Ch01 - Macroeconomics Outline
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Transcript of Ch01 - Macroeconomics Outline
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1 2015 Pearson Education, Inc.
Chapter Outline and
Learning Objectives
1.1 Three Key Economic Ideas1.2 The Economic roblem That
Every !ociety "ust !olve
1.# Economic "odels
1.$ "icroeconomics and
"acroeconomics
1.% & revie' o( ImportantEconomic Terms
&E)*I+, -sing raphsand /ormulas
CHAPTER
1
CHAPTER
Economics,
Foundations and Models
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Wat Is Tis Class A!out"
Peo#le $a%e coices as te& tr& to attain teir 'oals. Coices are
necessar& !ecause (e li)e in a (orld o* scarcit&.
!carcity+
Economicsis te stud& o* tese coices.
Econo$ists stud& tese coices usin'0000000000, si$#li*ied
)ersions o* realit& used to anal&e real-(orld econo$ic situations.
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Tical /Econo$ics uestions
We (ill learn o( to ans(er uestions li%e tese+
How are the prices of goods and services determined?
How does pollution affect the economy, and how should
government policy deal with these effects?
Why do firms engage in international trade, and how do
government policies affect international trade?
Why does government control the prices of some goods and
services, and what are the effects of those controls?
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Three Key Economic Ideas
1.1
E8#lain tese tree %e& econo$ic ideas+
Peo#le are rational9
Peo#le res#ond to econo$ic incenti)es9 and
3#ti$al decisions are $ade at te $ar'in.
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1. Peo#le Are Rational
Econo$ists 'enerall& assu$e tat #eo#le are rational.
ational+
Rational consu$ers and *ir$s (ei' te !ene*its and costs o* eac
action and tr& to $a%e te !est decision #ossi!le.
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2. Peo#le Res#ond to Econo$ic Incenti)es
As incenti)es can'e, so do te actions tat #eo#le (ill ta%e.
Example:
;
;
;
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Ma%in'
te
Connection
Healt Insurance and 3!esit&
3!esit& is risin' in A$erica, *or )arious reasons.
Is one o* tose reasons ealt insurance"
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The Economic roblem That Every !ociety "ust !olve
1.2
=iscuss o( an econo$& ans(ers tese uestions+
Wat 'oods and ser)ices (ill !e #roduced"Ho( (ill te 'oods and ser)ices !e #roduced"
Wo (ill recei)e te 'oods and ser)ices #roduced"
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1. What@oods and er)ices Will 4e Produced"
Indi)iduals, *ir$s, and 'o)ern$ents $ust decide on te 'oods and
ser)ices tat sould !e #roduced.
An increase in te #roduction o* one 'ood reuires te reduction in
te #roduction o* so$e oter 'ood. Tis is a00000000, resultin' *ro$
te scarcit& o* #roducti)e resources.
Te i'est-)alued alternati)e 'i)en u# in order to en'a'e in so$e
acti)it& is %no(n as te000000000000.
Example: the opportunity cost of increased funding for spaceexploration might be giving up the opportunity to fund cancer
research$
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2. HowWill te @oods 4e Produced"
A *ir$ $i't a)e se)eral di**erent $etods *or #roducin' its 'oods
and ser)ices.
Example: % music producer can ma&e a song sound good by
;
;
Example: %s the cost of manufacturing labor changes, a firm might
respond by
;
;
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. Who Will 'eceivete @oods and er)ices"
Te (a& (e are $ost *a$iliar (it in te Bnited tates is tat #eo#le(it i'er inco$es o!tain $ore 'oods and ser)ices.
Can'es in ta8 and (el*are #olicies can'e te distri!ution o* inco$e9
tou' #eo#le o*ten disa'ree a!out te e8tent to (ic tis
/redistri!ution is desira!le.
