Macro-Side1

Chapter 1:

An Introduction to Macroeconomics

by

McConnell, C.R., and Brue, S.L. (2009). Economics: Principles, Problems and Policies, 18th Edition, Irwin McGraw-Hill. Ooi Soon Beng

After studying this chapter, you should be able to understand:

 Key Macroeconomic Goals and Measurements  Gross Domestic Product  Business Cycles  Financial Investment versus Economic Investment  Employment and Unemployment  General Price Level (Inflation)

 Balance of Payments and Exchange Rates

 Macroeconomic Policies of Growth

Macroeconomics

The first modern work of economics began with the publication of _____________ .

____________ (1723-1790)

Macroeconomics

But, modern macroeconomics only dates from the Great Depression (1929-1939). The book, The General Theory of Employment, Interest, and Money, began the subject.

________________ (1883-1946)

Macroeconomics

Macroeconomics (from Greek prefix "makros-" meaning "large" + "economics") is a branch of economics that examines the economy as a whole.

Macroeconomics

Three widely agreed goals of macroeconomic policy are:

1. Sustainable long-run economic growth 2. Reduce unemployment 3. Keep inflation low

Macroeconomics

The three primary measures used in macroeconomics to assess the performance of an economy are 1) real gross domestic product (GDP),

2) unemployment,

3) inflation.

Macroeconomics

Real GDP measures the total final goods and services produced within the borders of a country, after adjusted for changes in the price level.

Nominal GDP measures the nominal or dollar value of all final goods and services produced within the borders of a country in current market prices. Real GDP differs from nominal GDP in that prices are held constant when calculating real GDP, so only changes in output are measured.

Macroeconomics

Assume that in Year 1 an economy produces 1000 units of output and they sell for $100 a unit, on average. In Year 2, the economy produces the same...