Chapter3Summary

Chapter3Summary - 1 Chapter 3 Summary Tucker,...

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Chapter 3 Summary Tucker , Macroeconomics for Today , 5th Edition 1. We are concerned about the macroeconomic problems of a market economy. A market economic has a number of basic characteristics, which are you should know (and which are listed in the notes). 2. A market economy can be illustrated with the simple circular flow graph. You should know the assumptions upon which this graph is based. The upper loop of the circular flow contains the product market, and the lower loop contains the resources market. A market is a communications network between buyers and sellers. Households are buyers of goods and services in the product market, and are the sellers of resources (because they are the owners) in the resource market. The value of consumer expenditures in the upper loop is identically equal to the value of the payments to resource owners in the lower loop. This is an identity (not simply an equality) because profits will take on whatever value is required to equilibrate the upper and lower loops. 3. A market is a communications network between buyers and sellers. The market may or may not be a physical place. 4. In the simple circular flow model, households primarily determine WHAT to produce on the basis of the dollar votes that they cast in the marketplace for goods and services. Given resource prices and the prevailing level of
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Chapter3Summary - 1 Chapter 3 Summary Tucker,...

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