microbook_3e-page9

microbook_3e-page9 - normative on the basis of o Efficiency...

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Micro vs. Macro MICROeconomics x Study of the decision-making of individuals, households and firms x Study of distribution of wealth MACROeconomics x Study of aggregates x What factors affect: o Gross Domestic Product? o the price level? o the unemployment rate? Positive vs. Normative Economics Positive x No judgements x Just asking how the economy operates Normative x Makes judgements x Evaluates the outcomes of economic behavior x Policy recommendations Economic policy x Positive – economic policy starts with positive theories and models to develop an understanding of how the economy works x Then economic policy evaluates
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Unformatted text preview: ( normative ) on the basis of: o Efficiency – Is the economy producing what people want at the least possible cost? (quantifiable) o Equity – Is the distribution of wealth fair ? Are landlords treating low-income tenants fairly ? (non-quantifiable) o Growth – Increase in total output of the economy. Note: efficiency gains lead to growth (quantifiable) o Stability – steady growth, low inflation and full employment of resources – capital and labor (quantifiable) x And recommends ( normative ) courses of action to policy-makers (presidents, congressmen, etc.) Page 9...
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This note was uploaded on 12/29/2011 for the course ECO 311 taught by Professor Willis during the Fall '10 term at SUNY Stony Brook.

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