Chapter 4 - because inflation is costly to society...

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Chapter 4 Economists – and society at large – agree on 3 important macroeconomic goals: economic growth, full employment, and stable prices. Economic growth: the increase in our production of goods and services that occurs over long periods of time Economists monitor economic growth by keeping track of real GDP Employment and unemployment Unemployment affects the distribution of economic well-being among our citizens A high unemployment rate means that the economy is not achieving its full economic potential Real GDP and employment are closely related Business cycles - Fluctuations in real GDP around its long-term growth trend - Expansion: a period of increasing real GDP - Recession: a period of significant decline in real GDP - Depression: an unusually severe recession Inflation - With very few exceptions, inflation rate has been positive - Prices have risen every year - Stable price (a low inflation rate) is an important macroeconomic goal
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Unformatted text preview: because inflation is costly to society Aggregation in macroeconomics-Aggregation: the process of combining different things into a single category Modern macroeconomics began with the publication of The General Theory of Employment, Interest, and Money in 1936, originated in controversy It may seem that macroeconomists agree on very little, but there is actually broad consensus on many positive economic issues. The roots of most macroeconomic controversies are normative. Today Keynesian and classical ideas has emerged Economic growth-If output, real GDP grows faster than population, the average person can enjoy an improved standard of living High employment-When employment is low, it harms not only the unemployed themselves, but also society in general: society loses output that could have been produced Stable prices-High inflation imposes costs on society and can lower living standards...
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This note was uploaded on 03/01/2009 for the course ECON 2006 taught by Professor Rdcothren during the Spring '08 term at Virginia Tech.

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Chapter 4 - because inflation is costly to society...

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