Sem 1 Lecture 1

Timeline of society evolving in terms of Macroeconomics

Feudalism —> Commercial Capitalism —> Industrial Capitalism —> Modern global capitalism

What was feudalism?

• Very slow economic growth

• Agrarian society

• barter based trade, though little trade

• self sufficient

Transition of feudalism to capitalism

• Colonisation of countries meant that there was international trade

• changes leading to agricultural productivity

→ More food per per worker, population could increase

→ New markets formed

• Black death caused decreased population

Characteristics of capitalism

• Money was the central thing M - P - M* where M = Money, P = goods produced, M* = sold goods for more profits

• Profits was the goal, firms wouldn’t produce for society benefits but rather for profits

• Workers sold labour and firms own capital and land

• Unemployment could exist unlike in feudalism societies

Characteristics of mercantilism (commercial capitalism)

Early form of capitalism where wealth was described from the accumulation of money and trade.

• There was support of trade from monarchs

• Central bank of England created in 1964

What is macroeconomics?

The study of the economy as a whole.

• Inflation

• Economic growth

• Unemployment

• International trade

• Economic policy

• Business Cycles

Economic growth (Key issue)

Increasing ability to produce more goods and services

• increased living standards

• Higher incomes

• higher quality of life

Business Cycles (Key issue)

These are fluctuations in output and employment

• Booms - profits increase, output increases, high employment

• Recessions - Profits decreases, low output, low employment

Unemployment (Key issue)

Unemployment is caused by lack of output and demand

• Fiscal policy is used to fix this

inflation (key issue)

General level of prices increase

• booms cause higher inflation and busts cause low