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Week Three Lecture Notes

by: Samantha Pruser

Week Three Lecture Notes ECON 222 001

Samantha Pruser
GPA 3.8
Principles of Macroeconomics
Chandini Sankaran

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About this Document

Week Three Lecture Notes Lecture Five- September 8, 2015 and Lecture Six- September 10, 2015
Principles of Macroeconomics
Chandini Sankaran
Class Notes
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This 5 page Class Notes was uploaded by Samantha Pruser on Sunday September 13, 2015. The Class Notes belongs to ECON 222 001 at University of South Carolina taught by Chandini Sankaran in Summer 2015. Since its upload, it has received 208 views. For similar materials see Principles of Macroeconomics in Economcs at University of South Carolina.


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Date Created: 09/13/15
Tuesday September 7 2015 Macroeconomics Notes Lecture Five Review Circular Flow Diagram model that illustrates how participants in markets are linked Physical capital often attained through borrowing Production Possibilities Frontier for Tesla A 80 sedans and 0 SUVs C 0 sedans and 80 SUVs 1 hour 2 SEdanS E 40 sedans and 40 SUVs Productivity 1 hour 2 SUV s 40 work hours available A 800 Not possible production 080 Points on the PPF are feasiblepossibilities production points that are efficient ACE see above 0 Means that company is making full use of resources available 0 Point B is 60 sedans and 20 SUVs I Equivalent to 40 hours valid point 0 G is not a valid point considering 6050 cannot be produced I Not enough available work hours Operate using all available resources is optimal for a PPF Points outside or below the PPF are unattainable infeasible with current resources and technology G is example of this from previous PPF F point inside the PPF o 30 sedans 15 hours 0 10 SUVs 5 hours 0 Within the realm of possibility however it is not productive Opportunity Cost 0C the highest valued alternative that must be given up in order to engage in an activity what you give up to get something Opportunity cost of 20 SUVs 20 sedans 0 Moving from B to C 20 sedans OC 0 DC of one SUV one sedan o Essentially this is just calculating the slope o Constant 0C for straight line PPF Shifts in the PPF on ONE axis New technology or an additional resource that is limited to the production of sedans Productivity 1 hour 4 sedans 1 hour 2 SUV s 40 work hours available Blue Previous graph Green New graph Not possible production A 160 Sedans and 0 SUVs C 80 sedans and 40 SUVs E 0 sedans and 40 SUVs 160 A2 A 80 C2 C 40 0 G E2 0 4O 80 160 160 PPF shifts only on sedan axis When PPF shifts than the country has experienced economic growth Shifts in the PPF on BOTH axes Caused by general technological breakthrough EXAMPLE assembly line or better machinery Productivity 1 hour 4 sedans 1 hour 4 SUV s 40 work hours available 1600 it 80 40 A 160 sedans and 0 SUVs C 80 sedans and 80 SUVs E 0 sedans and 160 SUVs 0160 40 80 Opportunity Costs are normally increasing 160 0 Because some resources are better suited to one task than another Example A town can only produce a limited number of tanks and automobiles the chart shows the opportunity cost of producing less tanks in return for more automobiles Plotted Points Tanks Automobiles Opportunity Cost A 400 O B 350 200 50 tanks C 200 400 150 tanks D 0 500 200 tanks The more resources already devoted to an activity the smaller the payoff to devoting additional resources to that activity Thursday September 10 2015 Macroeconomics Notes Lecture Six Review Marginal Opportunity cost is increasing 0 Because resources are not equally proficient in the production of both goods Tanks v Automobiles PPF Production Possibilities Frontier As more economic resources become available the economy can move outward Curve A to Curve B below Increasing Marginal Opportunity Cost is why PPF curves outward and is not straight Humans satisfy their wants by being 1 Economically Self Sufficient Consuming only goods that you produce no trade 2 Economically lnterdependent Specialize in the production of one good and trade with others for other goods I Trade allows us to consume more Absolute Advantage Girl can produce 1 cherry in 8 hours Boy can produce 1 cherry in 4 hours 1 apple in 1 hour 1 apple in 2 hours 40 work hours available for both the girl and the boy A 40 apples and O cherries B 20 apples and 25 cherries C O apples and 5 cherries 3 the production point and consumption point without trade 25 5 20 10 A 20 apples and O cherries B 10 apples and 5 cherries C O apples and 10 cherries 3 the production point and the consumption point without trade Without Trade Girl Boy Production Point 20 apples and 25 cherries 10 apples and 5 cherries Consumption Point 20 apples and 25 cherries 10 apples and 5 cherries With Trade Girl Boy Production Point 40 apples and 0 cherries 0 apples and 10 cherries Consumption Point 20 apples and 5 cherries 20 apples and 5 cherries Absolute Advantage Apples Girl Absolute Advantage Cherry Boy Trade the act of buying and selling Comparative Advantage next class


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