... In the 1930’s, there were no expanding industries; everything was headed downward. * Microeconomics focuses on how decisions are made by individuals and firms and the consequences of those decisions; Macroeconomics examines the overall behavior of the economy—how the actions of all the individuals and firms in the economy interact to produce a particular economy-wide level of economic performance. * Many thousands or millions of individual actions compound upon one another to produce an outcome that isn’t simply the sum of those individual actions. (rubber-necking traffic jam example) * Paradox of thrift: when families and businesses are worried about the possibility of economic hard times, they prepare by cutting their spending. This reduction in spending depresses the economy as consumers spend less and businesses react by laying off workers. As a result, families and businesses may end up worse off than it they hadn’t cut their spending. * The flip-side is also true; seemingly profligate behavior leads to good times for all * Before 1930’s, economists regarded the economy as self-regulating: unemployment would be corrected through the invisible hand and government attempts would be ineffective/harmful. * Keynesian economics: a depressed economy is the result of inadequate spending. Government interaction can help a depressed economy through monetary and fiscal policies. * Monetary policy: uses changes in the quantity of money to...
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...“shock” to the economy. We can analyze the impact of this “shock” on overall Real GDP (Aggregate Expenditure) as well as the impact upon the individual components that make up GDP (i.e. other macroeconomic components and indicators such as bond rates, money supply, etc.) For this analysis, we have created two models of the U.S. economy and will look specifically at the short run case (the first 5 - 8 quarters spanning 2012-2013). First, we created a “baseline” model which assumed that no change in aggregate expenditures occurred. Next, we created a model with a shock to the economy starting in the first quarter of 2012 by reducing state and local government purchases (COS) by $20 billion per quarter. By comparing the resulting data sets for these two scenarios across several variables, we can predict the impact that the “shock” to government spending would have on both the overall economy and the specific components of GDP. The reduction in state and local government spending was spurred by an overall reduction in tax collections. The government decided to reduce spending as a result. What is not initially clear is why there was a reduction in tax revenues, but there are several possibilities. The reduction in tax revenue could be due to fiscal policy changes, where the population was taxed at a lower rate than in previous periods. However, we know that the reduction in government spending was not due to policy changes, but resulted from changes in other economic conditions...
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...“issue of too much currency.” It can also be defined as a persistent increase in the prices of goods and services. Inflation may be defined as a state of disequilibrium in which an expansion of purchasing power tends to cause or is the effect of an increase of the price-level. Hardwick – “a persistent tendency for general price level to rise.” Inflation is a global phenomenon in the present-day times. There is hardly any country in the world that is not affected in one way or so by inflation. This is why inflation has attracted attention of economists all over. This is a phenomenon that affects everybody everywhere in one way or another. A wild inflation usually around 4 or less percent is not negatively received in an economy. But generally inflation has a very negative and adverse effect on an economy especially when it is not controlled by the government. It gives a panic of hyperinflation i.e. beyond normal inflation a very rapidly accelerating inflation that brings down the country’s monetary system. Germany experienced a hyper inflation in 1923 when the price level increased by more than ten billion fold in just one year. “This is a doubted statistical statement.” The then existing currency was withdrawn and replaced by a new one whose supply was put under strong control. Inflation is not just the rise of prices of goods, because as these goods’ prices rise, other goods prices fall leaving the general price level unchanged.It is not simply a general price level...
