L1 INTRODUCTION EC B2

WHAT MACROECONOMISTS STUDY

DIFFERENCE BTW MICRO AND MACRO LEVEL
CF WEEK 2 : Gross Inflation Unemployment Fiscal Policy and
Domestic Product Monetary Policy:
SCOPE AGGREGATION KEY VARIABLES (GDP)

Measures the total The rate at which the Examines the Government policies
MICROECONOMICS Studies individual Analyzes Examines prices, supply, economic output of a general price level of percentage of the for managing
economic units specific demand, and individual country and is a key goods and services workforce without taxation, spending,
(e.g., households, economic decision-making indicator of economic rises, impacting jobs, a critical aspect and central bank
firms, markets) behavior health. purchasing power of labor market actions influence
and economic dynamics. economic growth and
MACROECONOMICS Focuses on the Deals with Looks at variables like stability. stability.
economy as a aggregated GDP, inflation,
whole. (accumulated) unemployment, and
data and overall economic Recession: A significant decline in economic activity, often characterised by reduced GDP
outcomes. performance. growth, rising unemployment, and decreased consumer spending.
Depression: A severe and prolonged economic downturn marked by deep and sustained
declines in economic activity, widespread unemployment, and financial crise :(

THE CIRCULAR FLOW OF INCOME MODEL EXOGENOUS AND ENDOGENOUS VARIABLES

It explains the flow of Changes in government fiscal policy (exogenous) can impact
income between aggregate demand, leading to changes in GDP (endogenous).
households, firms, and
the government, focusing Central bank policies such as changes in interest rates (exogenous)
on GDP as a measure of can affect investment and consumption levels (endogenous).
economic performance.
FLEXIBLE VERSUS STICKY PRICES
If there are more
withdrawals (net saving,
net taxes, import If prices are sticky (short run), demand may not equal supply, which explains:
expenditure) in an • unemployment (excess supply of labor)
economy than injections • why firms cannot always sell all the goods they produce.
(investment, government
expenditure, export If prices are flexible (long run), markets clear, and the economy behaves very
expenditure), it can lead differently.
to a decrease in economic
activity and potentially Demand Equation Supply Equation
contribute to a recession
or economic downturn. Q d = D (P, Y ) Q s = S (P, Ps )