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01A. Introduction To Macroeconomics
01A. Introduction To Macroeconomics
Macroeconomics
Dr. Akshay Dhume
02/15/2023 1
Reading
1A.1.1. S_N_Chapter19
1A.1.2. S_N_Chapter20
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Macroeconomics
Macroeconomics is the study of the economy as a whole
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Macroeconomic Objectives
“High level and rapid growth in Output”
(Popular) Measure of Output: actual market prices
◦ Gross Domestic Product (GDP) – Real GDP: Measured in constant
the market value of all final goods or invariant or base year prices
and services produced within a Potential GDP:
country during a given year ◦ Maximum sustainable level of
◦ Real GDP versus Nominal GDP output that can be produced without
Nominal GDP: Measured in fueling inflationary pressures
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Actual and Potential Output
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Macroeconomic Objectives
“High Employment and Low Unemployment”
Seek high paying jobs without searching and waiting
too long
Seek job security and good benefits
Unemployment:
◦ “An individual is unemployed if the individual is seeking a job
at the prevailing market wage but is not able to avail one”
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Macroeconomic Objectives
“Price Stability: Low and Stable Inflation Rates”
Inflation is a sustained rise in the overall price level.
Measures of Overall Price Level
◦ Consumer Price Index
◦ Wholesale Price Index
◦ or
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Macroeconomic Policy Instruments
Policy instrument is an economic variable under the control of the
policymaker that can affect one or more macroeconomic
objective/goal
Policy Instruments
◦ Fiscal Policy:
Government Expenditure
Government Purchases
Transfer Payments
Government Receipts
Tax
Non-Tax
◦ Monetary Policy:
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Aggregate Demand and Supply
Aggregate demand refers to the total amount that different
sectors in the economy willingly spend in a given period.
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Aggregate Demand and Supply
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Aggregate Demand and Supply
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Aggregate Demand and Supply:
Application: War Time Boom
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Aggregate Demand and Supply:
Application: Supply Shock
What will happen to equilibrium Output and Price
Level if Supply of Oil is Cut? (Oil is a key input in
production process)
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