Chapter 6 - WHAT YOU WILL LEARN IN THIS CHAPTER chapter: 6

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1 of 40 WHAT YOU WILL LEARN IN THIS CHAPTER chapter: 6 >> Macroeconomics:      The Big  Picture 
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2 of 40 WHAT YOU WILL LEARN IN THIS CHAPTER An overview of macroeconomics, the study of the economy as a whole, and how it differs from microeconomics The importance of the business cycle and why policy-makers seek to diminish the severity of business cycles What long-run growth is and how it determines a country’s standard of living
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3 of 40 WHAT YOU WILL LEARN IN THIS CHAPTER The meaning of inflation and deflation and why price stability is preferred What is special about the macroeconomics of an open economy , an economy that trades goods, services, and assets with other countries
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4 of 40 Macroeconomics vs. Microeconomics Let’s begin by looking more carefully at the difference between microeconomic and macroeconomic questions. MICROECONOMIC QUESTIONS MACROECONOMIC QUESTIONS Go to business school or take a job? How many people are employed in the economy as a whole? What determines the salary offered by Citibank to Cherie Camajo, a new Columbia MBA? What determines the overall salary levels paid to workers in a given year?
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5 of 40 Macroeconomics vs. Microeconomics MICROECONOMIC QUESTIONS MACROECONOMIC QUESTIONS What determines the cost to a university or college of offering a new course? What determines the overall level of prices in the economy as a whole? What government policies should be adopted to make it easier for low-income students to attend college? What government policies should be adopted to promote full employment and growth in the economy as a whole? What determines whether Citibank opens a new office in Shanghai? What determines the overall trade in goods, services and financial assets between the U.S. and the rest of the world?
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6 of 40 Macroeconomics vs. Microeconomics Microeconomics focuses on how decisions are made by individuals and firms and the consequences of those decisions. Example: How much it would cost for a university or college to offer a new course ─ the cost of the instructor’s salary, the classroom facilities, the class materials, and so on. Having determined the cost, the school can then decide whether or not to offer the course by weighing the costs and benefits.
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7 of 40 Macroeconomics vs. Microeconomics Macroeconomics examines the aggregate behavior of the economy (i.e. how the actions of all the individuals and firms in the economy interact to produce a particular level of economic performance as a whole). Example: Overall level of prices in the economy (how high or how low they are relative to prices last year) rather than the price of a particular good or service.
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8 of 40 Macroeconomics vs. Microeconomics In macroeconomics, the behavior of the whole macroeconomy is, indeed, greater than the sum of individual actions and market outcomes.
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This note was uploaded on 10/04/2011 for the course ECON 2006 at Virginia Tech.

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Chapter 6 - WHAT YOU WILL LEARN IN THIS CHAPTER chapter: 6

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