Econ notes - Econ 102 1-9-08 Chapter 5 Introduction to...

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Unformatted text preview: Econ 102 1-9-08 Chapter 5 Introduction to Macroeconomics Economy : the structure of economic activity in a community, a region, a country, a group of countries, or the world. Gross Domestic Product : the market value of all final goods and services produced in the nation during a particular period- usually a year. Flow Variable : A variable that measures something over an interval of time, such as your income per week. Stock Variable : A variable that measures something at a particular point in time, such as the amount of money you have with you right now. Mercantilism: the incorrect theory that a nation’s economic goals should be to accumulate precious metals in the public treasury; this theory prompted trade barriers to reduce imports, but other countries retaliated in, reducing trade and the gains from specialization. Mercantilism taught that colonies existed to benefit the mother country. [17 th and 18 th century Britain and France] Economic fluctuations: the rise and fall of economic activity relative to the long-term growth trend of the economy; also called business cycles. Depression: A sharp reduction in an economy’s total output accompanied by high unemployment lasting more than a year; severe economic contraction. Recession: a decline in the economy’s total output lasting at last two consecutive quarters, or six months; an economic contraction. Inflation: an increase in the economy’s average price level. Expansion: a phase of economic activity during which the economy’s output increases. Case study: the Global Economy…. Pg. 94-95 • Business Cycles 1 o Are not perfectly synced but across countries o Often show apparent links • U.S. and U.K. o Both economies went into a recession in the early 80’s, then grew well for the rest of the decade o Entered another recessions in 1991, then recovered for the rest of the 90’s o Slowed in 2001, only to pick up again in 2004 • Problems with connected business cycles o A slump in one country could worsen another country who is already in a recession o A fear among economists in 2001 was that the terrorist attacks would cause a major collapse. They feared that the struggling stock prices, airline tickets, ect. Would affect other countries, again coming back and hurting the US, ultimately causing the connected economies to feed into each other until there was a collapse....
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This note was uploaded on 04/21/2008 for the course ECON 102 taught by Professor Ehrhardt during the Winter '08 term at University of Cincinnati.

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Econ notes - Econ 102 1-9-08 Chapter 5 Introduction to...

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