Macroeconomics Chapters 1-6
a science that studies scarcity; concerned with market outcomes (price and quantity)
the situation in which we want more than there is
the value of the most highly valued alternative when a choice is made
forcing a market to lower a price (apartment rate) which in the end makes it go away (landlord pulls apartment out)
people want more money but in the end less jobs because employees want to spend less
do what you are best at; you specialize in the thing you give up less to do; focus on things you are comparatively better at
3rd party not involved in transaction but are affected (pollution, noise)
largest economy in the world; mostly privately owned economy; large population and productive
labor, land and capital
role of government
referee-enforce laws; regulator-monopolies and banking systems; expenditures-purchases products and supplies products; taxing; redistributor- welfare,food stamps,medicare,medicaid
a variable that impacts both correlations and misleading/bias
if income increases and quantity demanded increases
if income decreases and quantity demanded increases
factors that shift demand
population, prices of related goods, preferences, future expected prices
plots relation between price and quantity supplied all other things being equal
plots the relation between price and quantity demanded all other things equal
factors that shift supply
technology, industry size, price of inputs, price of related outputs
when quantity supplied is larger than quantity demanded
when quantity demanded is larger than quantity supplied
when quantity demanded and quantity supplied are equal
if price increases, and quantity decreases, what happens to supply?
if price decreases and quantity increases, what happens to supply?
if price decreases and quantity decreases what happens to demand?
if price increases and quantity increases, what happens to demand?
when demand increases, the curve shifts…?
when demand decreases, the curve shifts..?
when supply increases, the curve shifts…?
when supply decreases, the curve shifts..?
maximum price that one is allowed to sell at, typically mandated by law; rent control, tickets, agriculture
minimum price that one is allowed to sell at, typically mandated by law; minimum wage, airline tickets, agriculture
negative price ceiling effects
black market, underinvestment, opportunity cost
negative price floor effects
disposal problem (gov. has to buy goods), over investment, unwanted discounts
volume of transactions
lower number of quantity demanded and quantity supplied
studies the prices of goods, employment of individual, production of a good or firm
studies the economic aggregates, price overall (inflation), unemployment rates, total production of the economy (GDP)
gross domestic product
the value of all final goods and services produced in a country in a given amount of time
calculated by using the value of output at current prices
calculated by valuing outputs of different years at common prices
the average of all prices of all final goods and services produced in an economy in a given year
a sustained increase in price level
people who have given up looking for a job
temporary unemployment; in between jobs or a normal job turning; a new job is expected soon
a job is replaced and goes away permanently usually due to technology leading to unemployment
unemployment related to the recession
employment only during one season resulting in unemployment during other seasons
no cyclicial; normal amounts of frictional, seasonal and structural employment
increases in the price level; it does not tend to erode real wages
when inflation increase, wages tend to__________ since wages are a price
nominal wage/ price index
price in initial year/ price in new year
determinants of real wage
independent of inflation based on data; productivity; unemployment rate
change in PL (price level)
real interest rate
i-change in PL (nominal interest rate-change in price level)
if inflation is higher than expected who benefits?