Chapter 2 Notes - Vandan Desai ECON 102Principles of...

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Vandan Desai ECON 102—Principles of Macroeconomics 1 Chapter 2—Oberving and Explaining the Economy (Lecture &otes) Economics is a way of thinking o Entails accurately describing economic events → explaining why the events occur → predicting under what circumstances such events might take place in future → recommending appropriate courses of action Economists try to explain puzzling observations/facts about the economy I. Health-Care Spending in America A. Spending as a Share of GDP i. Gross domestic product (GDP) —a measure of the value of all the goods and services newly produced in an economy during a specified period of time ii. Measured by adding up what people spend on everything , from health care to cars iii. Most comprehensive available measure of size of economy 1. GDP of U.S. in 2004 = $11.7 trillion 2. Spending of health care in U.S. in 2004 = $1,392 billion a. 3X as large as entire automobile industry b. Health-care spending has increased in 2000s B. The Relative Price i. Relative Price —price of a particular good compared to price of other things ii. ܴ݈݁ܽݐ݅ݒ݁ ݌ݎ݅ܿ݁ ݋݂ ℎ݈݁ܽݐℎ ܿܽݎ݁ = ୦ୣୟ୪୲୦ିୡୟ୰ୣ ୮୰୧ୡୣ ୟ୴ୣ୰ୟ୥ୣ ୮୰୧ୡୣ ୭୤ ୟ୪୪ ୥୭୭ୢୱ ୟ୬ୢ ୱୣ୰୴୧ୡୣୱ iii. Price of health care has increased relative to average of all other prices C. Correlations Between Economic Variables i. Economic variable —any economic measure that can vary over a range of values ii. Examples: health-care spending’s share of GDP or relative price of health-care iii. Two variables
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This note was uploaded on 10/31/2010 for the course ECON 201 taught by Professor Coomber during the Spring '08 term at Community College of Baltimore County.

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Chapter 2 Notes - Vandan Desai ECON 102Principles of...

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