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...70+ DVD’s FOR SALE & EXCHANGE www.traders-software.com www.forex-warez.com www.trading-software-collection.com www.tradestation-download-free.com Contacts andreybbrv@gmail.com andreybbrv@yandex.ru Skype: andreybbrv SCHAUM’S Easy OUTLINES PRINCIPLES OF ECONOMICS Other Books in Schaum’s Easy Outlines Series Include: Schaum’s Easy Outline: Calculus Schaum’s Easy Outline: College Algebra Schaum’s Easy Outline: College Mathematics Schaum’s Easy Outline: Discrete Mathematics Schaum’s Easy Outline: Differential Equations Schaum’s Easy Outline: Elementary Algebra Schaum’s Easy Outline: Geometry Schaum’s Easy Outline: Linear Algebra Schaum’s Easy Outline: Mathematical Handbook of Formulas and Tables Schaum’s Easy Outline: Precalculus Schaum’s Easy Outline: Probability and Statistics Schaum’s Easy Outline: Statistics Schaum’s Easy Outline: Trigonometry Schaum’s Easy Outline: Business Statistics Schaum’s Easy Outline: Principles of Accounting Schaum’s Easy Outline: Applied Physics Schaum’s Easy Outline: Biology Schaum’s Easy Outline: Biochemistry Schaum’s Easy Outline: Molecular and Cell Biology Schaum’s Easy Outline: College Chemistry Schaum’s Easy Outline: Genetics Schaum’s Easy Outline: Human Anatomy and Physiology Schaum’s Easy Outline: Organic Chemistry Schaum’s Easy Outline: Physics Schaum’s Easy Outline: Programming with C++ Schaum’s Easy Outline: Programming with Java Schaum’s Easy Outline: Basic Electricity Schaum’s Easy Outline: Electromagnetics Schaum’s Easy Outline:...
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...camera phone - Larger television - Bigger house - Exotic vacation Why can’t we have everything we want? - Our wants exceed our resources. Economics and Opportunity Cost Economics – the study of how best to allocate scare resources among competing users. Opportunity cost – The value or price of the most desired goods and services that are foregone in order to obtain something else. - The next best alternative that you give up. Factors of Production Resource inputs used to produce goods and services. The four resources: - Labor, land, capital and entrepreneurship Resources are factors of production. Economic resources – all natural human and manufactured resources that can be used in the production of goods and services. Land – arable land, forests, minerals, energy (oil deposits and coal), water, air, wild plants, animals, birds and fish. Labor – all the physical and intellectual talents that can be used in the production of goods and services. Capital – all manufactured aids to production like tools, instruments, equipment, machines, factory, buildings, transportation, and distribution facilities that businesses use in producing goods and services. It does not include financial capital like money, stock, or bonds. Entrepreneurship – the social human resource that organizes labor,...
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...schedule or curve showing the total amount spent for final goods and services at different levels of real GDP. average propensity to consume Fraction (or percentage) of disposable income that households plan to spend for consumer goods and services; consumption divided by disposable income. average propensity to save (APS) Fraction (or percentage) of disposable income that households save; saving divided by disposable income. anticipated inflation Increases in the price level (inflation) that occur at the expected rate. aggregate A collection of specific economic units treated as if they were one. For example, all prices of individual goods and services are combined into a price level, or all units of output are aggregated into gross domestic product. planned investment The amount that firms plan or intend to invest. investment schedule A curve or schedule that shows the amounts firms plan to invest at various possible values of real gross domestic product. equilibrium GDP (See equilibrium real domestic output.) equilibrium real domestic output The gross domestic product at which the total quantity of final goods and services purchased (aggregate expenditures) is equal to the total quantity of final goods and services produced (the real domestic output); the real do- mestic output at which the aggregate demand curve intersects the aggregate supply curve. leakage (1) A withdrawal of potential spending from the in- come-expenditures stream via saving, tax payments...
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...macroeconomic performance Rising living standards – economic growth o Tendency for the level of output (i.e. quantity and quality of goods and services) to increase over time o There is an upward trend in living standards (as evidenced by GDP per capita) in Australia over time (up from roughly $32000 in ’73 to around $64000 in ’09) o Although fluctuations in the business cycle do occur, the downward swings are not as significant as the overall upward trend Stable business cycle o Short run business cycle The tendency for economies to pass through periodic periods of economic expansion followed by economic contraction o low volatility in fluctuations of actual output around its trend or potential output. o Volatility of Australian growth rate (as evidenced by the SD of Aust’s real quarterly GDP growth rate) has decreased over time) o Great Moderation Large fall in volatility of real output Causes (debated) Shocks to ec have decreased over time Ec. has become more stable due to changes in institutional arrangements Economic policy makers have become better at reducing fluctuations in the business cycle Relatively Stable Price Level o low (positive) rate of inflation o RBA’s inflation target is 2-3% Sustainable levels of Public and National debt o Public debt borrowing by public sector from private sector Influenced by government budget deficits/surpluses o National debt borrowing by domestic residents from foreign countries Domestic residents include both govts...
