econ 011 studyguideex1

econ 011 studyguideex1 - Econ 011 STUDY GUIDE Exam 1...

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Econ 011 STUDY GUIDE Exam 1 Chapter 1 Macroeconomics: The Bird’s eye view of the economy Great Depression - Worst economic rescission U.S. has ever experienced - Unemployment rate hit 25% - Stocks lost a third of their value in 3 weeks - 1 st Factor – o Decrease in sales and production = many layoffs in factories and mines - What caused this? o Stock Market crash o Capitalism o Poor economic planning G.D. Stock Market Crash - Stocks – current and expected profits of firms - Economy goes down stock market goes down - Similar crash during another time period (??) and no depression - There was a depression in most industrialized countries, stocks almost non- existent Capitalism - After WWII, long period of economic expansion - Not the cause of crash ***Poor Economic Planning*** Cause of Crash - Policy makers did not correctly anticipate G.D. - Did not know about the behavior of economy as a whole - Bad policy decisions – in terms of macroeconomics - Should build an expansion against the recession 1920’s lead to a retraction - Result o Economy developed into subfields – Macroeconomics : The study of the functioning economy as a whole and also how macroeconomic policies affect the economy o Macroeconomic Policies : Government actions designed to affect the performance of the economy as a whole - Standard of Living : o The degree to which people have access to goods and services that make their lives easier, healthier, safer and more enjoyable - Economic Growth - A process of steady increases in the quantity and quality of the goods and services the economy can produce o Average labor productivity: Total output / number of people employed = output per employed worker - Recessions : - Slowdowns in economic growth
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o Doesn’t always need to go down, could just be producing at a slower rate - Depressions :- Severe recessions - Expansions : - Periods of rapid economic growth (ex. From year to year 3% to 5% to 6% to 7%) - Booms : - Particularly strong expansions Unemployment - Labor force – people employed and people unemployed but who want to be employed - Does not always decrease during expansions – always rises during recessions – always greater than zero - Unemployment Rate – Number for people unemployed / Labor force o % of people out of work - Major issues of unemployment o Rates differ from country to country o Ex. European v. U.S. Unemployment rate Inflation - Inflation – the rate prices in general are increasing over time - Varies over time – high in 70s / low in 90s - Varies between countries – (2001) 3% U.S. 400% Ukraine - Positive – prices increase - Disinflation – prices continue to increase but at a slower rate - Deflation – Prices decrease – negative Major Macroeconomic Issues - National economies are becoming extremely interdependent - Steel and Textile industries negatively affected b/c we can purchase them outside the U.S. at a lower cost - Trade Deficit – exports < imports (Currently in deficit) - Trade Surplus – exports > imports Policies - Monetary Policy – Determination of the nation’s money supply o Controlled by the central bank or, in the U.S. the Federal Reserve System
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econ 011 studyguideex1 - Econ 011 STUDY GUIDE Exam 1...

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