Macroeconomic Essay

Macroeconomic Essay
Macroeconomic theory essay.
Evaluate the theoretical argument that price and wage flexibility allow an economy to correct a negative demand shock. Provide evidence from Japan
in the 1990s to illustrate your answer and consider briefly what policy lessons may follow for dealing with the impact of the current world financial
crisis.
In the year 2007–2008, the global economy has been suffering deeply from the impact of the major financial crisis. This event is considered the
worst of its kind in decades, since the great depression. The cure for this crisis has been the topic of much debate; many economists suggest that the
idea of price and wage flexibility can return the economy back to full employment as it could have done for Japan...show more content...
This makes up a liquidity shortage in the money market so that at this point, any use of expansionary monetary policy is inefficient in this situation. If
money supply is to be increased, people would hold more and more money as precautionary or further investment, making the economy fall deeper into
the liquidity trap; on the other hand, this could even result in a monetary deflation. After a long trapped period, Japan's economy showed its first sight
of recovery in 2003 with higher output growth and rising employment, wage as well as investment.
Policy lessons
"What kept Japan down were repeated macroeconomic policy mistakes" (The New York times, 2008). In fact, the Japanese government's action was
not effective regarding the situation of their economy. The use of monetary policy did not only worsen the effect of the liquidity trap but also create a
deflationary pressure. On the other hand, their slow cuts in Bank of Japan nominal interest rate and deflation lead to nominal and real interest rate of
different levels. Even nominal interest rate at zero, real interest rate has been positive. Fiscal policy was inadequate to increase demand and output but
led to deficits and accumulating government debt.
'Could we but suddenly double the productive powers of the country, we should double the supply of commodities in every market; but we should, by
the same stroke, double the purchasing power. Everybody would bring a double

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Fundamentals of Macroeconomics Paper Macroeconomics is a study in which reflects the economy as a whole and the levels of total output, which is
also referred to as national income. National income measures the value of an output produced in an economy over a period of time. In this paper
gross will attempt to describe the economics related word terms such as gross domestic product (GDP), real GDP, nominal GDP, unemployment rate,
inflation rate and interest rate in laymen. Also will describe how purchasing of groceries, how massive layoffs, and decrease in taxes can affect the
government households and business.
Gross domestic product GDP is the total market value of products and services produced within the borders of given country...show more content...
This are products that are produced in a given period of time by property or labor located in the United States of America. The Measurement is
calculated as a gross domestic product in constant dollar. Nominal GDP is reported to the public without the inflation adjustment to make it appear than
this original value. Nominal GDP can be higher or lower than conventional GDP Theory. Nominal GDP are not accountable towards inflation that can
be misleading. Furthermore Nominal GDP may increase due to either increased output in an economy, or increased prices in the economy
Employment is the overall total number of people with a job, which in includes the employees, businessmen, and self–e employed/ entrepreneurs. The
total number of employed can change over time due to several factors. According to Wise geek (2015) "The relationship between Gross Domestic
Product (GDP) and unemployment rates can be seen by the application of Okun's Law" Additional, "According to the principle established by this
law, there is a corresponding two percent increase, in employment for every established one percent increase in GDP" (Wisegeek, 2015)
Unemployment rate is the number of people who are willing to work, able to work and those who are looking for work that are unable to find work.
The unemployment rate is one of the most scrutinized and monitored statistics. This is a result that most economist believe that when this increases it
is clear sign that the