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...statistics would be ideal for: 1) Making International Comparisons: In doing this it is necessary to convert the figures to same currency using a rate of exchange. 2) Government Planning: A rising real national income with a fairly constant capital stock will generally be associated with a fall in unemployment. Similarly, there is likely to be direct relationship between the level of real national income and the rate of inflation. As the equilibrium level of national income reaches the full employment level of national income, so inflationary pressure is likely to build up in the economy. To devise appropriate government policies, to combat unemployment and inflation and to estimate the effects of such policies, accurate national income statistics are essential. 3) Formulating macroeconomic policy. 4) The aggregate model is needed to explain why prices in general rise or fall. 5) Explaining what determines changes in the level of aggregate output Aggregate Demand * This is the total quantity of output demanded at alternative price levels in a given time period, “ceteris paribus”. * Our view here encompasses the collective demand for all goods and services rather than the demand for any single good. * It therefore consists of demand of local consumers, firms, the government and foreigners in the case of open economy. That is QD = C + I + G +DX, where DX is export demand, C is local consumers, I is investment and QD is aggregate demand. * ...
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...well-being as well as that of your family and everyone. Each issue involves the overall economic performance of the nation rather than whether one particular individual earns more of less than another • Global economic crisis o Began in late 2007 has created enormous losses of income and jobs for millions. • Big three concepts o Unemployment rate • Higher the overall unemployment rate the harder it is for individual who wants a job to find work. • Wide spread consensus that unemployment is the most important macroeconomic issue has been further spread by the bad labor market of 09-10 o Inflation rate • High inflation means that prices on average are rising rapidly while a low inflation rate means that prices on average are rising slowly. 0 means essentially the same over time. Retired people lose the most because what they have saved buy less. High inflation helps those who have borrowed. Creates uncertainty o Productivity growth • The aggregate output per hour of work that a nation produces in total goods and services • The faster aggregate productivity grows the easier it is for each member of society to improve his or her standard of living. • If growth rate stays the same we have to sacrifice going forward by building fewer hospitals and schools. Called zero-sum society because any extra good or service enjoyed by one person requires that something be taken away from another. • Many argue that the achievement of rapid productivity growth and the avoidance of...
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...macroeconomic objective and their importance to UK economic. Is it possible for government to achieve all these objective at the same time? Individuals, governments, firms and nations make selection on apportion rare resources to fulfil their unlimited desire which is economic concern about. Economics can generally be resolved into: microeconomics and macroeconomics. Microeconomics centralizes particular market and segments of economy such as individual consumer behaviour, supply and demand in individual markets, externalities arising from production and consumption and the theory of firms. However, macroeconomics is the concentration of the overall economy behaviour which is looking at ‘aggregate’ variables such as aggregate demand, national output and inflation. ‘Aggregate demand is the demand for the gross domestic product (GDP) of a country,’ the level of national output can be determined by AD which places a leading role. Aggregate demand is represented by this formula: Aggregate Demand (AD) = C + I + G + (X-M). ‘C’ means Consumers' expenditures on goods and services. ‘I’ expresses investment spending by companies on capital goods. ‘G’ indicates government expenditures on publicly provided goods and services. ‘X’ signifies exports of goods and services and ‘M’ presents imports of goods and services. Moreover, macroeconomics is also concerned with issues. Besides, there are some objectives that governments or countries want to achieve. Finally, policies help to accomplish those...
