Core Macroeconomic Principles: Business Cycles to Saving
Chapter 1: Economic Fundamentals
Chapter 1
Business cycle: expansion & contractions of economy.
Aggregation: adding individual markets into economy-wide totals.
Positive $\rightarrow$ descriptive/factual (“is”).
Normative $\rightarrow$ value judgment (“should”).
Key Activities:
- Forecasting $\rightarrow$ predict future values.
- Analysis $\rightarrow$ interpret current events.
- Data development $\rightarrow$ improve measurement systems.
- Research $\rightarrow$ theory + empirical testing.
Comparative statics
Read MoreNational Income Accounting: GDP, GNP & Economic Indicators
National Income Accounting Fundamentals
1. Measuring National Income and Output
A fundamental principle is that everything produced generates income for someone. The primary measure is Gross Domestic Product (GDP).
GDP: The total market value of all final goods and services produced within a country’s borders during a specific period.
Methods for Measuring GDP
In a Closed Economy:
- Sum the Value Added: Calculate the value added by all firms located in the economy.
- Value Added = Value of Output – Value of
Understanding Gross Domestic Product (GDP): Macroeconomics Essentials
1.1 Macroeconomics vs. Microeconomics
Microeconomics focuses on how decisions are made by individuals and firms and the consequences of those decisions. One product, one price, a single market.
Macroeconomics examines the aggregate behavior of the economy – how the actions of all the individuals and firms in the economy interact to produce a particular level of economic performance as a whole. Aggregate production, price index, economy as a whole.
1.2 Gross Domestic Product (GDP)
- The most frequent