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Information about Macroeconomics

Published on March 2, 2014

Author: elyakhanamiryan



Macroeconomic terms

Macroeconomic terms

What do macroeconomics study? Why?

Macroeconomists study indicators such as GDP and unemployment rates to understand how the whole economy functions.

Macroeconomists develop models that explain the relationship between such factors as national income, output, consumption, unemployment, inflation, savings, investment, international trade and international finance.

What do microeconomics study?

In contrast, microeconomics is primarily focused on the actions of individual agents, such as firms and consumers, and how their behavior determines prices and quantities in specific markets.

Factors • • • • • • • • • National income Output Consumption Unemployment Inflation Savings Investment International trade International finance

Who uses macroeconomic models? Why?

Macroeconomic models and their forecasts are used by both governments and large corporations to assist in the development and evaluation of economic policy and business strategy.

Output and income What is National Output? How is it measured?

• National output is the total value of everything a country produces in a given time period. Everything that is produced and sold generates income. • Macroeconomic output is usually measured by Gross Domestic Product (GDP) or one of the other national accounts.

Unemployment How is the amount of unemployment measured? What does labor force include?

• The amount of unemployment is measured by the unemployment rate, the percentage of workers without jobs in the labor force. • The labor force only includes workers actively looking for jobs. • People who are retired, pursuing education, or discouraged from seeking work by a lack of job prospects are excluded from the labor force.

Inflation and deflation What are these terms? How are they measured? How are they controlled?

• A general price increase across the entire economy is called inflation. • When prices decrease, there is deflation. Economists measure these changes in prices with price indexes. • Central bankers, who control a country's money supply, try to avoid changes in price level by using monetary policy. • Raising interest rates or reducing the supply of money in an economy will reduce inflation. • Central bankers try to stabilize prices to protect economies from the negative consequences of price changes.

Supply and Demand A supply schedule is a table that shows the relationship between the price of a good and the quantity supplied. A supply curve is a graph that illustrates that relationship between the price of a good and the quantity supplied. A demand schedule, depicted graphically as the demand curve, represents the amount of some good that buyers are willing and able to purchase at various prices, assuming all determinants of demand other than the price of the good in question, such as income, tastes and preferences, the price of substitute goods, and the price of complementary goods, remain the same.

Supply and Demand Price Downward-sloping Following the law of demand, the demand curve is almost always represented as downward-sloping , meaning that as price decreases, consumers will buy more of the good. Quantity

Supply and Demand What is Equilibrium ? Equilibrium is defined to be the price-quantity pair where the quantity demanded is equal to the quantity supplied, represented by the intersection of the demand and supply curves.

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