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...several channels, which are known collectively as the ‘transmission mechanism’ of monetary policy. The purpose of this paper is to describe the MPC’s view of the transmission mechanism. The key links in that mechanism are illustrated in the figure below. First, official interest rate decisions affect market interest rates (such as mortgage rates and bank deposit rates), to varying degrees. At the same time, policy actions and announcements affect expectations about the future course of the economy and the confidence with which these expectations are held, as well as affecting asset prices and the exchange rate. Second, these changes in turn affect the spending, saving and investment behaviour of individuals and firms in the economy. For example, other things being equal, higher interest rates tend to encourage saving rather than spending, and a higher value of...
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...| |[pic] | | | | | | | | | | | | | | |UNIT NO | | |DM4X 10 | | | | | |UNIT TITLE | | |OUTCOME 2 | | |THE UK ECONOMY | | | | | ...
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...DEFINITION OF 'MARKET' 1. A medium that allows buyers and sellers of a specific good or service to interact in order to facilitate an exchange. The price that individuals pay during the transaction may be determined by a number of factors, but price is often determined by the forces of supply and demand. 2. The general market where securities are traded. 3. People with the desire and ability to buy a specific product/service. INVESTOPEDIA EXPLAINS 'MARKET' 1. Markets do not necessarily need to be a physical meeting place. Internet-based stores and auction sites are all markets in which transactions can take place entirely online and where the two parties do not ever need to physically meet. 2. If a broad market index (such as the S&P 500) fell, people might say that "the market was down," using the S&P 500 as a proxy to represent the overall market's performance. 3. For example, "the widget market" is referring to all the people who will buy widgets. 7. Macroeconomics - Nominal vs. Real GDP, and the GDP Deflator The main difference between nominal and real values is that real values are adjusted for inflation, while nominal values are not. As a result, nominal GDP will often appear higher than real GDP. Nominal values of GDP (or other income measures) from different time periods can differ due to changes in quantities of goods and services and/or changes in general price levels. As a result, taking price levels (or inflation) into account is necessary when...
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...Chapter 7: Efficiency, Exchange, and the Invisible Hand in Action I. The Invisible Hand a. Individuals act in their own interests i. Aggregate outcome is collective well-being b. Profit motive ii. Produces highly valued goods and services iii. Allocates resources to their highest value use 1. Jon Stewart does not wait tables II. Accounting Profit c. Most common profit idea d. Accounting profit = total revenue – explicit costs iv. Explicit costs are payments firms make to purchase v. Resources (labor, land, etc.) and vi. Products from other firms e. Easy to compute f. Easy to compare across firms III. Economic Profit g. Economic profit is the difference between a firm's total revenue and the sum of its explicit and implicit costs vii. Also called excess profits h. Implicit costs are the opportunity costs of the resources supplied by the firm's owners i. Normal profit is the difference between accounting profit and economic profit viii. Normal profits keep the resources in their current use IV. Three Kinds of Profit j. Two Functions of Price ix. Rationing function of price distributes scarce goods to the consumers who value them most highly x. Allocative function of price directs resources away from overcrowded markets to markets that are underserved xi. Invisible Hand Theory states that the actions...
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...to 2. PLANNED ECONOMY e.g. USA, Japan Private firms or individuals own means of production. They make choices about: o What to produce o How to produce o For whom to produce - What to produce is answered by consumers according their demand for goods & services - How to produce is answered by the businessmen. They will choose the production method, which reduces their costs to reach the higher profit. - For whom to produce – firms produce goods & services which consumers are willing and able to buy. Role of government 1. To pass laws to protect businessmen & consumers 2. To issue money 3. To provide certain services – police 4. To prevent firms from dominating The market and to restrict the power Of trade unions 5. Repair and maintain state properties Advantages: Goods and services go where they are most in demand and free market responds quickly to people’s wants + wide variety of G&S No need for and overriding authority to determine allocation of goods&services Producers and consumers are free to make changes to suit their aims Competition and the opportunity to make large profits, greater efficiency, innovation Disadvantages: It mis-allocates resources(to those with more $) It creates inequality of incomes It is not competent in providing certain services It leads to inefficiency (market imperfection) It can encourage the consumption of harmful goods - drugs e.g. Cuba, China, former Soviet Union State (government) owns all...
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