Macroeconomics Research Paper
Colorado Technical University Research Paper Submitted in Partial Fulfillment of the Requirements for ECON201 Macroeconomics Colorado
Springs, Colorado March 2012 Introduction The economic growth is the process by which per capita income rises over time. Growth theory attempts
to model and understand the factors that are behind this process. It is a particularly challenging area of research because growth is extremely uneven
in space as well as in time. Over the past millennium, world per capita income increased thirteen–fold, from $435 per person per year around the year
1000 to $5,700 nowadays. This contrasts sharply with the preceding millennia, when there was almost no advance in per capita income. Per capita
income...show more content...
Another key determinant of economic growth is demographic (Dilipk, 2004). The economic growth is associated with the increase in the Gross
Domestic Product (GDP) of the country. The Gross Domestic Product (GDP) is the value of all final goods and services produced within the economy
in a given period of time. The GDP is usually reported with the unemployment and the inflation variables. There are various factors that greatly
contribute in enhancing the economic growth in the country. According to the Keynesian approach, there have been identified the four variables that
affects the economic growth. These are investment, saving, liberalization of the trading activities, movement of the capital, policy of the exchange rate
and the macroeconomic stability of the economy. The investment in the human capital and the physical capital are also one of the factors that fasten
the economic growth in the country. The demography is another factor that determines the growth of the economy. However, among these factors,
research study has identified other factors that determines and enhance the economic growth. These are role of finance in the economic growth and the
role of financial intermediaries in enhancing the economic growth. These factors greatly help in making the process of the economic growth faster. The
economic growth is largely associated with the economic development of the country.

ECON1016GroupWorkAssessment
PROBLEM
SETNO4(Chapter30&33)
Student #1 Name and ID: Gwee Yi Xuan S3506518, 10148285
Student #2 Name and ID: Cheah Wei Yun, S3509385, 10148653
Student #3 Name and ID: Yong Chang Wei Stanley, S3532641, 10154582
Question 1
Suppose that a country's inflation rate increase sharply. Explain the following situations. (1 mark for each)
a) What happens to the inflation tax on the holders of money?
As inflation rate increases sharply, the price level also increases sharply, causing the real value of money that the holders have to decrease.
b) Why is wealth that is held in savings account not subject to a change in the inflation tax?
Due to the Fisher effect, the bank has already taken...show more content...
d) A casual worker who has no labour contract
This unexpectedly low inflation will help the worker, as it meant that they are cheaper to hire. Thus, the company will continue to hire them, regardless
of a labour contract, keeping them employed.
e) A private school that has invested some of its endowment in Government
Bonds.
This unexpectedly low inflation will hurt the private school, as the nominal interest rate is lower than expected. This meant that they will earn less
revenue from the government bonds. Nominal interest rate (в†“) = Real interest rate + Inflation rate (в†“)
2
Question 3
a) 'In the long run, "money is neutral."
(ii) The longвЂђrun aggregate supply curve is vertical
Changes in the supply of money affect nominal variables, but not real variables.

b) Firms and workers often reach agreements under which nominal wages are
"sticky" for periods as long as one or two years.
(iii) The shortвЂђrun aggregate supply curve slopes up
An increase in the inflation rate, increases the quantity of goods and services supplied in the short run. The wages do not adjust immediately to the
inflation rate, due to the agreements that fixed the wages for up to one or two years.
3
c) When the price level rises, the real value of savers' monetary wealth declines.
(i) The aggregate demand curve slopes down
The nominal value of money is fixed, but the real value is not. When inflation rises,
these

Effects of Macroeconomics
Effects of Macroeconomics
Abstract
The following pages focus on analyzing the effects of macroeconomics between countries with the use of economic theory, microeconomic and
macroeconomic fundamentals, and other theories that can be used in this case. The Introduction presents some of the points of view used in addressing
this paper. The following sections focus on describing the macroeconomics effects of fiscal and monetary policies, stock markets, oil prices, but also
other important effects determined by these phenomena. The Conclusions section presents some of the most important issues addressed by the paper.
Introduction
The economies of countries are affected by environmental factors, but also by the economies of other countries. The process of globalization has
increased the influence that countries' economies have on one another. Therefore, it is important to understand how macroeconomics is influenced by
globalization, and how this process influences national economies. This is intended to help countries reduce these effects and increase control on their
economies.
Effects of Macroeconomics Between Countries
There are several effects that can be discussed when analyzing macroeconomic relationships between countries. The most important effects can be
observed regarding the situation of currencies, monetary exchange, monetary policies, trade relationships, imports and exports, and these countries'
economies. It is necessary to understand how countries are

