MACROecon Ch.10 Reading Notes.docx - Ch 10 Reading Notes...

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Ch. 10 Reading Notes Market economies raised society’s standard of living (driven by people’s natural tendency to exchange and specialize) Short -run economics: Keynesian economics Long- run economics: Classical Increasing productivity means that there is more output produced while keeping the number of inputs the same Potential output conveys a sense of the growth that is possible Potential output can also be called potential income because, in the aggregate, income and output are identical Potential output focused on rather than the production possibility curve – macro focuses on aggregate output – GDP and doesn’t focus on the choices of dividing up GDP among alternative products as does micro Potential output is a barrier beyond which an economy cannot expand without either increasing available factors of production or increasing productivity Long run growth analysis focuses on supply Say’s law: supply creates its own demand. Aggregate demand will always equal aggregate supply.
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