Macro 4 - The Short Run Keynesian Aggregate Supply and...

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The Short Run Keynesian Aggregate Supply and Demand Model (chapter 4) The Birth of Macroeconomics -Three central questions of macroeconomics 1. Why do output and employment sometimes fall, and how can unemployment be reduced? 2. What are the sources of price inflation, and how can it be kept under control? 3. How can a nation increase its rate of economic growth? Objectives and Instruments of Macroeconomics -Objectives: Output, employment, and stable prices Measuring Economic Success -Output -the best measure of an economy’s total output is GDP -GDP is the measure of the market value of all final goods and service produced in a country during a year -Two ways to measure GDP -Nominal GDP is measure in actual market prices -Real GDP is calculated in constant or invariant prices. -% growth rate of Real GDP in year t: 100 x (GDPt - GDPt-1)/GDPt-1 -Potential GDP represents the maximum sustainable level of output that the economy can produce. -High Employment, Low Unemployment
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Macro 4 - The Short Run Keynesian Aggregate Supply and...

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