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Economics
social science
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Economics
efficient allocation of scarce resources
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Economics
decision-making/choices
OPPORTUNITY COST
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Branches of Economics
Microeconomics
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Branches of Economics
Macroeconomics
Macro
National Income
Total wages and salaries Total corporate profits
Macroeconomics
Aggregate Demand
the sum of the primary expenditures on goods and services produced by an economy at a specific period of time
Consumption Investment Governement Purchases Net Exports
Macroeconomics
Macroeconomics
AD National Income,Y
Macroeconomics
Macroeconomics
Macroeconomics
Macroeconomics
Macroeconomics
Macroeconomics
Aggregate Supply
Total production of products and services that are made in an economy at a specific time
Based on the available amount of resources of the economy, level of resource utilization as inputs of production, and the level of technology used in production
Macroeconomics
Macroeconomics
SAS
Income,Y
Macroeconomics
Macroeconomics
Macroeconomics
Macroeconomics
Macroeconomics
Macroeconomics
Macroeconomics
Macroeconomics
Macroeconomics
Income,Y
Sustainable - increasing
Price Stability
Measured by inflation rate (percentage increase in price level of commodities)
Based on Consumer Price Index (CPI) ability to pay usual commodities per month
Housing and Repairs Services (Education, Recreation, Transportation) Water/Fuel/Electricity Clothing Miscellaneous (Other Expenses)
Price Stability
Ideal: single-digit inflation 1%/ 2% - stagnant economy
Full Employment
Willing and able to work have jobs (15 to 65 years old) Target employment rate: 95% of the population
Classical Theory
In the long-run (LR), output is determined by supply, which depends on technology (the production function) and the equilibrium in the labor market (there is full-employment) Money is neutral. Increasing the level of money supply will only lead to proportional increase in the level of prices, with no impact on output.
Keynesian Theory
In the short-run (SR), economys total income is largely determined by the desire to spend by households, firms and the government. The economy is not operating at full employment During recessions, there is inadequate spending; thus, there is a need to stimulate demand
Keynesian Theory
The more people would like to spend, the more firms would be willing to produce and sell; thus, firms will hire more workers. In the SR, demand determines supply. Prices are sticky in the short-run