Lecture 11 - ECO100 - Introduction to Introduction to...

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CO 100Y ECO 100Y troduction to Introduction to conomics Economics Lecture 11: troduction to Introduction to Macroeconomics © Gustavo Indart Slide 1
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he Study of Economics The Study of Economics ± Microeconomics is concerned with the study of the choice problem faced by the economic agents: households and firms ¾ Microeconomics, for instance, examines how the equilibrium price for a particular commodity is determined pp y ± Macroeconomics is concerned with the study of the economy as a whole ¾ For instance, macroeconomics examines how the general level of prices is determined (and not the price of any particular commodity) © Gustavo Indart Slide 2
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Growth vs. Fluctuations ± The main concern of government economic policy is to: ¾ facilitate the smooth working of the economy in the short- run ¾ promote the growth of the economy in the long-run ± The economy goes through periods of expansion and period of id i h i l l d h b i l contraction during what is called the business cycle ¾ During period of expansion demand might grow too fast and inflation might occur ¾ During periods of contraction demand might fall too much and unemployment might grow he government might attempt to smooth these changes in the ± The government might attempt to smooth these changes in the economy in order to prevent the negative effects of high inflation and high unemployment © Gustavo Indart Slide 3 ± The government can use two main types of economic policies: fiscal policy and monetary policy
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iscal Policy Fiscal Policy iscal policy fers particularly to changes in the level ± Fiscal policy refers particularly to changes in the level of government expenditures on goods and services and in the level of taxes the government collects ¾ Short-run: it affects the general level of aggregate demand ¾ Long-run: it might affect investment and thus economic growth © Gustavo Indart Slide 4
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Monetary Policy oe t a y oc y ± Monetary policy refers particularly to changes in the stock of money in the economy or to changes in the rate of interest ¾ This is done by the Bank of Canada ¾ Changes in the rate of interest affect aggregate demand ¾ Changes in the money supply will affect the rate of interest and thus aggregate demand ¾ Greater impact on investment and consumption of © Gustavo Indart Slide 5 expensive goods in particular
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This note was uploaded on 08/10/2010 for the course ECONOMICS ECO100Y taught by Professor Furlong during the Summer '09 term at University of Toronto- Toronto.

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Lecture 11 - ECO100 - Introduction to Introduction to...

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