Chapter 1 (Principles of Macroeconomics) - Week 1 Lecture Notes
Chapter 1 (Principles of Macroeconomics) - Week 1 Lecture Notes ECON 222 001
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This 2 page Class Notes was uploaded by Julia List on Monday May 2, 2016. The Class Notes belongs to ECON 222 001 at California Polytechnic State University San Luis Obispo taught by Fisher in Spring 2016. Since its upload, it has received 24 views.
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Date Created: 05/02/16
Lecture 2 ECON 222 –Macro Econ March 30, 2016 Basic Principles-Microecon o 1- people face tradeoffs o 2- cost is what you give up to get it o 3- think at the margin o 4- people respond to incentiveds o 5-trade makes everybody better off Mutually beneficial trade o 6-markets are usually a good way to organize economic activity Market- a group of buyers and sellers Market economy vs command and control vs traditional organization(trading) Market best way to organize activity o Gives dignity to human being, free will/choice o 7-Governments can sometimes improve market outcomes Fail-monopoly (arise naturally or due to gov. regulation), private transactions harm people Roles for gov- Enforce property rights People are less inclined to work if their property will be stolen Nozicks Anarchy, State, and Utopia view of government Monopoly on violence Enforce contracts Create market that does not currently exist Market failure- market fails to allocate society’s resources efficiently Causes o Production or consumption of a good affects bystanders (e.g. pollution) o Market power- single buyer/seller has substantialiunfluence on market price (e.g. monopoly) In such cases, public policy may promote efficiency o 8- A country’s standard of living depends on its ability to produce goods and services Productivity source of wellbeing Huge variation in living standards across countries and over time Average income in rich countries 10x poor countries US standard of living today 8x larger than 100 years ago o DUE TO OVERALL PRODUCTIVITY Output of marketable goods/services per unit labor $10^12 for 160million workers=133k per year Productivity increases by Infrastructure/physical capital knowledge/human capital equipment skills technology available to workers invention of new ideas (human creativity) = human prosperity o 9-Prices rise when the government prints too much money Inflation- increases in the generl level of price In the long run- inflation caused by excessive growth in the quantity of money which causes the value of money to fall The faster central bank creates money, the greater the inflation rate Money- record keeping way of who has done what exchanges o No trust in market- money creates trust o 10- markets are interdependent If market for cars is booming, then the demand for bus rides will decrease If dollar is strong, import competing sectors will have a weak demand Most important market is that for labor, if there is unemployment then there are effects in other markets too