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Week 1: Introduction to Macroeconomics (Main issues (6) (Unemployment,…
Week 1: Introduction to Macroeconomics
Main issues (6)
Unemployment
Inflation [
deflation
(to reduce cost of production => less output are produced => GDP decrease)]
Economic fluctuations (business cycle) - cyclical movement
Globalization (International trade +
finance - capital flows
)
Economic growth
Optimal policy (fiscal + monetary)
Long- run economic growth (3)
Demographic such as population growth (entrepreneurs + investment)
Other factors such as democracy
Technology progress
If a country import a lots => factory close => unemployment high
Variables (ie: y = ax + c)
Endogenous variable: ax
Exogenous variable: c
Analysis
Normative: determine which policy should be used
Positive: examines an economic consequences of a policy
Markets
Goods
Asset (money, bond and capital)
Labor
Prices
wage rate
price
interest rate
GDP = C + I + G + NX
Real interest rate = Nominal - inflation
Business cycle
: short- run movements (expansions and recessions) of economic activity.
Closely related to unemployment
Stagflation
: high inflation + high unemployment
Inflation rose steadily during
world war II
Inflation: raising in average price