econ. review #1

Econ review#1 - Econ 102 Review#1 MACRO ECONOMICS study of the economy as a whole employment inflation and growth aggregation build mechanical

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Econ 102 – Review #1 MACRO ECONOMICS – study of the economy as a whole, employment, inflation, and growth aggregation build mechanical models to explain behaviors intermediate relevance – help design policies to invoke desirable aggregate outcomes (high growth, low inflation, etc) Long Term Economic Growth Economic Growth - increase production of goods and services real GDP – some measure of output and production, total quantity produced over 1 year we measure standard of living with real GDP growth – real GDP per capita grows when real GDP increases faster than the population Malthusian Theory of Stagnation no hope for improvement in standard of living higher output (production of food) higher standard of living people have more children population grows standard of living back to “usual” level does NOT apply to countries that underwent Industrial Revolution Industrial revolution associated with demographic transition fall in fertility and mortality (at beginning they are high, after they fall) slow population growth population growth invariant to improving standard of living demographic transition made possible for living standards to improve over time Gary Becker industrialization and falling mortality rate resulted in higher returns from human capita (education, skill, knowledge) trade off between ‘quantity and quality’ parents want to have less children and educate them better
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Econ 102 – Review #1 small differences in long-term growth rates can imply huge differences in standard of living Growth Rate Formula = GDP new – GDP old x 100 GDPold Rule of 70 how many years it takes GDP to double 70/growth rate = # of years to double Business Cycle Fluctuations economic growth is not constant business cycles – fluctuations in real GDP around its long-term growth expansion – period of real GDP increasing fast than normal contraction – period of real GDP increasing slower than normal recession – fall in real GDP (usually after 2 quarters of negative growth) of significant depth and duration depression – an unusually severe recession (1929- The Great Depression) why do we care about business cycles: unemployment firms driven out of business due to tougher than usual economic conditions unemployment rate = people without job unemployment rate is countercyclical people with and without job low during booms, high during recessions Supply and Demand
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Econ 102 – Review #1 demand – when price of a good rises and everything else remains the same, then the quantity of the good demanded will fall supply – when price of good rises, the quantity of goods supplied increases equilibrium supply = demand GDP – Gross Domestic Product total value of all final goods and services produced for the marketplace during a given period, within the nation’s borders
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This note was uploaded on 04/06/2009 for the course ECON 102 taught by Professor Drozd during the Fall '08 term at Wisconsin.

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Econ review#1 - Econ 102 Review#1 MACRO ECONOMICS study of the economy as a whole employment inflation and growth aggregation build mechanical

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