MACRO MODELS

MACRO MODELS - PRINCIPLES OF MACROECONOMICS MODELS IN...

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PRINCIPLES OF MACROECONOMICS MODELS IN MACROECONOMICS Foster
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Spring 2010 Econ 012 - Foster 2 Macroeconomic Theory Observe real world phenomenon Develop theory Collect data and analyze to verify theory
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Spring 2010 Econ 012 - Foster 3 The Scientific Method Make assumptions People make rational decisions Full information 2 countries/2 goods Build Models Study relationships between important variables
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Foster MODEL 1: The Simple Circular-Flow Diagram Markets for Factors of Production Households Firms Income Wages, rent, profit, interest Factors of production Labor, land, capital, entrep. Spending G & S bought G & S sold Revenue Markets for Goods & Services 4 Spring 2010
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Spring 2010 Econ 012 - Foster 5 Enhanced Circular Flow Diagram
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Spring 2010 Econ 012 - Foster 6 Full Circular Flow Diagram
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7 MODEL 2: The Production Possibilities Frontier A graph that shows the combinations of two final goods the economy can possibly produce given the available resources and the
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MACRO MODELS - PRINCIPLES OF MACROECONOMICS MODELS IN...

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