ECN 203 (11), Introduction to Macroeconomics

ECN 203 (11), Introduction to Macroeconomics - Chapter 11...

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Chapter 11 – Introduction to Macroeconomics This chapter starts our coverage of Macroeconomics , the study of how the economy works as a whole. The chapter defines the key variables to measure the “health” of an economy, and briefly discusses how the variables are measured and interpreted.
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Macroeconomics Microeconomics -- the “web of connections” of all the individual interdependent markets that make up an economy. Macroeconomics – putting the microscope away and looking at the overall economy as its own entity, imperfections and all.
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The Macro Goal Variables Measures of Economy’s “Health” Definitions and Realistic Goals (US, for the most part).
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Goal #1 – Sufficient Production or Output Measured by Real Gross Domestic Product (Real GDP) . Real GDP (Y) -- The total production or output of final goods and services over a period of time, expressed in constant prices of a base year.
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Real Versus Nominal GDP Nominal GDP (unadjusted GDP) -- Total production at current prices. Real GDP (GDP adjusted for changes in prices) -- Total production at constant prices of a base year.
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Why is Production or Output Important? Real GDP – the sum total of production of final goods and services across all markets of the economy, it measures total production or output . By definition, Real GDP identically measures total income to all the factors derived from production and sales.
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Real GDP -- Realistic Goal Realistic Goal for Real GDP -- to be as high as possible without accelerating inflation (overstimulated economy).
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The Full Sustainable Level of Real GDP (Potential GDP)
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ECN 203 (11), Introduction to Macroeconomics - Chapter 11...

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