Week 2 lecture notes - Macroeconomics
Week 2 lecture notes - Macroeconomics ECON 2105 080
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This 5 page Class Notes was uploaded by Gunawork on Saturday September 5, 2015. The Class Notes belongs to ECON 2105 080 at Georgia State University taught by Brian Hunt in Fall 2015. Since its upload, it has received 100 views. For similar materials see PRINCIPLES OF MACROECONOMICS in Economcs at Georgia State University.
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Date Created: 09/05/15
MacroEcon 2105 Week 2 Lecture Notes Chapter 2 continued om week I The function of markets in principles MARKET OPPORTUNITY Capacity Scarcity Regulatory To whom does it bene t in attempt to acquiring the most Scarcity should sometimes be a motivator allocate scarcity All need to serve in as a medium unlimited needs People need to choose rational and need to be regulation People willing to pay or not pay comes in affect to pricing mechanism land labor and capital regulation connection is incentive Markets need to create exploited trade and exchange opportunities for people V VVVV Capitalist Socialist Government involvement SIDE NOTE when you look at the CPI model of closed economy think of the role that the different entities play Tom s tradeoffs the production possibility frontier OPPORTUNITY COST Income SIDE NOTE In private labor wages would be allocated Example with 2 different goods and their constraints and production possible frontier gt Land is speci c to production of coconuts can t be used for anything else gt Labor can be used to produce coconut gt Capitol speci c to production of sh only gt Labor ltgt mobile Determining market return thanksgiving cooking in the kitchen with grandma example Division of labor ON THE NEXT PAGE THERE LL BE THE GRAPH AND CALCULATIONS RELATED TO THE FISH AND COCONUT EXAMPLE Quantity of coconuts Feas39b39e and Not feasible 3S efficient D 30 O 25 20 15 5 1O Feasible but I not efficient I PrOdPCEtfon pOSSIbIIIty 5 frontier I I l of PPF l O 10 20 3O 4O 50 Quantity of fish The curve is steeper Fish costs more than coconut 1 1 sh 14 coconut relative price does the good we 1 coconut 4 sh pay have opportunity cost 2 10 sh 5 coconut 1 sh 12 coconut 1 coconut 2 sh Comparative advantage and gains from trade ex Tom and Hank Not all resources are capable of production everything Specialization Slope THE NEXT PAGE COVERS CHAPTER 6 INTRO TO MACROECON Chapter 6 While you are in class think of these questions that ll be answered during the lectures and reading the chapter What makes macroeconomics different from microeconomics What business cycle is and why policy makers seek to diminish the severity of business cycles How longrun economic growth determines a country s standard of living The meaning of in ation and de ation and why price stability is preferred The importance of open economy macroeconomics and how economies interact through trade de cits and trade surpluses VVV VV Intro to Macroeconomics As economy changes in composition naturally Chaos is still a natural formation While Macro is the whole pie Micro is the speci c slice of the pie Different people form different areas affect the economy s growth and downfall gt In ation could be healthy not when it s a hyper in ation it shouldn t pass a certain limit slow rate of in ation is good for the economy and people as a whole In ation changes of money and the usage of money gt De ation dangerous worse it s more expensive Macroeconomics vs Microeconomics MicroEcon focuses on how decisions are made by individuals and rrns and the consequences of those decisions Example gt How much it would cost for a university or college to offer a new course the cost of the instructor s salary the classroom facilities the class materials and so on gt Having determined the cost the school can then decide whether to offer the course by weighing the costs and bene ts MacroEcon examines examines the aggregate behavior of the economy that is how the actions of all the individuals and rms in the economy interact to produce a particular level of economic performances as a whole Example gt Overall level of prices in the economy how high or how low they are relative to prices last year rather than the price of a particular good or serv1ce In macroeconomy the behavior of the whole economy is greater than the sum of individuals actions and market outcomes Example Paradox of thrift when families and businesses are worried about the possibility of economic hard times they prepare by cutting their spending This reduction is spending depresses the economy as consumers spend less and businesses react by laying off workers As a result families and businesses may end up worse off than if they hadn t tried act responsibly by cutting their spending Save or spend Regulator Taxer MICROECONOMIC QUESTIONS MACROECONOMIC QUESTIONS Go to business school or take a job How many people are employed in the economy as a whole What determines the salary offered by Citibank to Cherie Camajo a new Columbia MBA What determines the overall salary levels paid to workers in a given year MICROECONOMIC QUESTIONS MACROECONOMIC QUESTIONS What determines the cost to a university or college of offering a new course What determines the overall level of prices in the economy as a whole What government policies should be adopted to make it easier for lowincome students to attend college What government policies should be adopted to promote full employment and growth in the economy as a whole What determines whether Citibank opens a new office in Shanghai What determines the overall trade in goods services and financial assets between the United States and the rest of the world Macroeconomics theory and policy gt In a self regulating economy problems such as unemployment are resolved without government interventions but through the working of the invisible hand gt According to Keynesian economics economic slumps are caused by inadequate spending and they can be mitigated by government interventions gt Monetary policy uses changes in the quantity of money to alter interest rates and affect overall spending gt Fiscal policy uses changes in government spending and taxes to affect overall spending Y C I G ltgt saves consumer induced investor induced govt induced ECONOMICS IN A CT I 0N Fending off depression Look at everything affected not just the market place