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Macroeconomics PowerPoint PPT Presentation


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Macroeconomics . An Introduction . Microeconomics and Macroeconomics. Microeconomics: Study of the behavior of economic units such and households and firms Macroeconomics: Study of economic aggregates such as national income and the overall price level . PPC Revisited .

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Macroeconomics

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Macroeconomics l.jpg

Macroeconomics

An Introduction


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Microeconomics and Macroeconomics

  • Microeconomics: Study of the behavior of economic units such and households and firms

  • Macroeconomics: Study of economic aggregates such as national income and the overall price level


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PPC Revisited

  • Macroeconomic Objectives

  • Full employment

  • Stable Prices

  • Steady Growth

  • Achieving macroeconomic goals

  • in a market economy

  • The market’s self-correcting

  • mechanism

  • Imperfect and slow market

  • adjustments

Good a

F

G

U

H

Good B

0


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Business Cycles

  • The Great Depression: 1929

  • The Keynesian Solution

  • The Act 1946: The Federal government is to intervene in the economy to prevent declines in output and employment


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Recent Macroeconomic Experiences

  • The 1950s: The Post-war recovery

  • The1960s: Continued growth with some inflation

  • The 1970s’ stagflation

  • Controlling inflation and supply side economics in the 1980s

  • Prosperity in 1990s (Low inflation and low unemployment)

  • Slow down in 2000-2001; mild recovery in the following years


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Macroeconomic Concerns

  • Unemployment

    The unemployment rate is often regarded as the key indicator of the health of the economy.

  • Inflation/deflation

    Although high inflation (or sever deflation) has not been a common occurrence in the US some other countries have had long period of very high inflation.

  • Slow economic growth

    Recessions are periods (lasting two consecutive quarters) during which aggregate output declines.

    A prolonged deep recession is called “depression.”


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Macroeconomic Policy Tools

  • Fiscal policy

    • Taxation

    • Government expenditures

    • Trade policies

  • Monetary policy

    • Money and interest rates

    • Foreign exchange policies

  • Growth or supply-side policy


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    Business Cycle

    GDP: A measure of economic output

    • Nominal GDP

    • Real GDP

    • Potential (real) GDP

    • Business cycle: trough – expansion – peak – recession


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    Business Cycle

    RGDP

    Peak

    Recession

    Expansion

    Trough

    Time


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