Macroeconomics 201 Principles of Macroeconomics Term Paper By Mitchell Wright I decided to write my paper on the economy America during
the 1970s. I chose this time period because it seemed to really be a major shifting point in the country. Not only did the economy change drastically
with a major recession, exports falling and interests rates sky rocketing, but it also changed the way Americans lived their lives. The oil crisis in the
Middle East caused major gasoline shortages forcing Americans to drive less. This brought about the beginnings of the environmentalist movement
and more organized efforts to conserve fossil fuels and protect the environment as Americans became aware that there was not a limitless supply of
fossil fuels in the world. Finally, this decade in time set the stage for the election of Ronald Regan, arguably one of the greatest presidents in our time,
and his theory of supply–side economics, slashing tax rates for investors and businesses in an effort to give more back to the consumer and stimulate
job growth. Without the economic turmoil of the 1970s, the economic growth and prosperity might not have occurred in the following decade and the
economic boom of the 1990s might also have been compromised. There were several major social and political issues that were emerging in the
beginning of the 1970s that played a crucial role in shaping America as we know it today. The Women's Rights movement, Affirmative Action, Roe v.
Wade, Environmentalism, etc.

Fundamentals Of Macroeconomics Paper
Fundamentals of Macroeconomics
Fundamentals of Macroeconomics
Stafford M. McClendon
ECO372
University of Phoenix Online
Part 1
Describe the following terms in your word.
Gross domestic product (GDP) The Market value or measure of how strong a countries economy is. Also a measure of the dollar value or goods
produced at a given time period.
Real GDP Real GDP represents the actual dollar value exercised for constant change. Market values change rapidly and often, the real GDP is shows
the value as it changes.
Nominal GDP Nominal GDP is a measure of how strong the dollar value, but because inflation has not been accounted for the figures are sometimes
...show more content...
The low production means prices go up because of low quantity. When prices go up consumers and retailers are affected because it becomes a trickle
affect, from the retailer down to the consumer and the savings they usually get goes out the window. It also affects households because when the prices
go up leaving less money for other activities such as outings or family fun activities. It affects decreased taxes to help lower prices to drive the
demand back up because if people cannot afford the higher prices, placing smaller taxes upon them would drive the demand back up, thus
increasing the demand and the supply. The massive layoff of employees affects everything. If people do not have jobs they cannot afford anything
because they do not have money to buy products. Layoffs affect home because it becomes stressful upon marriages and households in general. No
job you cannot afford to pay bills, buy food, put gas in vehicles to look for work, mowing the lawn. Layoffs make people do unjust deeds, such as

stealing from the consumers they normally would not have an issue purchasing the products. No power or electricity in the homes means any lights to
see. Layoffs mean no water to take a bath, water the lawn or plants. Layoffs affect the government because it means less taxes being paid. When
people are working the economy becomes stronger because people can go out and make

Macroeconomics Essay
"Macroeconomics is a branch of economics that deals with the performance, structure, and behavior of a national economy as a whole.
Macroeconomists seek to understand the determinants of aggregate trends in an economy with particular focus on national income, unemployment,
inflation, investment, and international trade" (Wikipedia, 2007). Government tends to use a combination of both monetary and fiscal options when
setting policies that deal with the Macroeconomic.
According to McConnell & Brue (2004), governments make adjustments through policy changes which they...show more content...
dollars into gold at $35 per ounce, has made the U.S. and other countries' monies into fiat money–money that national monetary authorities have the
power to issue without legal constraints.
Money is used in all economic operations; money has a powerful effect every economic activity. The increase in supply of money put more money in
the hands of the consumers and increased spending. When the money supply continues to expand and the prices begin to increase, particularly if the
output growth reach to the capacity limits as the public begin to expect the inflation, lenders insist on higher interest rates to offset and expected
decline in purchasing power over the life of their loans. Contradictory results happen when the supply of money falls, or when the rate of growth cries
off. The U.S. money supply comprises currency–dollar bills and coins issued by the Federal Reserve System and the Treasury–and various kinds of
deposits held by the public at commercial banks and other depository institutions such as savings and loans and credit unions. On June 30, 1990, the
money supply, measured as the sum of currency and checking account deposits, totaled $809 billion. Including some types of savings deposits, the
money supply totaled $3,272 billion. And even broader measure totaled $4,066 billion

