Summary Of Macroeconomics

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In the first chapter of this book, the introduction shows the approach to macroeconomics that we take in foreshadows the basic macroeconomic ideas and issues that we develop in later chapters. Macroeconomics is given a definition and thoroughly explained, and then primary interest to macroeconomist: economic growth and business cycles are further explained at how they apply in our everyday lives. In the second chapter of the book, measurement is introduced and the importance of calculating variables. The objective in this chapter is to discover how variables such as the measurement of GDP and its components are enforced, and the measurement of prices, savings, wealth, capital, and labor market variables. In this paper I will analyze all of…show more content…
It focuses on the aggregate behavior of consumers and firms, the behavior of governments, the overall level of economic activity in individual countries, the economic interactions among nations, and the effects of fiscal and monetary policy.” One measure of economic activity is gross domestic product (GDP), the quantity of goods and services produced within a country during a specific period of time. The figure below displays an example of GDP per capita in the United States during the years 1900-2011.

Besides relying on GDP to understand the quantity of goods and service, macroeconomists also rely on models. In this case, the models are used to explain long-run economic growth, the purpose for business cycles, and the role economic policy should play in the macro economy. They are not always accurate explanations of the outcome or growth. The purpose for these models is to grasp an idea of what some economic problems may be. A model is a description of the features found below:
1. The consumers and firms that interact in the economy
2. The set of goods that consumers wish to consume
3. Consumers’ preferences over
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Inflation is the change in the level of prices in the market. In Figure 1.10 the inflation rate is shown below, the black line is displayed as the percentage rate of increase in the consumer price between the years 1960–2012. In the early 1960’s the inflation rate was low, it began to increase in the late 1960’s.

Inflation is very expensive; however, it is certainly useful to understand the causes, one main cause of inflation is that when demand increases excessively, the price will be increased by producers to gain higher profit margins and the sudden shift in cost, will cause inflation, this is known as demand-pull inflation. Another cause for inflation is known as cost-push inflation this occurs when firms respond to rising costs, by increasing prices to protect their profit margins. Chapter two explains measurement of what was previously looked at in chapter one; GDP. There are three approaches to measuring GDP, all three approaches give out the same output, the three approaches are known as the product approach, the expenditure approach, and the income approach. To calculate GDP using the product approach, the value of all goods and services produced in the economy are added and then the value of all intermediate goods used in production is subtracted gain an output

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