BASIC MACROECONOMICS

• What is macroeconomics?


  Macroeconomics is the study of economy as a whole, examines the behavior of economic aggregates such as aggregate income, consumption, investment, and the overall level of prices.
• Components of Circular Flow?

  1. households
  2. FIRMS
  3. GOVERNMENT
  4. MARKET FOR GOODS AND SERVICES
  5. MARKET FOR FACTORS OF PRODUCTION
  6. FINANCIAL MARKETS
  7. REST OF THE WORLD
• What is Households?

  A social unit consisting of a person living alone or a group of persons who sleep in the same housing unit and have a common arrangement in the preparation and consumption of food.
• Why family and household different terms?

  Family refers to a group of people related by blood, marriage, or adoption, while a household refers to a group of people living together in the same dwelling.
• What is Firm?


  Entities that employ factors of production (land, labor, capital and technology) to produce goods or services for consuming units.
• What is Government?

  A group of people that governs a community or unit.
• Types of Government

  1.Democracy

  2. Republic

  3. Monarchy

  4. Aristocracy

  5. Dictatorship
• Role of Government in an economy

  1.Fiscal Policy

  2. Monetary Policy

  3. Growth or supply-side policies
• What is fiscal Policy?

  Government spending and taxation to influence the economy.
• What is Monetary policy?

  Control of money supply
• What is growth policies?

  Economic strategies to increase a country's GDP and government policies that focus on stimulating aggregate supply instead of aggregate demand.
• What is market?

  A market is a place or system where buyers and sellers interact to exchange goods and services.
• What is FINANCIAL INTERMEDIARIES?


  Entities where trading of securities including equities, bonds, currencies and derivatives occurs.
• What does rest of the world mean?

  Countries outside a specific region or country.
• What is market arenas?

  Households, firms, the government, and the rest of the world all interact in three different market arenas. (1) Goods-and-services market (2) Labor market (3) Money (financial) market
• What is goods-and services market?

  a market where Households and the government purchase goods and services (demand) from firms and firms supply to the goods and services market
• What is labor market?

  a market where firms and government purchase (demand) labor from households (supply)
• What is money market?

  a market where short-term borrowing and lending of funds in the financial market. Households supply funds to this market in the expectation of earning income, and also demand (borrow) funds from this market. Firms, government, and the rest of the world also engage in borrowing and lending, coordinated by financial institutions.
• What are financial instruments?

  Treasury bonds, notes, and bills, Corporate bonds, shares of stock, dividends
• What is Treasury bonds, notes, and bills?

  are promissory notes issued by the government when it borrows money.
• What is Corporate bonds?

  are promissory notes issued by corporations when they borrow money
• What is Shares of stock?

  are financial instruments that give to the holder a share in the firm’s ownership and therefore the right to share in the firm’s profits.
• What is dividends?


  are the portion of a corporation’s profits that the firm pays out each period to its shareholders.
• What are the concerns of macroeconomics?

  Inflation, unemployment, economic growth, sustainable development
• What is inflation?

  a sustained increase in the overall price level of goods and services in the market
• What is Hyperinflation?

  period of a rapid and sustained increases in the overall price level.
• What is deflation?

  sustained decrease in the overall price level.
• What is economic growth?

  Economic growth refers to an increase in the production and consumption of goods and services in an economy over a specific period of time.
• What is GDP?

  Gross Domestic Product is define as the total final value of all goods and services produced within a given country and by country’s factors of production, for a given period of time.
• What is business cycle?


  the cycle of short-term ups and downs in the economy;
• What is aggregate output?

  the total quantity of goods and services produced in an economy in a given period
• what is recession?


  a period during which aggregate output declines. Two consecutive quarters of decrease in output signal a recession.
• What is depression?

   A prolonged and successive deep recession
• what is unemployment rate?


  percentage of the labor force that is unemployed that aggregate labor market is not in equilibrium.
• What is sustainable development?

  development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
• What is development?

  Development is process of improving the quality of all human lives with three equally important aspects. These are: 1. Raising peoples’ living levels; 2. Creating conditions conducive to the growth of peoples’ self-esteem through the establishment of social, political and economic systems and institutions which promote human dignity and respect; 3. Increasing peoples’ freedom to choose by enlarging the range of their choice variables,
• What are the general problems of our time?

  Equilibrium problem ang Optimization Problem
• Why resources are scarce?

  Because we live in a world where humans' wants are infinite but the lan, labor, and capital required to satisfy those wants limited.
• Why bounded willpower happens?

  because people sometimes make choices that are not in theri long-run interest; due to lack of self-control or present bias
• What is intertemporal choice?


  When the cost and benefitss of a decision are separated across time