Chapter 1 - Macro

Chapter 1 - Macro - over time but in a way that is...

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Chapter 1 What is macroeconomics? - Macroeconomics is the study of collections of people and firms and how their interactions through markets determine the overall economic activity in a country or region. Also focuses on the study of individual people, firms, or markets. How Macroeconomics studies key questions - The approach of studying macroeconomics consists of document facts, develop a model, compare the predictions of the model with the original facts, and use the model to make other predictions that maybe eventually be tested. - Parameters refer to an input that is generally fixed over time, except when the model builder decides to experiment by changing it. - Exogenous variable refers to an input that is allowed to change
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Unformatted text preview: over time, but in a way that is completely determined ahead of time by the model builder. Ex: Assumption that the population will grow at a constant rate-Endogenous variable: when a model operates on the exogenous variables and parameters in order to generate outcomes. Ex: level of the wage and the level of employment. Features of U.S. graph-The overall upward trend due to economic growth-The short-run fluctuations in economic activity o Potential output measures the way per capita GDP would evolve if prices were completely flexible and resources were fully employed. -The suggested question of what the future holds.-These features reflect the structure of the book...
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