thing comparative advantage does not explain however is why sometimes the value of it exports is larger than what it imports. Or vice versa. What determines whether a country runs a trade surplus or a trade deficit? It lies in decisions about savings and investment spending. Investment spending (for machineries and factories) means trade deficit and low investment spending means trade surpluses.


Buy Material

Are you sure you want to buy this material for

25 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."

Amaris Trozzo George Washington University

"I made $350 in just two days after posting my first study guide."

Bentley McCaw University of Florida

"I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"

Parker Thompson 500 Startups

"It's a great way for students to improve their educational experience and it seemed like a product that everybody wants, so all the people participating are winning."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.