Macro 1

Front 1

macroeconomics

Back 1

the study of economic growth

Front 2

history of macro

Back 2

created by john maynard keynes in response to the great depression. before then it was assumed markets always worked well

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markets are:

Back 3

voluntary, decentralized, innovative, efficient

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basic elements of well functioning markets

Back 4

self interest, competition, profit maximization

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supply

Back 5

ability and willingness to sell specific quantities of a good at alternative prices in a given time period

Front 6

law of supply

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the quantity of a good supplied in a given time period will rise as its price increases and vice versa

Front 7

determinants of supply

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technology, factor cost, other goods, taxes and subsidies, expectations, number of sellers

Front 8

shifts of supply

Back 8

changes in anything other than price

Front 9

movement along supply curve

Back 9

changes in price (quantity supplied)

Front 10

demand

Back 10

ability and willingness to buy specific quantities of a good at alternative prices in a given time period

Front 11

law of demand

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all else equal, as the price of a good increases, peoples desire to buy it will go down, and vice versa

Front 12

determinants of demand

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expectations, tastes, income, other goods, number of buyers

Front 13

shifts of demand

Back 13

changes in anything other than price

Front 14

movement along demand curve

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change in price (quantity demanded)

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conservative economics

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(classical) primary value: individual freedoms. markets almost always work well, gov intervention is counterproductive

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liberal economics

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(keynesian) primary value: social well being. markets sometimes work well. in the aggregate, market meltdowns can be catastrophic. gov intervention is needed to promote stability and growth

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why economics is political

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raises questions about the appropriate role of gov

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GDP

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market value of all the goods and services a country produces in a year. total size of the national economy

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GDP per capita

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shows what GDP per person would be if GDP were divided equally

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real GDP

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adjusted for inflation

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nominal GDP

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not adjusted for inflation

Front 22

4 limitations of GDP

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measures economic activity not welfare or happiness, many economic activies arent included (housework, black market), measurement problems (unreported income), doesnt subtract out costs that arent valued in the market (pollution)

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annual GDP

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measurement of all final goods and services produced in a year

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total value added

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calculation of GDP that is designed to avoid the problem of double counting intermediate goods

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market failures

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public goods: market doesnt provide goods that are collectively consumed
externalities: impacts of economic activity on the larger community
market power: lack of competition
inequities:lack of fairness/ equal opportunity
booms and busts: economic instability, even in times of stagnation

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gov failures

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lack of knowledge: local actors always know more about local conditions than central gov
policy uncertainties: effects of policies often cant be predicted with much accuracy
politics: creating economic policies for political reasons
lags: conditions may have changed by the time policies are implemented
law of unintended consequences: expect the unexpected

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depreciation

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consumption of capital in the production process

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macro issue

Back 28

effect of federal spending on the unemployment rate

Front 29

increases in real per capita GDP depend on increases in:

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productivity

Front 30

income definition of GDP

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total income earned in a country in a year. wages+rent+interest+profits