Prin Of Economics Macro
Prin Of Economics Macro ECO 201
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This 5 page Class Notes was uploaded by Gerda Casper on Wednesday October 21, 2015. The Class Notes belongs to ECO 201 at Tarleton State University taught by William Beaty in Fall. Since its upload, it has received 22 views. For similar materials see /class/225675/eco-201-tarleton-state-university in Economcs at Tarleton State University.
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Date Created: 10/21/15
Economics Test 1 Notes Macroeconomics relationships are complex Large Lags everything takes time in economics When lags occur we raise issues on what really causes problems Scarcityexists cause nature does not provide us with the resources to produce enough godds and services to satisfy out material wants Economic Problems 0 Unlimited wants 0 Limited resources Implications of Scarcity 0 Can t have everything we want 0 Getting more of one thing implies giving up something else Opportunity Cost When we make a choice in the face of scarcity we give up opportunity to do something else Economics is a materialistic science that is concerned with the production and distribution of goods and services Basic Economic Questions 0 What goods and services should be produced 0 How should they be produces o For whom should these goods and services be produced 0 Countries choose economic systems to address these questions Alternative Economic Systems 0 Traditional Economy 0 An economic system that answers the basic economic questions the way they have always been answered 0 Downside doesn t handle change good What to do after change 0 o Centrally Planned Economy Responsible 0 We will make someone responsible for things 0 Always have to make plans and predict o Cant predict change 0 Market Based System 0 People who can afford resource gets resource 0 Rely on Profit Motive to address 3 basic questions 0 Profits total revenues total costs 0 whom what how Factors of Production ingredients from which goods and services are produced Economic Resources 4 Basic Groups Land natural resources that we use to produce goods and services location quotgifts of naturequot Owners of land receive rent from the producers who use these resources Labor the work time and work effort that people devote to produce goods and services Labor includes both the physical effort and skills Economists call skills uman capital Payments called wages Capital tools instruments machines building and other items that have been produces in the past and that business now use to produce goods Owners of capital good receive interest for the use oftheir productive resources Entrepreneurship organize labor land and capital to produce goods and sevices Vision to do something Payments called profits Macroecomics the study og the aggreavate total effects on the national economy and the global economy that individuals businessmen and government meke Produce more Address the economic problem of scarcity by attempting to increase total aggregate output and reduce unemployment Alternative in dealing with economic problems Microeconomics study of choices that individuals and businesses make and the way these choice interact and are influenced by governments Markets bringing buyers and sellers together Answers to economic problem use resources in such a way to satisfy as many people Produce more efficiently Microeconomics address the problem by placing emphasis on efficiency in the production and distribution of goods and services Positive Economics 0 Positive statements are about what is 0 We can test a positive statement by checking it against the facts 0 Ex it is raining outside 0 Predictions o f then relationships 0 Used to develop theories 0 Make predictions 0 Attempt to eliminate value judgements 0 Hard to do this because we are all people studying people Examples an across the board income tax cut will help stimulate the econmy and reduce the unemployment rate An across the board income tax cut will benefit wealthy tax payers more than it benefits poor tax payers Normative Economics 0 About what ought to be 0 Statements depend on values and cannot be tested 0 Opinions 0 Characteristics 0 Should should not statements 0 Often are extensions of positive statements 0 Applied to government policy 0 Based on personal value judgement Examples the US should implement an across the board income tax cut The US should not implement an across the board income tax cut Disagreement Among Economists and Sources of These Disagreements Because normative statements are based on value judgements which cant be verified economists and others are more likely to disagree on normative than on positive statements Economic Theories models Represent simplified views of the world that help us understand the world predict the effect of changes in outside forces on the world and create policy to change the world Function of Theories Understanding o Predicting 0 Policy making Building a Theory The Scientific Method quotrefers to a body of techniques for investigating phenomena acquiring new knowledge or correction and integrating previous knowledge Observation Measurement Assumptions Hypothesis WPPN Testing Observation looking at world events and questioning why they occur Measurement collection information about observed phenomena Making Assumptions using general statements about the world to simplify and reduce the scope of a model 0 Foundation of building a theory 0 Assumptions are everywhere Hypothesis drawing a tentative conclusion based on assumptions and logic Testing Comparing the models conclusions to historical and future events Never stop testing Production Possibility Factor PPF o quotboundary between combinations of goods and services that can be produced and combinations that can t be produced given the available factors of productionquot 0 At any point of the PPF the economy is operating at maximum compacity 0 Use models as illustrating 0 Pictures in graphs Assumptions of PPF 0 When economy is operating on the PPF o It resources are fully employed o It is operating at maximum efficiency 0 Its technology is being fully utilized final assumptions in order to simplify our analysis we assume the economy produces only two classes of goods Consumer and capital