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Transcript of Macroeconomics
The services and efforts of humans that are used for production.
Example: A farmer hires extra people during the picking season and gives them wages.
The total quantities of goods and services supplied per unit of time by the economy at various price levels, other things being equal.
Long-run: prices in the economy can change but the prices and productivity of all factor inputs are held constant.
Short-run: both prices and average wage rates can change.
The total quantities of goods and services demanded per unit of time by the economy at various price levels, other things being equal.
Goods that are able to satisfy the place of another item.
Aggregate Supply (cont.)
Population increases (right)
Improvements in technology (right)
Favorable weather increases crop production for the year (right)
Drought causes reduced production of crops for the year (left)
The growth in the market value for goods or services over time.
The demand for foreign cars from countries like Japan, smaller and more affordable.
China's economic growth profits made from trees purchased from the United States, then sold back as cheap furniture.
Coke vs. Pepsi
Butter vs. Margarine
Tax cuts (right)
Tax increase (left)
Relates physical output of a production process to physical inputs or factors of production.
More bakers, more ovens= greater output of cookies
Includes the manufactured (or previously produced) resources used to manufacture or produce other things.
Ex: The farmer sells his crop to make money.
The sum total of knowledge and information that society has acquired concerning the use of resources to produce goods and services.
Example: The new Xbox One system.
The area within which buyers and sellers of a good or service can interact and engage in exchange.
Primary objective of macroeconomic theories of these markets is to explain its activities and are characterized by the basic types of commodities exchanged.
Product Market- goods or output market
Financial Market- commodity exchanged through financial markets is legal claims
Resource Market- service of four factors of production –labor, capital, and land
These exchange the three primary types of macroeconomic commodities
Four Macroeconomic sectors
Household-primary participant on the buying side of the product market
Business- is THE primary participant of the selling side of the product market
Government-participants on the buying side of the product market along with the household and business sector
Foreign-participants in the product market, on both the buying and selling side
Activity flows from sector to sector through each of the three markets
Actions of two or more rivals in pursuit of the same objective.
Purely competitive markets has 5 characteristics
There must be enough buyers and sellers so that not one may influence the price
The product must be standard for all sellers
The price of the product is free to go up or down without government interference
Buyers and sellers are free to buy and sell to whom they want
Sellers are free to leave and enter the industry if they wish
Purely Monopolistic Markets- there is only one seller of the product and can manipulate the price to its advantage
Imperfectly Competitive Market- Most markets in the U.S. These fall in between purely and competitive monopolistic extremes. Dependent on the degree to which the market diverges from the extremes
A state where economic forces such as supply and demand are balanced in the absence of external influences.
Equilibrium is one of the most useful, and widely used, notions in economics
Equilibrium underlies economic analysis, including the study of the market, the aggregate market, Keynesian economics, consumer demand theory, and short-run production.
Equilibrium in the market, is reached when the quantity demanded is the same as the quantity supplied and at the same price
Production possibilities curve
An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in revenues ($$) and other GDP components such as business inventories
One M&M factory makes 10 million candies a day
A graphical representation of the maximum quantities of two goods and/or services that an economy can produce when its resources are used in the most efficient way possible.