Chapter 19

Chapter 19 - - Macroeconomics is the study of the...

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- Macroeconomics is the study of the determination of ecnomic aggregates such as total output, employment, price level and rate of economic growt. o Macro requires undertstanding of both the short-term and long-term. o Long term groups Those based on Microeconomic foundations which are called optimizers. Others do not based it as strictly. These view wages as less flexible, costs and prices slower to adjust. - Important Idea: Production of output generates income. o Thus by definition, national product is national income. - Everything is measured in terms of dollars. o Nominal: Measured in current dollars. Known as Current Dollar Income o Real: Measuresd in constant dollars based on a specific year. Moves only based on quantity, not affected by inflation. Also known as Constant Dollar Income. - Buisness Cycle: The fluctuations of national income around its trend value that follow a more or less wavelike pattern. We are more concerned with the long-term growth than the short-term one. - Ponteial output: Ouput when all resources are at full-employment. o Symbol: Y* o Output gap: Difference between Potential GDP and Real GDP. When Y-Y* is positive we are in a recessionary gap, when Y-Y* we are in inflationary gap. Buisness Cycle
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Chapter 19 - - Macroeconomics is the study of the...

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