Case, Karl E. , and Ray C. Fair, and Sharon M. Oster. Principles of
Macroeconomics. Tenth Edition. Upper Saddle River, NJ: Prentice Hall, Inc., 2012.
Chapter 5 - Introduction to Macroeconomics
Macroeconomics That part of economics that focuses on the fa
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C 1. The spending by Americans while traveling in Europe best illustrates
A. trade ow. /
\/ B. labor ow. ,_ _ "
' nancial ow.
4.) For each of the following trade relationships, explain the likely source of the
comparative advantage of each of the exporting countries.
a.) The Unites States exports software to Venezuela, and Venezuela exports oil to
the United States.
b.) The Unit
4.) Use the concept of opportunity cost to explain the following:
a.) More people choose to get graduate degrees when the job market is poor.
b.) More people choose to do their own home repairs when the economy is slow and
Gross Domestic Product (GDP): measures total income of everyone in the economy
Measures total expenditure on the economy's output of goods and services
o Income equals expenditure for economy as whole
Market value of all final goods and services produce
Additional thoughts for the final exam:
What tools does the Fed have available to control the money supply?
How is each tool used to increase the money supply or decrease the
What is the federal funds rate?
How is it influenced by open marke
Intro to Savings & Investment
Institutions: humanly devised constraints that structure human interaction. The
institutional framework of any economy must be sound in order for growth to occur. More
SI: ECN 222
Unemployment & the Labor Force
Not in labor force
The labor force
Adult population: must be 16 years or older.
Not in labor force: not working or looking for work but i
Exam 2 thoughts:
Know how the CPI is different from the GDP deflator, what is measured by each?
-GDP Deflator measures prices, CPI measures the typical consumers cost of living
What are the steps to constructing the CPI?
-Fix the basket
-Find the prices
SI: ECON 222
Session#: 2 & 3
Supply & Demand Review
Market Signals: buyers and sellers participate in markets and communicate through price
signals (fluctuations in prices).
Market: a group of buyers and sellers
In a Perfectly Com
Without money, trade requires barter
Requires double coincidence of wants - two people each have a good that the
Unnecessary with money, the set of assets that people regularly use to buy good
and services from other people
3 Functions of M
Economic Growth and Public Policy
Institutional framework of economy must be sound
"Humanely devised constrains that structure human interaction"
o Property Rights
Without law and order and dependable conditions sign
SUPPLY AND DEMAND TOGETHER:
Equilibrium: P has reached the level where quantity supplied equals quantity demanded
(point where supply and demand curves cross)
Surplus: quantity supplied exceeds quantity demanded
o QS > QD because P > PE
Velocity of Money and the Quantity Equation (Long-run Concepts)
Ex. In baseball:
27 outs per game
Outs/player => 27 outs/9players => 3 outs/player
Money Supply = M
Total Spending = NGDP => P (price level) x Y (output or RGDP)
Velocity of Mone
A market is a group of buyers and sellers of a particular product
A competitive market is one with many buyers and sellers, each has a negligible effect
A perfectly competitive market: all goods exactly the same, buyers and sellers so
Scarcity: limited nature of societies resources
Economics: study of how society manages its scarce resources
-decisions on what to buy, how much to work, how much to save and spend
-a firm's decision on how much to produce with how many workers
Aggregate Supply & Demand
Business Cycles: short-run economic fluctuations are called business cycles.
We use the model of aggregate supply and demand to study these fluctuations.
We do this by combining our understanding of other economic concepts and
SI: econ 222
Real vs. Nominal (interest, GDP, etc.)
When something is measured in real dollars, the amount is adjusted for inflation. This
means that the amount of money is actually represented in dollars f
Chapter 18: Open-Economy Macroeconomics
What is the difference between a closed and open economy?
o A closed economy is an economy that does not interact with other economies. While an
open economy is an economy that interacts freely with other economies
Notes on Principles of How People Interact
Principle 5: Trade can make everyone better off
People can specialize in producing one good and exchange it for another one
Countries also benefit from trade and specialization
o Better price abroad for goods t
Notes on GDP
Measuring a Nations Income
Gross domestic product
o Measures the total income of everyone in the economy
o Also measures total expenditure on the economys output of goods and
For the economy as a whole, income equals expenditure
Notes on Aggregate Demand
Short-run economic fluctuations are often called business cycles
We use the model of aggregate demand and supply to study fluctuations
In the short-run, changes in nominal variables (like P) can affect real variables,
such as (Y)
Notes on Non-Price Determinants
Price of related goods
Two goods for which an increase in the price of one leads to an
increase in the demand for the other
Two goods for which an increase in the price
Notes on How the Economy Works as a Whole
Principle 8: A countrys standard of living depends on its ability to produce goods and
Huge variation in living standards across countries over time
The most important determinant of living standards:
ECN Chapter 4 Practice
Demandrefers to the position of the demand curve, whereas thequantity demandedrefers to the
amount consumers wish to buy. Similarly,supplyrefers to the position of the supply curve, whereas
thequantity suppliedrefers to the
Chapter 10: Measuring the Cost of Living
What do we call a situation where the overall level of prices in an economy is rising?
11.1: The Consumer Price Index
o What is the consumer price index?
a measure of
Chapter 15: Unemployment
15.1 a: How Is Unemployment Measured?
o What organization is responsible for measuring unemployment?
Measuring unemployment is the job of the Bureau of Labor Statistics (BLS),
Chapter 4: Supply and Demand
4.1: Markets and Competition
o What is a market?
Def: a group of buyers and sellers of a particular good or service
o What is competition?
Def: a market in which there are many buyers and many sellers s
Chapter 10: Measuring a Nations Income
What is the difference between microeconomics and macroeconomics?
o Microeconomics is the study of the study of how households and firms make decisions
and how they interact in ma