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Module 2. Introduction to Macroeconomics. Goes up during…. Goes down during …. Connection to Business Cycle. What is a business cycle ? How are employment and unemployment measured and how do they change over the business cycle?

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module 2

Module 2

Introduction to Macroeconomics

m2 quiz

What is a business cycle ?

  • How are employment and unemployment measured and how do they change over the business cycle?
  • Define aggregate output and how does it change with the business cycle?
  • What is the meaning of inflation and deflation and why do we prefer price stability?
  • How does economic growth determine a countries standard of living?
  • Why do models play a crucial role in economics?
M2 Quiz
business cycle

Economic Upturns and Downturns

  • The time of recession to expansion and back to recession
Business Cycle
employment and unemployment

Employment is the total number of people currently working for pay.

  • Unemployment is the total number of people who are actively looking for work but aren’t currently employed.
  • During recession unemployment rates generally rise, during expansion they generally fall.
Employment and Unemployment
aggregate output

The economy’s total production of goods and services for a given time period, usually a year.

  • Aggregate output falls in a recession, rises during expansion.
Aggregate Output
inflation deflation and price stability

Inflation – rise in the overall price level

  • Deflation – a fall in the overall price level.
  • Inflation discourages people from holding cash, Deflation more attractive to hold on to cash.
  • We want price stability because it keeps the economy stable.
Inflation/Deflation and Price Stability
economic growth and standard of living

Economic growth allows for higher wages which allows people to afford more of what they want and “need” thus a rising standard of living.

Economic Growth and Standard of Living
models and economics

Models are important to economics because they allow us to make situations more simple so we can focus on analyzing one change at a time.

  • Ceteris Paribus – Other things equal assumption.
Models and Economics
slide15

Unit 1 Test On Wednesday

  • -Review Modules 1-4
  • Unit 1 Vocabulary
  • Unit 1 Review