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Chapter 1. An Overview of Macroeconomics: BY Kansomba Chikumbutso
Chapter 1. An Overview of Macroeconomics: BY Kansomba Chikumbutso
An Overview of
Macroeconomics
BY
KANSOMBA CHIKUMBUTSO
An Overview of Macroeconomics
1. What is Macroeconomics
2. Macroeconomic Goals
Introduction to Macroeconomics
1. What Is Macroeconomics?
Introduction to Macroeconomics
2. Macroeconomic Goals
• Low Unemployment
• Price Stability
• Economic Growth
• Complementary and Conflicting Goals
Introduction to Macroeconomics
2. Macroeconomic Goals
Low Unemployment
25%
Great Depression
(1929 - 1933)
20%
Unemployment rate, %
World War II
(1941 - 1945)
1981 - 1982
15% recession
1973 - 1975 1990 - 1991
recession recession
10%
U.S.
5%
Introduction to Macroeconomics
2. Macroeconomic Goals
Economic Growth
Introduction to Macroeconomics
2. Macroeconomic Goals
Complementary and Conflicting Goals
• Complementary Goals
– Low unemployment and high economic
growth
• Conflicting Goals
– Low unemployment and low inflation
Introduction to Macroeconomics
3. Key Principles of Economics
• Rational Self-Interest
Introduction to Macroeconomics
3. Key Principles of Economics
Scarcity, Choice, and Opportunity Cost
Introduction to Macroeconomics
3. Key Principles of Economics
Scarcity, Choice, and Opportunity Cost
• Limited Resources
• Unlimited Wants
• Scarcity - resources, goods and services
are limited relative to the wants and desires
for them
• Choice
• Opportunity Cost - the highest valued
alternative foregone in making any choice
Introduction to Macroeconomics
3. Key Principles of Economics
Rational Self-Interest
• Rational
– Individuals are able to estimate benefits and costs
(net benefit) of a particular action
– They are able to compare the net benefits of
alternative actions
• Self-Interest
– Only engage in that activity if the net benefit is
greater than zero
– Engage in the activity that yields the greatest net
benefit
Introduction to Macroeconomics
3. Key Principles of Economics
Decisions Are Made at the Margin
• Marginal Benefit
– the increase in total benefit from the production
or consumption of one additional unit of a good
or service
• Marginal Cost
– the increase in total cost from the production or
consumption of one additional unit of a good or
service
Introduction to Macroeconomics
4. Economic Theory in Practice
• Fallacy of Composition
Introduction to Macroeconomics
4. Economic Theory in Practice
Economic Theory and Models
Introduction to Macroeconomics
4. Economic Theory in Practice
Economic Theory and Models
Introduction to Macroeconomics
4. Economic Theory in Practice
Fallacy of Composition
Introduction to Macroeconomics
4. Economic Theory in Practice
Normative versus Positive Economics
Introduction to Macroeconomics