Pros And Cons Of New Classical Macroeconomics
Introduction
New classical Macroeconomics is an important school of macroeconomics development since 1970s. New Classical Macroeconomics is originally
evolved from the school of Rational Expectations and monetarism. New classical Macroeconomics is also referred to the Macroeconomics of the
rational expectations, or equilibrium method for Macroeconomics. New classical Macroeconomics abides by traditions of the classical economics and
believes in the effectiveness of market forces. New classical Macroeconomics tries to develop theories of macroeconomics based on the hypothesis that
economic parties behavior maximizes and market cleaning. New classical Macroeconomics believes in that if market mechanism works spontaneously,
macroeconomic issues, such as unemployment and recession, will be solved (Leslie, 1993). The main representative researchers of New classical
Macroeconomics include Robert Lucas, Thomas Sargent, R.J. Barro and Neil Wallace.
The main theory of New classical Macroeconomics is the Policy ineffectiveness theorem. Specifically speaking, New classical Macroeconomics usually
the following four propositions: first, private economy can be stable; second, currency is neutral in the long run; third, currency can be neutral in the
short term; and forth, the economic policy of Keynesian positive intervention is harmful (Dornbusch, 1990). Currently, New classical Macroeconomics
and Keynesian are the two major schools of mainstream economics in the world.
This essay

Essay about Principles of Macroeconomics
Data Exercise One ECON 201: Principles of Macroeconomics September 5, 2014 To live in an economy that is not negatively impacted by recession,
downsizing, or business capsizing would be ideal. The unfortunate reality is that we are faced with economic situations that will be either helpful or
hurtful to us all. Over the last few quarters between 2013 and 2014 the U.S. Bureau of Economic Analysis (BEA), conducted an analysis that reflects
the changes in GDP. During this time the Nominal GDP was much greater than the Real GDP. Expenditures Approach to Calculating GDP
–638175208978500From 2013 through 2014 the Nominal GDP was greater because the values during that time were not adjusted. It is understood that
Nominal GDP is the...show more content...
Considering the table above, GNP was higher than the National Income by 2,521.3. To determine National Income from GNP you have to subtract
GNP. The main component would be the value of GNP and the total output of goods and services of a country. National Income also considers both
domestic and international earnings. GDP in Different Countries COUNTRY GDP (in billions of U.S. dollars) Population (in millions) Per Capita
GDP (in thousands of U.S. dollars) 1 2 3 4=2/3 UNITED STATES 16800 316.1 5314.7 JAPAN 4901 127.3 3849.9 CHINA 9240 1357.3 680.7
MEXICO 1260 122.3 1030.2 RUSSIAN FEDERATION 2096 143.5 1460.6 SWITZERLAND 650.7 8.081 8052.2 SWEDEN 557.9 9.592 5816.3
LUXEMBOURG 60.38 .543 11119.7 COUNTRY GDP (in billions of U.S. dollars) Population (in millions) Per Capita GDP (in thousands of U.S.
dollars) 1 2 3 4=2/3 LUXEMBOURG 60.38 .543 11119.7 SWITZERLAND 650.7 8.081 8052.2 SWEDEN 557.9 9.592 5816.3 UNITED STATES
16800 316.1 5314.7 JAPAN 4901 127.3 3849.9 RUSSIAN FEDERATION 2096 143.5 1460.6 MEXICO 1260 122.3 1030.2 CHINA 9240 1357.3
680.7 In the table above are different countries reflecting their GDP, population and Per Capita GDP. When arranged based on GDP, the United States
ranked highest. Upon rearranging the order by highest Per Capita GDP to the lowest, the order did not remain the same, as for order per GDP and
Luxembourg was the highest. This difference is due to the population size and the fact that

