Basic macroeconomics

Economics Basics

A general price increase across the entire economy is called inflation. Typically, central banks take action by issuing money to buy bonds or other assetswhich boosts the supply of money and lowers interest rates, or, in the case of contractionary monetary policy, banks sell bonds and take money out of circulation.

Macroeconomics is a broad discipline which encompasses many separate areas of study.

An Introduction to the Principles of Macroeconomics

In contrast, the latter focuses on exchanges that occur across all markets within a country, taking into account the interrelated actions of consumers, businesses, government agencies, financial intermediaries, and global trading partners as they exchange resources, goods, and services as well as facilitate currency and quantity flows.

Production theory Production theory is the study of production, or the economic process of converting inputs into outputs. In another example of unconventional monetary policy, the United States Federal Reserve recently made an attempt at such a policy with Operation Twist.

Opportunity cost depends only on the value of the next-best alternative. Market structure The market structure can have several types of interacting market systems.

The AD—AS diagram can model a variety of macroeconomic phenomena, including inflation. Classical unemployment theory suggests that unemployment occurs when wages are too high for employers to be willing to hire more workers.

The ways in which we define and measure money are important to managing an economy. The AD-AS model has become the standard textbook model for explaining the macroeconomy.

Completing this unit should take you approximately 32 hours. Economists interested in long-run increases in output study economic growth. Fiscal policy Fiscal policy is the use of government's revenue and expenditure as instruments to influence the economy.


There is a multiplier effect that boosts the impact of government spending. Economic growth leads to a lower unemployment rate.

A general price increase across the entire economy is called inflation. When the economy faces higher costs, cost-push inflation occurs and the AS curve shifts upward to higher price levels.


Output and income[ edit ] National output is the total amount of everything a country produces in a given period of time. The unemployment rate in the labor force only includes workers actively looking for jobs.

In particular, Lucas made the Lucas critique that cast doubt on the Keynesian model. Cost-of-production theory of value The cost-of-production theory of value states that the price of an object or condition is determined by the sum of the cost of the resources that went into making it.

Usually policy is not implemented by directly targeting the supply of money. The effects of fiscal policy can be limited by crowding out. The Solow model assumes that labor and capital are used at constant rates without the fluctuations in unemployment and capital utilization commonly seen in business cycles.

The AD—AS diagram can model a variety of macroeconomic phenomena, including inflation. Over the long run, the two series show a close relationship.

However, eventually the depreciation rate will limit the expansion of capital:New classical macroeconomics, sometimes simply called new classical economics, is a school of thought in macroeconomics that builds its analysis entirely on a neoclassical framework.

Specifically, it emphasizes the importance of rigorous foundations based on microeconomics, especially rational expectations. New classical macroeconomics strives to provide neoclassical microeconomic.


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Economics is a field of study that has become increasingly relevant in our globalized, financialized society. The economy is part of our collective conscious and a.

Sep 18,  · Is a branch of economics that deals with the performance, structure, and behavior of a national or regional economy as a whole.

It studies about aggregated indicators such as GDP, unemployment rates, and price indices to understand how the whole economy functions. Paul Krugman, a New York Times Op-Ed columnist, writes about macroeconomics, trade, health care, social policy and politics. Inhe received the Nobel Prize in Economics.


Macroeconomics is the study of how a country's economy works while trying to discern among good, better, and best choices for improving and/or maintaining a nation's standard of living and level of economic and societal well-being.

Basic macroeconomics
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