26-03-2012, 02:24 PM
Introduction to Macroeconomics
Macroecon_Intro.ppt (Size: 660 KB / Downloads: 213)
Microeconomics examines the behavior of individual decision-making units—business firms and households.
Macroeconomics deals with the economy as a whole; it examines the behavior of economic aggregates such as aggregate income, consumption, investment, and the overall level of prices.
Aggregate behavior refers to the behavior of all households and firms together.
The Roots of Macroeconomics
The Great Depression was a period of severe economic contraction and high unemployment that began in 1929 and continued throughout the 1930s.
Classical economists applied microeconomic models, or “market clearing” models, to economy-wide problems.
However, simple classical models failed to explain the prolonged existence of high unemployment during the Great Depression. This provided the impetus for the development of macroeconomics.
Recent Macroeconomic History
Fine-tuning was the phrase used by Walter Heller to refer to the government’s role in regulating inflation and unemployment.
The use of Keynesian policy to fine-tune the economy in the 1960s, led to disillusionment in the 1970s and early 1980s.
Government in the Macroeconomy
There are three kinds of policy that the government has used to influence the macroeconomy:
Fiscal policy
Monetary policy
Growth or supply-side policies
Financial Instruments
Treasury bonds, notes, and bills are promissory notes issued by the federal government when it borrows money.
Corporate bonds are promissory notes issued by corporations when they borrow money.
Expansion and Contraction:The Business Cycle
An expansion, or boom, is the period in the business cycle from a trough up to a peak, during which output and employment rise.
A contraction, recession, or slump is the period in the business cycle from a peak down to a trough, during which output and employment fall.