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Tes o* Econo$ies
Centrally planned economies
"aret economies
"aret+
Mi8ed econo$ies a)e *eatures o* !ot o* te a!o)e. Most econo$icdecisions result *ro$ te interaction o* !u&ers and sellers, !ut
'o)ern$ents #la& a si'ni*icant role in te allocation o* resources.
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E**icienc& o* Econo$ies
Mar%et econo$ies tend to !e $ore e**icient tan centrall&-#lanned
econo$ies.
Mar%et econo$ies #ro$ote+
roductive e((iciency,
&llocative e((iciency,
Tese e**iciencies co$e a!out !ecause all transactions result *ro$voluntary e3change+ transactions tat $a%e !ot te !u&er and
seller !etter o**.
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Ca)eats A!out Mar%et Econo$ies
Mar%ets $a& not result in *ull& e**icient outco$es. For e8a$#le+
;Peo#le $i't not i$$ediatel& do tin's in te $ost e**icient (a&
; @o)ern$ents $i't inter*ere (it $ar%et outco$es
; Mar%et outco$es $i't i'nore te desires o* #eo#le (o are not
in)ol)ed in transactions e8+ #ollution
Econo$icall& e**icient outco$es $a& not !e te $ost desira!le.
Mar%ets result in i' ineualit&9 so$e #eo#le #re*er $ore e4uity, i.e.
*airer distri!ution o* econo$ic !ene*its.
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Economic "odels
1.#
Bnderstand te role o* $odels in econo$ic anal&sis.
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I$#ortant Features o* Econo$ic Models
Assu$#tions and si$#li*ications+ e)er& $odel needs te$ in order to
!e use*ul.
Testa!ilit&+ 'ood $odels 'enerate testa!le #redictions, (ic can !e
)eri*ied or dis#ro)en usin' data.
Economic variables+ so$etin' $easura!le tat can a)e di**erent
)alues, suc as te inco$es o* doctors.
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Te cienti*ic Dature o* Econo$ics
Econo$ists tr& to $i$ic natural scientists !& usin' te scienti*ic
$etod. 4ut econo$ics is a social science9 stud&in' te !ea)ior o*
#eo#le is o*ten tric%&.
Wen anal&in' u$an !ea)ior, (e can #er*or$+
; ositive analysis+
; )ormative analysis+
Econo$ists 'enerall& #er*or$ #ositi)e anal&sis.
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Ma%in'
te
Connection
ould Medical cool 4e Free"
Forecasts indicate a si'ni*icant sorta'e o* doctors, es#eciall&
#ri$ar& care #&sicians, !& 2020.
Hi' costs o* $edical scool $a&+
; Pre)ent so$e #eo#le *ro$ !eco$in' doctors
; ead #eo#le to #ursue lucrati)e s#ecialties instead o* #ri$ar& care
Would $ore #eo#le !eco$e #ri$ar& care #&sicians i* $edical scool
(ere *ree" And i* so, (ould it !e (ort te cost"
Econo$ic $odels can *ind ans(ers to te #ositi)e as#ects o* tis
de!ate.
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"icroeconomics and "acroeconomics
1.$
=istin'uis !et(een $icroecono$ics and $acroecono$ics.
Mi i d M i
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Microecono$ics and Macroecono$ics
"icroeconomicsis te stud& o*
;
;
;
"acroeconomics
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& revie' o( Important Economic Terms
1.%
=e*ine i$#ortant econo$ic ter$s.
T i l i E i
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Ter$inolo'& in Econo$ics
i%e all *ields o* stud&, econo$ics uses ter$s or ar'on (it s#eci*ic,
#recise $eanin's.
o$eti$es tese ter$s (ill !e used in (a&s tat di**er e)en *ro$
closel& related disci#lines.
E8a$#les+
C Mi ti t A id
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Co$$on Misconce#tions to A)oid
4elie)in' econo$ics is onl& a!out $one&.
Con*usin' #ositi)e and nor$ati)e anal&sis.
Assu$in' *a$iliar $eanin's *or econo$ic ter$s.