Macroeconomics (from the Greek prefix makro– meaning "large" and economics) is a branch of economics dealing with the performance, structure,
behavior, and decision–making of an economy as a whole, rather than individual markets. This includes national, regional, and global economies.[1][2]
With microeconomics, macroeconomics is one of the two most general fields ineconomics.
Macroeconomists study aggregated indicators such as GDP, unemployment rates, National income, price indices, and the interrelations among the
different sectors of the economy, to better understand how the whole economy functions. Macroeconomists develop models that explain the
relationship between such factors as national income, output, consumption, unemployment, inflation,savings, investment, international trade and
international finance. In contrast, microeconomics is primarily focused on the actions of individual agents, such as firms and consumers, and how their
behavior determines prices and quantities in specific markets
While macroeconomics is a broad field of study, there are two areas of research that are emblematic of the discipline: the attempt to understand the
causes and consequences of short–run fluctuations in national income (the business cycle), and the attempt tounderstand the determinants of long–run
economic growth (increases in national income). Macroeconomic models and their forecasts are used by governments to assist in the development and
evaluation of economic policy.
Basic

Macroeconomics Quiz & Answers Essay example
Chapter 1 : Introduction to Macroeconomics
1) Which of the following is NOT a topic studied in Macroeconomics?
A) gross domestic product
B) the unemployment rate
C) the price of IBM computers
D) the inflation rate
Answer: C
.
2) Which of the following is a topic studied in Macroeconomics?
A) gross domestic product
B) the wage of auto workers
C) the price of IBM computers
D) the amount of pizza produced
Answer: A
3) Which of the following is a topic studied in Macroeconomics?
A) the functioning of individual industries
B) aggregate behavior of households and industries
C) the behavior of individual households
D) the decision– making behavior of individual business firms
Answer: B
4) Prices that do not always adjust...show more content...
D) hyperinflation.
Answer: B

22) Between a trough and a peak, the economy goes through a(n)
A) recession.
B)bust.
C) expansion.
D) hyperinflation.
Answer: C
23) Between a peak and a trough, the economy goes through a(n)
A) expansion.
B) inflation.
C) recession.
D)boom.
Answer: C
24) Unemployment means that
A) at the going wage rate, there are people who want to work but cannot find work.
B) people are not willing to work at the going wage rate.
C) there are some people who will not work at the going wage rate.
D) there is excess demand in the labor market.
Answer: A
25) Unemployment implies that in the labor market
A) there is an excess supply of labor.
B) there is an excess demand for labor.
C) there are too few workers for the jobs available.
D) quantity demanded of labor exceeds quantity supplied.
Answer: A
26) The unemployment rate equals
A) labor force/population.
B) unemployed/employed.
C) (employed– unemployed)/labor force.
D) (labor force – employed) / labor force.
Answer: D

26) if the labor force is 50 million and 48 million are employed then the unemployment rate is:
A) 2%.
B) 4%.
C) 5%.
D) 52%.
Answer: B
27) If 20 million workers are unemployed and 180 million workers are employed, then the nemployment rate is
A) 10%.
B) 11.1%.
C) 18%.
D) 80%.
Answer: A
28) The period in the business cycle from a trough to peak is called a(n)
A) recession.
B) expansion.
C) slump.
D)

Economics, or the study of human decision in the midst of scarcity, contains the related studies of microeconomics and macroeconomics. These two
studies focus on economics from differing scales, with microeconomics primarily concerned with the way individuals and commercial entities handle
scarcity and macroeconomics concerned with the overall effect on nations and large economies. While both are related there are key differences.
Microeconomics, or the study of how individuals agents in an economy make decisions in relation to scarcity, uses such concepts as marginal analysis,
fixed, marginal and variable cost to measure how those decisions are made. Concentrating primarily on individuals and single commercial entities,
microeconomics measures how these individuals analyze and make decisions in relation to the scarcity of budget constraints. A great example of this is
the decision that must me made by consumers on which house to buy or rent, and which products to consume, or the decisions by companies on which
products to produce and at what quantity.
Macroeconomics, on the other hand, follows the large picture, and is concerned with the production of an entire society. Such ideas as how monetary
policy, or the quantities that banks lend and the interest rates, and fiscal policy, or the expenditures and taxation rates, affect what is produced and
consumed by a society as a whole are common themes. While different from microeconomics, much of macroeconomics drives and is

