Macroeconomics Notes

Chapter 1

Self Interest

The choices that are best for the individual who makes them

Social Interest

The choices that are best for society as a whole

➢ Efficiency

➢ Equity

Normative

Statements about what ought to be- depend on values and cannot be tested

Positive

Disagreements that can be settled by facts- “what is”- It can no right or wrong and it can be tested

Chapter 2

Factors of Production

➢ Land- “gifts of nature” or natural resources that we use to produce goods and resources

o Minerals, energy, water, air, wild plants, animals

➢ Labor- the work time and work effort that people devote to producing goods and services

➢ Capital- tools, instruments, machines, buildings, and other items that have been produced in the past and that businesses now use to produce goods and services

o Hammers, computers, auto assembly lines, office towers and warehouses, dams and power plants, and shopping malls

o Infrastructure capital- highways and airports

➢ Entrepreneurship- the human resources that organizes labor, land, and capital to produce goods and services

o Four factors: rent, wages, interest (income paid for the use of capital), and profit

o 69% of total income in 2012 were wages

o 31% was Rent, interest, and profit

o Functional distribution of income- distribution among the factors of production

o Personal distribution – distribution of income among households

o The highest 20% who earn 51% of total income

o Poorest 20% earl 3% of the total income

Two groups of economies

➢ Advanced economics

o US, France, Japan, Germany, Italy, United Kingdom, Canada

o Hong Kong, South Korea, Singapore, Taiwan

➢ Emerging market and developing economies

o Central and Eastern Europe and Asia

o Czech Republic, Poland, Hungary, China, India, Brazil

o Emerging from a system of state-owned production, central economic planning, and heavily regulated markets to a system of free enterprise and unregulated markets...