Macro notes

Macro notes - Chapter 1: The Central Concepts of Economics...

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Chapter 1: The Central Concepts of Economics A. Why study economics? 1) For whom the bell tolls a. Without econ, no information of international trade, tax policy or causes of recessions and high unemployment b. Econ- decisions about buying a home, pay for education and retirement 2) Scarcity and efficiency- twin themes of economics a. Behavior or financial markets income reasons business cycle international trade and finance pursue important goals b. Economics: the study of how societies use scarce resources to produce valuable goods and services and distribute them among different individuals - Goods are scarce and society m ust us e its resources efficiently - Without scarcity there is no econo mics Scarcity: full of econo mic goods - With unlimited wants, an econo my m ust m ake use of society’s resources in satisfying people’s wants and ne eds Econo mic efficiency: requires a n econo my produce highest combination of qu antity a nd quality of goods a nd s ervices given its technology and scarce resources 3) Micro vs. m acro a. Micro econo mics founder- Adam Smith- individual entities (markets, firms, a nd hous eholds, m onopoly; self interest is good- b en efits b. Macroecono mics- overall p erform ance of the econo my- John Maynard, Keynes m a d e m acro what it is today (1936 AKA in Great Scientific a pproach- to understand econo mic life o Involves observing econo mic affairs and drawing upon statistics a nd historical records - Econo m etrics- statistics to econo mic probability- us ed for sifting Septe m b er 2, 2010
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Econweb.rutgers.edu/sheflin - What should not be done to deal with the possible double- dip  recession- Raise taxes - Taxing is less disposable income- lower consumption  part of  - Raise government spending- aggregate demand goes up - Raise money supply  interest rates will fall thus businesses borrow  and invest - Macro- inflation, unemployment, average prices, debt interest rates  (and supply), fiscal (government spending and taxing), monetary  policy, economic growth, international economics Keep unemployment rate from rising: + 100,000 jobs a month - European central bank (ECB [like U.S. fed])  optimism don’t see  - “too big to fail””- not thightly reculates (bear, Lehman)- engaged in  risky behavior because government needs to bail them out Demand Micro- what, how, who, role of prices Macro- how much to produce, GDP, CPI - Determines exchange rate- supply/ demand Economics : social science that deals with how individuals, organizations and societies deal with scarcity  and choice Opportunity cost : price of next best alternative- more micro Why no free lunch? Everything has an opportunity cost Economics is about choices - Scarcity tradeoffs     opportunity cost Guns v. butter      food v clothing    leisure time v. work    efficiency v. equity 
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This note was uploaded on 05/05/2011 for the course ECON 103 taught by Professor Lin during the Spring '08 term at Rutgers.

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Macro notes - Chapter 1: The Central Concepts of Economics...

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