Macroeconomics Chapter 2 Study Guide
Chapter 2: Date of Macroeconomics 1. What components of GDP (if any) would each of the following transactions affect? What will happen to
GDP? Explain. a. A family buys a new refrigerator. Answer: Consumption increases because a refrigerator is a good purchased by a household. GDP
increases. b. Aunt Jane buys a new house. Answer: Investment increases because a house is an investment good. GDP increases. c. Ford sells a
Mustang from its inventory. Answer: Consumption increases because a car is a good purchased by a household, but investment decreases because the
car in Ford's inventory had been counted as an investment good until it was sold. GDP is unaffected. d. You buy a pizza. Answer:
...show more content...
Answer: 4% real GDP per person = real GDP/population %О” real GDP per person = %О” real GDP– %О” population = 6–2 11. If GDP (measured
in billions of current dollars) is $5,465 and the sum of consumption, investment, and government purchases is $5,496, while exports equal $673, what
are imports equal to? Answer: $704 GDP = Consumption + Investment + Government + Exports–Imports $5,465 = $5,496 + $673 – IM Imports = $704
12. A woman marries her butler. Before they were married, she paid him $20,000 per year. He continues to wait on her as before (but as a husband
rather than as a wage earner). She earns $1,000,000 per year both before and after her marriage. How can this marriage affect total GDP? Answer: It
decreased GDP by $20,000. Household production is not included in GDP. 13. Below are some data from the land of milk and honey. Year Price of
Milk Quantity of Milk (quarts) Prices of Honey Quantity of Honey (quarts) 2005 $1 100 $2 50 2006 $1 200 $2 100 2007 $2 200 $4 100 a. Compute
nominal

The purpose of the individual assignment is to read each chapter and then summarize the chapter. The first chapter summarized is chapter one.
Managerial Economics uses microeconomics and macroeconomics principals to manage businesses. This analytical approach gives a logical aspect to
management. Hopefully with a logical approach using economic theories this will enable managers to maximize managerial decision to increase
profits. There are seven forces that can affect long–run profitability. Those forces are: few close substitutes, strong entry barriers, weak rivalry within
markets, low market power of input suppliers, low market power of consumers, abundant complementary products, and limited harmful government
intervention. All businesses use has a cost of operation. Since these cost requiring purchases this gives companies opportunities to reduce cost. A total
economic cost is the sum of the opportunity costs of market–supplied resources (explicit costs) plus the opportunity costs of owner–supplied resources
(implicit costs). The textbook regurgitates what we learned from other economics course by mentioning profit is calculating the difference between
revenue and cost. There are different ways to calculate profits. Accounting profit for instance is different from economic profit. Accounting profit does
not subtract the implicit cost of using resources from total revenue. The value of a business is the price which the firm can be sold. A company

Macroeconomic Policy Essay
The main components of macroeconomic policy are monetary and fiscal policy. The main aims of macroeconomic policy are continued economic
growth, high employment, stable prices (low inflation), an elevation in average living standards, and a maintainable stance on the balance of payments
(Macroeconomics). Practically all governments apply macroeconomic policies to reach policy goals and to improve the workings of the economy.
Economic growth is important for reducing poverty levels. Continued growth means the ability to meet the needs of the current generation without
burdening future generations with debt (Macroeconomics). Low inflation rates are important because high inflation rates can damage the international
competitiveness of a...show more content...
It can be defined as the usage of government spending and taxation to alter the state of the economy (Weil). Fiscal policy is essential to managing the
economy since it can affect the total amount of output produced or the gross domestic product. If expenditures are increased and taxes are reduced,
people will have higher incomes which requires additional output, and in turn, generates more income and spending. Initial increases in government
expenditures or reduction in taxes led to a collective increase in Gross National Product (Pechman). Declines in spending or rises in taxes reduce GNP.
Tax policy, one division of fiscal policy, could lead to tax adjustments that could be used to restrict or stimulate demand and can be used to stabilize
inflation. If the government purchases more goods and services, economic activity goes up. If the government cuts taxes, then consumers end up with
higher incomes, after taxes are removed. This leads to a boost in spending and economic activity. According to Greg Mankiw from Harvard University,
the four goals of tax policy should be efficiency, intergenerational equality, egalitarianism, and stabilization (Mankiw). The tax system should raise
enough revenue so that future generations are not burdened with debt. Tax policy should also attempt to establish more equal after–tax incomes. Lastly,
tax policy should help the economy maintain a relatively high level of

