PPT--Ch05--FA18.ppt - PPT-Ch_05 Introduction to...

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PPT-Ch_05 ------ Introduction to Macroeconomics
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Readi ngs 1. PPT_Ch_05 2. DOC_Ch_05 3. Case, Fair, Oster – Chapter 5.
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The Components of the Macro-economy Four Macro (Micro) Players: 1. households 2. firms, 3. government, 4. rest of the world (ROW = other countries) They interact in Three Market Arenas 1. Goods and Services (Output) market 2. Labor market 3. Financial-Capital market. The circular flow diagram shows the exchanges made by the four macroeconomics players in the three market arenas (see next slide )
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Households: receive income from firms and govt. purchase goods and services from firms, and pay taxes to govt. purchase foreign-made goods and services (imports). Firms: produce GS, receive payments from households and govt for goods and services they produce pay wages, dividends, interest, and rents to households and taxes to the government. The government : receives taxes from firms and households, pays firms for GS pays wages to government workers pays interest and transfers to households. World Economy (WE): Exports Imports. The Circular Flow Diagram: The Components of the Economy.
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The Method and The Objectives of MACROECONOMICS
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Introduction to MACROECONOMICS Microeconomics examines the behavior of individual decision-making units — firms and households. Macroeconomics deals with the economy as a whole; it examines the behavior of economic aggregates such as aggregate production (income), aggregate consumption, investment, and the overall price level. Aggregate behavior refers to the behavior of all households and firms summed together
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Macroeconomic Concerns Three major Objectives of macroeconomics: 1. Output growth 2. Inflation 3. Unemployment 4. Govt. Deficit and Debt
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The main macroeconomics measure: Output and Output Growth The main macroeconomics measure is: Aggregate Output ( measured as GDP) = the total amount of goods and services (GS) produced in an economy in a year. Growth Rate of GDP (aggregated Output): It tells us how the economy is doing, how fast is growing 2015 2014 (2015) 2014 % 100 GDP GDP GDP GDP
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Variations in Output Growth A Recession is a period during which aggregate output declines and unemployment rises .
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