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Unformatted text preview: Chapter 24: Economic Growth, Business Cycles, Unemployment, and Inflation Macroeconomics is the study of the aggregate moods of the economy, with specific focus on issues associated with those moods growth, business cycles, unemployment, and inflation. Issues of growth are generally considered in a long run framework. o Long run growth framework focuses on incentives for supply supply side economics Business cycles are generally considered in a short run framework. o Short run business cycle framework focuses on demand demand side economics Real gross domestic product the market value of final goods and services produced in an economy stated in the prices of a given year. Secular growth trend tends to be the annual growth given of a specific economy. Per capita real output is real GDP divided by the total population. Growth rates today are high by historical standards. The growth trend that we now take for granted started only at the end of 18 th century. About the time that markets and democracies became the primary organizing structures of the economy and society. China and India have their size as their main asset. One reason market economy have been so successful is channel individual efforts into production and growth sense of accomplishments. Growth allows government to avoid hard distributional questions of who should get what part of our existing output. Material growth comes with costs: pollution resource exhaustion and destruction of natural habitat. As more goods made available to control pollution, less is available for growth of average individuals personal consumption. Business cycle is the upward or downward movement of economic activity, or real GDP, that occurs around the growth trend....
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