Untitled Flashcards Set

Major Issue: Fluctuations over time.  

Material means of existence increases over time (more than last year) in order to know that, you have to count the stuff being produced, and do it again at a later time, you have to use the same definitions and units before and after (consistency is key) 

Economic growth = producing more stuff.  

Suppose no economic growth, were producing the same amount of goods and service constant, the living standards are going to decrease (population is growing, needs more economic growth to accompany it) in a stagnant economy the living quality goes down. Economic growth should be consistent with population growth.  

If more progress is important, than focus more on more economic growth.  

Americans purchase commodities from money from labor they provide. All workers produce the same thing, good and or service.  

If population is growing, we need more jobs to give people money to be able to buy commodities. Economic growth is related to employment opportunities. The issue is that economic growth fluctuates.  

In macroeconomics we define time (short term vs long term) in terms of months vs decades not like microeconomics which is price based.  EG average annual growth of US economy past 100 years is 2% 

There are periods where economic growth is growing way higher than average (expansion or upside) and then its lower (recession).  

More akin to a sinusoidal wave, but with less consistency.   

For the US FRED website we see that the white background shows growth higher than average, and gray shows lower than average. But expansions is more often and recessions is less.  

Imagine the economy is doing well, but a little too well, an issue arises as there's not enough people to employ. Its not sustainable, as it can lead to inflation.  

The opposite, issue is not enough employment, less spending aka recession.  

If you are bringing a bunch of jobs but not enough labor, (aka unemployment is 4%) it’s a lot harder to employ people leading to inflation. If unemployment was higher 10% eg then this would work.  

Relations with business cycle.  

Example grad school: go to grad school if in a recession as its harder to get employed.  

If in an expansion: pain of grad school is not worth it.  

A businesses health is dependent on where the economy is.  

First relation – procyclical (business cycle): when the economy is in an expansion, that variable increases with and decreases with recession (e.g. corporate profits).  

Second Relation – countercyclical: when the economy is in an expansion, everything else held constant, that variable goes down, e.g. grad school applications, and unemployment rates.   

In a dynamic market economy, for the vast majority of people, their economic lives is driven by their employment, their ability to purchase goods and services.  

We don’t consider those who can't work (eg children) as unemployed, they are not unemployed rather at the labor force.