ma'am allen

Basic macro economics

Focuses on national level

Gdp

Focuses on domestic product

Gnp

Focuses on national product

People face trade off

There is no such thing as free lunch

Efficiency

the property of society getting the most it can from its scarce resources

Equity

the property of distributing economic prosperity fairly among the members of society

The cost of something is what you give up to get it

Because people face trade-offs, making decisions require comparing the cost and benefits of alternative courses of actions in many cases, however, the cost of some action is not as obvious of it might first appear.

Marginal

additional

Rational people think at the margin

Marginal Benefit

Marginal cost

Marginal changes

People respond to incentives

Because people make decisions by comparing costs and benefits, there behavior may change when the cost or incentive. or benefits change. That is, people respond to incentive

Trade can make anyone batter off

Trade allows each person to specialize in the activities he/she does best. whether it is farming, sewing, or home building. Trading / Others, people can buy a greater variety and services at lower cost

Central Planning

communist countries worked on the premises that central Planner in the government were in the best position guide ecomic activity

Market Economy

the decisions of a central planner are replaced by the decisions of millions of firms and households

Markets are usually a good way to organize economic activity

Central Planning communist countries worked on the premires central Planner in the government were in the best that guide ecomic activity

position to

of a central planner are Market Economy the deoinions replaced by the decisions of millions of firmas

Adam smith

Father of Economics

The invisible hand

As long as there is supply and demand, it reaches equilibrium that means the invisible hand to moving

Government can vometimes improve market ouf comer

Although markets are usually a good way to organize

economic activity, this rule has vome important exceртолг

there are two broad reasons for a government to intervene

in the economy: "to promote efficiency and to promote equity"

Productivity

the amount of goods and services produced for each hour of a Worker's time

A country’s standards of living depends on its ability to produce goods and vervices

Lower invesment today means lower productivity in the future

Inflation

an increase in the overall level of prices in the economy

Prices rise when the government prints too much money

This results in inflation

Philips curve

inverse relationship between inflation and unemployment

societes faces a short-run tradeoff between inflation and unemployment

Philips curve

Flow

defined as a quantity measured over a particular period of time

Stock

defined as a quantity measured as of a given point in time.

Wealth

anything of valued owned

income

is a flow. It is a rate at which we earn money

Two sector model

•Households

Factors of Production

Consumption Expenditure

•Firms

Factor Payments

Goods and Services

Three Sector model

Household and Government

Firms and Government

Financial Market and Government

Four sector model

Household and Foreign Sector

Firms and Foreign Sector

Financial Market and Foreign Sector

Government and Foreign Sector

Production possibility curve

is a graphical representation of various production possibilities of two goods at a given time, with given resources and technology.

Economic Growth

period of steady growth in output along with an improvement in living standards

Full employment

the situation in which all available resources in the economy are employed to produce goods and services

Price Stability

the objective of countries is to keep their inflation rate as low as possible, maintaining price stability

Gdp

market value of all final goods and services produced within a nation in a given time.

Final Goods

intended for the end user.

Intermediate goods

used as components or ingredients in the production of other goods.

Nominal GDP

measure of output based on current prices.

Real GDP

measure of output based on changes in inflation.

GDP deflator

is a measure of the overall level of prices.

Expenditure approach

measures GDP as the sum of expenditures on final goods and services

Income approach

measures GDP as the sum of incomes of factors of production (wages, rent, interest, and profit

Value-added Approach

measures GDP as the sum of value added to each stage of production (from initial to final stage).

Consumer Price Index

Refers to the weighted average of the prices of goods and services purchased by the typical consumer.

Inflation

Refers to the increase in the overall price levels of an economy.

Inflation rate

the CPI's growth rate.

Deflation

decrease in the overall price levels of an economy.

Low Inflation

gradual increases in the prices that are predictable or expected. (0% -9%)

Galloping Inflation

prices are increasing rapidly but in periodic bursts. (10%-99%)

Hyperinflation

continuous increase in the prices of goods and services. (100% - higher)

Demand-pull Inflation

aggregate demand rising faster than potential output.

