__172.20.40.61_Materials_wonga-0028_Chapter_5

__172.20.40.61_Materials_wonga-0028_Chapter_5 - Chapter 5...

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Chapter 5 – An Introduction to Macroeconomics Adapted by Andrew Wong
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Issue: Was It The Conservatives Fault? The worse pounding ever taken by a major Canadian federal party occurred in 1993, when the Conservatives, under the leadership of Brian Mulroney, (his government was highly unpopular at the time for several reasons) decided to call an election). This occurred six months after the appointment of Kim Campbell as the new Conservative prime minister. Federal public finances were saddled with a large budget deficit; and Canada’s rate of unemployment had risen to as high as 12 percent just a few months before the election, showing no sign of early ?
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Issue: Was It The Conservatives Fault? Kim Campbell has stated, while on the election campaign trail, that the unemployment problem was too complex to be discussed during an election campaign. Obviously the voters thought that Campbell was wrong: The economic policies pursued by the federal government can influence the number of jobs created or destroyed by the economy, so they are obviously relevant to an election campaign even though they are by no means the only influence. ?
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Drawing a Line Between Macro and Microeconomics Aggregation and Macroeconomics An economic aggregate is nothing but an abstraction that people use to describe some important feature of economic life, such as total domestic product.
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Drawing a Line Between Macro and Microeconomics The Foundations of Aggregation The composition of demand and supply in various markets is of little consequence for the economy-wide issues of growth, inflation, and unemployment. During economic fluctuations, markets tend to move up or down together.
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Supply and Demand in Macroeconomics Moving to Macroeconomic Aggregates Aggregate supply and aggregate demand relate domestic product (on the horizontal axis) to the price level (on the vertical axis).
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FIGURE 1: Two Interpretations of a Shift in the Demand Curve Q 0 Price P 0 D 1 A S D D S E Quantity (a) P 0 S D D S E Quantity (b) D 1
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FIGURE 2: An Economy Slipping into a Recession D 2 B Price Level S D 0 D 0 S E Domestic Product 2
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FIGURE 3: Economic Growth D 1 C Price Level S 0 D 0 D 0 S 0 E Domestic Product D 1 S 1 S 1 Q 0 Q 1
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__172.20.40.61_Materials_wonga-0028_Chapter_5 - Chapter 5...

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