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MACROMIDTERMSTUDYGUIDE - 1 What is economics What is...

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1) What is economics? What is macroeconomics? Economics is the study of how productive and distributive aspects of human life are organized. Macroeconomics analyzes the behavior and performance of the economy as a whole, focusing on the total or aggregate performance of the economy. 2) What are the main goals of macroeconomics? When did these Goals become important as goals of government? The Great Depression caused people to question the classical model that markets are self- regulating and self-adjusting. The government needed to play a bigger role in the economy. Economic growth (increased GDP), full employment (about 4% unemployment) and price stability (minimum inflation) are the main goals. 3) Besides macroeconomics, what changes made during the Great Depression make the “recession” we are having today less painful? Less severe? 1934- Securities and Exchange Commission created 1933- Glass-Steagall Act created the FDIC set labor standards (wages) 1935 Social Security 4) Recession, Depression…what are signs of a poor economy today and historically? -Slow economic growth (GDP only increased 2.5% over past 10 years annually) -Jobs going abroad, less job creation -5.9 million more without health insurance in 2007 than 2001 -rising income inequality -housing bubble burst—housing prices down 25% (32% in GD) -2009 Dow falls 50%, GD October 1929 falls 89% -rising unemployment 5) Do we always want growth? Should this be our goal? Economic growth does not always indicate a better economy. More health bills because of illness and more toxic cleanup increases GDP, but this growth is not good. Other examples include gambling, sex and violence in media, types of growth that are looked down upon by certain groups. Prices of certain products we buy are subject to higher prices because we are supporting bad, sleazy forces in the economy. Social and physical stresses arise from growth, such as need for bottled water and soundproof windows, relaxation tapes. Cars and televisions create detrimental productive growth (fast food restaurants, tire dumps). Pesticides increase economic growth. Our goal should be REAL economic growth, through using renewable power and better traditional methods. 6) How do the economic problems of today compare with those in the Great Depression? The Great Depression was caused by over-speculation in real estate and today, by higher risk loans for higher priced housing. In the GD, 5000 banks failed, but now, much less have failed. Mortgage foreclosures are at record highs. Unemployment today is at about 10%, in GD, it was 25%. GD, GDP fell by 25%, today, fell by 2% or less. Stocks fell by 90% in GD, today they fell by about 50%.
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7) How do you measure economic growth? How big is the US economy today? Economic growth is the increased output of goods and services over time, and is measured with GDP, or the value of goods and services produced in a year. Today, the economy is about 14 trillion dollars.
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