Cost-Push Inflation

inflation due to an increase in

production costs.

Employed

people who work

Unemployed

not employed, want to work, looking for a job

Not in the labor force

not employed, not unemployed

Labor force

total number of workers (employed & unemployed)

Labor Force

Number of employed + Number of unemployed

Structural Unemployment

occurs when there's a mismatch between the skills of the available workforce and the skills demanded by employers

Frictional Unemployment

refers to the short-term unemployment that occurs when people are in the process of moving from one job to another.

Cyclical Unemployment

is a type of unemployment that arises from fluctuations in the overall demand for goods and services in the economy

The Theory of Efficiency Wages

suggests that paying workers more than the minimum wage necessary to attract them can increase a company's overall productivity and profitability

The wage rate

is the price of labor per working hour, which could be measured in nominal and/or real terms.

Nominal Wage

what workers get paid per hour in current dollars/peso

Real Wages

The real purchasing power of a worker's earnings nominal wages divided by CPT

Wages

refer to the payment for a unit of time/hour worked.

Earnings

refer to wages multiplied by the number of time units/hours worked

Employee benefits

can be either payments in kind or deferred.

Total compensation

consists of earnings plus employee benefits.

Income received by a family

includes earnings, benefits, and unearned income, which includes dividends or interest received on investment and government transfer payments.

A scale or output effect

the reduction in the scale of production or output due to the reduction in employment

A substitution effect

capital is substituted for labor in the production process.

Market

clearing wage

Above-market wages

- overpaid

Below-Market Wages

- underpaid

Economic Rents

defined as the difference between the wage workers are actually paid on a job and the workers' reservation wages.

Technology

refers to the creation, use, and knowledge of tools, techniques, crafts, systems, or methods of organization to solve a problem or serve a purpose or end.

Technological Advancement

refers to the process of developing new and superior technologies that displace older ones, leading to significant improvements in organizational performance. This process involves cycles of incremental change and technological discontinuities, ultimately leading to the emergence of dominant designs across industries.

Improved Efficiency

efficiency and output in several fields have been greatly boosted by recent technological developments.

Enhanced Communication

improved communication and global connectivity technology have made communication more efficient, user-friendly, and accessible to more people throughout the world.

Access to Knowledge

one of the greatest advantages of technological progress is that more people are able to access knowledge and education

Health Care Development

medical discoveries and better treatment for patients.

Privacy and Concern

data breaches, identity theft, and illegal spying are all made more likely by the extensive gathering and storage of personal data.

Ethical Issues

Emerging technologies, such as AI and genetic engineering, present moral quandaries and societal effects.

Effects on Environment

electronic waste is generated during the manufacturing, use, and eventual disposal of electronic gadgets

Employment Shift

concerns about economic inequality and job elimination are exacerbated by the rapid pace at which automation and AI are being deployed.

Consumption Function

is a functional statement of the relationship between disposable income (Y) and the consumption expenditure

Disposable Income

part of total income which is available for consumption and saving.

Prosperity to Consume

The relationship between consumption and (disposable) income can be further elaborated by studying propensity to consume.

Average Propensity to Consume (APC)

defined as the ratio of consumption to income. (Total Consumption/Total Disposable Income)

Marginal Propensity to Consume (MPC)

defined as the ratio of change in consumption to change in income between two time periods. (Change in Consumption/Change in Disposable Income)

Level of Income

consumption expenditure of people directly depends upon the level of income

Distribution of National Income

lower income groups have higher MPC while higher income groups have a lower MPC.

Nature of the Income

the propensity to consume is also determined by the nature of income, whether the income received is stable or variable.

Marginal Propensity to Save (MPS)

defined as the ratio of change in saving and change in income over a period of time.

Investment

is defined as addition to the existing capital stock.

Capital stock

include fixed assets such as land, building, machinery and equipment, etc.

Gross Investment

refers to the total amount of investment expenditure that occurs within an economy during a specific period

Net Investment

represents the change in the capital stock of an economy after accounting for depreciation

Depreciation

decline in the value of capital assets due to wear and tear, obsolescence or other factors

Net investment

Gross investment - Depreciation