Economics is the study of choice. It is about people and how they choose to use limited resource in an effort to satisfy unlimited wants. There are two important components to this definition: limited resources and unlimited wants .Together they form what is now as the problem of scarcity which is basic most of all economic problems. If we are stop and think for a moment, we can see why scarcity are such as problem there are not enough resources on this planet for people to get everything they want. As result choice must be made.

1. Growth and instability
Introduction to economic
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2. Economic Growth
An increase in real GDP occurring over some
time period.
An increase in real GDP per capita occurring
over some time period.
Economic growth is calculated as a percentage
rate of growth per quarter (3 month )/per yr.

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3. CONTINUE......
• RATE OF ECONOMICS GROWTH
REG = Last GDP – Initial GDP *100
Initial GDP
• In real GDP...
• REG : REAL GDP
Population size
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4. GROWTH AS GOAL
• The expansion of total output relative to
population results in rising real wages and
income.
• Rising real wages and income provide richer
opportunities to individuals and families .
• Growth lessens(reduce) the burden(heavy) of
scarcity .
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5. Rule of 70
• Quantitative grasp of the effect of economic
growth.
• It tells us that we can find the number of yrs it
will take for some measure to double.
• Approximate # : 70
Of yrs require Annual % rate of growth
To double
The real GDP
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6. Main sources of growth
• Society can increase its real output and
income in two ways
By increasing its inputs of resources
And by increasing the productivity of those
inputs.
Productivity : measured broadly as real output
per unit of input
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7. The Business cycle
• Alternating rises and declines in the level of
economic activity .
Peak : business activity reach temporary mxm
full employment ,(price rise during
this phase ).
Recession : decline total
output/income/employment .
Trough : bottom of recession .
Expansion : recovery of economy(temporary rise
income, full employment and rise production
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8. Causation (Business Cycle)
• Innovation such as the railroad , the
automobile, synthetic fibers ETC.
• Productivity : the expand of productivity
causes economy booming while when
productivity falls economy recedes.
• Monetary phenomena : when gvnt creats
much money inflationary boom occurs .
Immediate cause of cyclical change is change
in level of spending .
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9. Cyclical impact (durable & non-
durable)
Capital goods i.e commercial building , heavy
equipment and farm implements are durable
goods.
It can postpone the purchasing of capital
goods
Consumer goods i.e service industry food
industry are non-durable goods
Can’t postpone and they insulted most severe
effects of recession .
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10. Un employment
• Total number of able men and women
of working age seeking paid work
• Twin problems that further inflame the BC are
unemployment & inflation .
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11. Measurement of unemployment
• Unemployment rate : unemployed *100
• labour force
• Unemployment excluding :
• part-time employment: either their choice or
can’t find suitable work
• Discouraged workers : an employed individual
who isn’t actively seeking regarded as ‘Not in
the labour force ‘
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12. Types of unemployment
• Frictional unemployment :for workers who are
either searching for jobs or waiting to take jobs in
the near future.
• Structural unemployment : unemployment
results because the composition of the labor
force doesn’t respond immediately or completely
to the structure of the job opportunities .
• Cyclical unemployment :(unemployment caused
by fluctuations in the level of economic activity
inherent in trade cycles .
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13. Full employment
• When it’s experiencing only frictional and
structural unemployment .
• Natural unemployment rate : occurs when the
number of job seekers equals the number of
job vacancies.
Economy cost of unemployment :
 GDP Gap and Okun’s law- the basic economic
cost of unemployment is forgone.
 GDP gap = actual GDP – Potential GDP
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14. Inflation
• A rise in the general level of prices
• When inflation occur each dollar of income
will buy fewer goods and services.
• Inflation reduce the purchasing power
• Inflation doesn’t mean that all price are rising
even during periods of rapid inflation, some
price may be relatively constant while other
are falling.
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15. Measurement of inflation
• Consumer Price Index (CPI):A measure of price
changes in consumer goods and services such as
gasoline, food, clothing and automobiles.
• Price Production Index (PPI): A family of indexes that
measure the average change over time in selling prices
by domestic producers of goods and services.
• Wholesalers’ Price Index (WPI):represents the price of
goods at a wholesale stage i.e. goods that are sold in
bulk and traded between organizations instead of
consumers.
• GDP inflator (C+I+G+X-M)
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16. Types of inflation
• Demand pull inflation: occurs when demand for a
good or service increases so much that it outstrips
supply.
• Cost push inflation : When there is a decrease in the
aggregate supply of goods and services stemming from
an increase in the cost of production.
Cost-push inflation basically means that prices
have been "pushed up" by increases in costs of any of
the four factors of production (labor, capital, land
or entrepreneurship).
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17. Redistribution effects of inflation
• Inflation hurts some pple , leaves others un
effected and actually help still others.
• Nominal income: # of $ received as wages ,
rent ,interest or profit.
• Real income : measure of amount of goods
and services that nominal income can buy
(purchasing power of nominal income)
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18. Who is hurt by inflation
• Fixed-income receivers
• Savers
• Creditors
Who is un affected or helped by inflation
Flexible income receivers
Debtors
Nominal interest : real interest rate +
rate inflation premium
(the expected rate of inflation)
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19. Hyperinflation
• Extraordinary rapid inflation.
• Can have devastating impact on real output
and employment.
• Business owners don’t know what to charge
their product.
• Consumers don’t know what to pay .
• Examples ; Germany after 1st world war ,
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