Eco

• Macroeconomics


  The branch of economics that studies the behavior and performance of an economy as a whole
• Macroeconomic factors

  • Unemployment
  • Growth rate
  • Gross domestic product
  • Inflation

  
• Unemployment


  Also referred to as joblessness, occurs when people are without work and are actively seeking employment
• During periods of recession (low economic activity)


  An economy usually experiences high unemployment rate
• Types of unemployment

  • Classical
  • Cyclical
  • Structural
  • Frictional
  • Hidden
  • Long term
  • Seasonal
  • Voluntary
• Classical unemployment


  Caused by wages being too high relative to productivity, wages are so high employers cannot hire all the available workers
• Cyclical unemployment


  Caused by the economic downturn and upturn, occurs during recessions when a business could no longer afford to employ its workers because its revenues are falling due to decreased demand
• Structural unemployment


  Occurs when the labour market is not able to provide jobs for everyone who wants to work, a mismatch between the skills of the unemployed workers and the skills needed for the available jobs
• Frictional unemployment


  The time period when a worker is transitioning from one job to another, they are temporarily unemployed until they find another job
• Hidden unemployment


  An unemployment that is not taken into account in official unemployment statistics because of how data is collected, workers that are not reflected into the official data/statistics
• Long-term unemployment


  People who have been unemployed for 12 months or more, actively seeking a job but cannot find one
• Seasonal unemployment


  Certain industries only produce or distribute their products at certain times of the year
• Voluntary unemployment


  When workers choose not to work at the current equilibrium wage rate
• Poverty


  Not having enough means to meet basic needs like food, shelter, and clothing, a state of one who lacks a usual or socially acceptable amount of money or material possessions
• Ways of defining poverty

  • Absolute poverty
  • Relative poverty

  
• Absolute poverty


  The general definition of poverty, it is unrelated to any economic or social context, not being able to buy enough necessities to survive such as food, extreme poverty

  
• Relative poverty


  This poverty is relative to the economy, the poor are defined as those who are deprived from the benefits of a modern economy, means poverty defined in comparison to other people's standing in the economy, changes could happen with economic growth

  
• Circular flow of income


  Means the unending flow of production of goods and services, income, and expenditure in an economy, shows the redistribution of income in a circular manner between the production unit (firm/government) and households (consumers)
• Two most vital parts of an economy

  • Households
  • Firms
• Households


  The primary economic function of households is to supply domestic firms with needed factors of production: land, human capital, real capital, and enterprise
• Firms


  The function of firms is to supply private goods and services to domestic households and firms and to households and firms abroad, using factors and paying for their services
• Savings (withdrawals)


  Households may choose to save rather than spend some of their income, saving is a withdrawal from the circular flow of income and it has a pivotal role in determining changes in national income over time
• Investment (injections)


  Firms purchase capital goods such as machinery and this spending is an injection into the circular flow, this process is called "Investment"
• Public sector


  In a mixed economy with a government, the simple model must be adjusted to include the public sector, households pay taxes to the government which is a withdrawal, government injects income back into the economy by spending on public and merit goods
• International trade


  Countries that trade are called "open" economies, households spend some of their income on imports which is a withdrawal from the circular flow, foreign consumers and firms buy domestic exports which is an injection into the circular flow
• GNP (Gross National Product)


  The total value of all finished goods and services produced by a country's citizens in a given financial year, irrespective of their location
• GDP (Gross Domestic Product)


  The standard measure of the value added created through the production of goods and services in a country during a certain period
• Components used to compute GNP and GDP

  • Consumption
  • Government spending
  • Capital spending by businesses
  • Net exports
• Inflation rate


  Extremely important to the trading economy, also called the currency system, establishes the way in which the exchange rate is determined, the value of the domestic currency with respect to other currencies

  
• Exchange rate systems


  • Fixed exchange rate
  • Flexible exchange rate
  • Managed floating exchange rate

  
• Fixed exchange rate


  The currency is fixed by the government, the government's main responsibility is to maintain the stability of the country's exchange rate and capital flows
• Flexible exchange rate


  The exchange system where the exchange rate is dependent upon the supply and demand of money in the market, the value of the currency is allowed to fluctuate freely as per the changes in the demand and supply of the foreign exchange, there is no intervention with the government
• Managed floating exchange rate


  It is the combination of the fixed rate system (the managed part) and the flexible rate system (the floating part), the exchange rate is neither entirely free (or floating) nor fixed, the central bank follows the necessary rules and regulations to influence the exchange rate, if a country manipulates the exchange rate by not following the rules and regulations, then it is known as dirty floating
• Money currencies
• Microeconomics


  Studies the behavior of individuals and business and how decisions are made based on the allocation of limited resources
• Demand


  The amount of some good or service consumers are willing and able to purchase at each price
• Law of demand


  Inverse relationship between price and quantity demanded, higher price = lower quantity demanded, lower price = higher quantity demanded
• Demand curve


  A downward curve that shows the inverse relationship between price and quantity demanded
• Tourism demand


  The total number of persons who travel, or wish to travel, to use tourist facilities and services at a certain place
• TE SYSTEM


  The floating part, also called a hybrid system