Difference Between Macro And Microeconomics Essay
MICRO AND MACROECONOMICS
7 SEPTEMBER 2016
Abstract:
Two branches of economics that are vital to our study are macro and microeconomics. This piece of writing will attempt to differentiate them and
provide a summary of an article from the internet that is relevant to the topic. The writer will also attempt to define a sunk cost, how it differs from a
marginal cost and how he has used marginal analysis to solve a problem.
The difference between macro and microeconomics
A decent attempt to differentiate among the two sub–branches of economics should start with a definition. Microeconomics is "the analysis of
economic behavior at the level of individual market participants, chiefly individual businesses or consumers," (Law, J. [Ed] 2009 p 906) whereas
Macroeconomics is defined as "the branch of economics that studies economies as a whole rather than the behavior of particular economic agents."
(Law, J. [Ed] 2009 p 863.) Therein in the definition lies a vast difference that can be deduced. The former is on a small scale while the latter is on a
larger scale.
Microeconomics analyses how individuals at their personal level will be influenced by scarcity and how this in turn brings about an opportunity cost
that would be a result of their choice. In macroeconomics however, conditions that go beyond scarcity need to be analyzed wholesomely for an
opportunity cost to be realized. Therefore, in microeconomic terms, choices that individuals make will have a

Essay about Macroeconomics
You may have already studied microeconomics, which looks at supply, demand and prices for individual goods. Macroeconomics looks at the bigger
picture and involves the study of the economy as a whole.
National income
Let us start by looking at a simple example – a
'two sector' economy made up of households
(consumers) and firms (producers) –and use this to develop the idea of national income. To start with we will ignore the impact ofgovernment policy
and overseas sectors.
Households ultimately own the factors of production, e.g., labour, materials and capital, and supply these factors to firms who use them to produce
goods and services. In return households earn rewards for supplying the firms with the factors of...show more content...
This model will use the following definitions: Consumption (C) – consumption goods produced and sold to customers i.e., the chairs.
Savings (S) – income that is not spent on consumption. Investment (I) – production of, or expenditure on, non–consumption goods (carried out by
firms) including expenditure on increasing stocks of consumption goods.
Injections – expenditure on domestic output not originating from consumers e.g., investment.
Leakages – income not spent on consumption of domestic output e.g., savings.
Consumers will not spend all their income on goods and services. They will also have savings – income not spent on consumption. Similarly producers
will not just spend on producing goods but will also carry out investment – expenditure on non–consumption goods.
There are therefore injections into (investment) and leakages from (savings) the circular flow.
These injections and leakages can now be added to the circular flow model (see Figure 2)
Figure 2
Notes to Figure 2
In this model the income earned by households (Y) must be equal to expenditure on purchasing national product (E). Output of consumption goods by
firms equals consumption expenditure by household's (C). Note that households do not spend all their income – instead they save (S) – a leakage.
Expenditure on non–consumption goods by firms is investment (I) – an injection.
Income (Y) = Expenditure (E)
Income

Macroeconomics
croecon [pic] Introduction to Economics EF 110 Take home exercise Due date: Wednesday 27th April 6pm 2011 This assignment must be submitted
via moodle EF110 homepage. This assignment accounts for 10% of the final module grade Answer all questions. Marks awarded for each question
can be clearly seen. This is an individual test and while it is expected that you may consult notes, etc, the final work shown should be your work
alone. Your signature below will be taken as fulfilling the usual declaration that what is shown on the following pages is your own work and not the
work of others. |Student Name: |David Fogarty |...show more content...
( 10 marks) PART B From the following data, calculate the equilibrium national income Consumption function is represented by C= A+B(Yd) Where
C= consumption component of GDP A= autonomous component of consumption function B= marginal propensity to consume (MPC) from
disposable income Yd = disposable income If B= 0.8 and A= 40 And I=50, G=80, X=40, M=30, (Exogenous) Tax (T) =30% WHAT IS EQUIIBRIUM
NATIONAL INCOME? (50 marks) Part A (i) Expenditure Method
– Sales to Consumers total

Macroeconomic Essay

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