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FIRST YEAR MACROECONOMICS NOTES

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Full chapter 1-12 macroeconomics UBCO ECON 102 20+ pages full of notes and practice questions + key

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  • May 14, 2023
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  • Rouzbeh gouchani
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ECON 102

,Aaaa01:macoomam)ONOMICS
TEN PRINCIPLES OF ECONOMICS:TUESDAY JAN 10

-> The word economy
c omes from the Green word for "one who manages 4 household."

a scarcity:the limited nature of society resources


· Whateconomics does?The study how
of m anages its
society scarce resources


10 PRINCIPLES
THE -




I
-> Principle #1:people face tradeoffs (There is no such thing as free lunch)


· o f society getting
Efficiency:the property it
the most can from its scarce resources


·Equity:The property
of distributing economic prosperity fairly among the members of society

-> principle #2:The cost ofsomething is you
what give up to get it

·opportunity cost:Whatever you must give up to obtain something

-> principle #3:Rational people think at the margin How people make decisions

·Rational people:Those who systematically and purposefully
do the best they can to acheive their objectives.

·
Marginal changes:small incramental adjusments to a action
plan of


-> principle #4:people respond to incentives

o
incentive:something that induces a person to act


principle #5:Trade
->
can make everyone better off

o Trade allows countries to specialize in whatthey andenjoy
bobest a greater variety of goods and services

·Trade btwn two countries can make each country
b etter off


-> Absolute adv:Asituation in which an individual, business or country can produce more a
of good or service than any other producer w/the same


quantity of resources


-> comparative advi situation in which an individual, business, or country can produce a sors atl ower opportunity cost than another producer


principle #6:Markets
->
are usually
a good way to organize economic activity
where decision making authority
is distributed
distribute for a particular purpose throughout a larger group
-> to


· a llocates resources through the decentralizedecisions of many
economy:An economy that
Market firms and households as they interact
in

markets for goods and services
Ithird party)
o The invisible hand:metaphor for how, in a free market
self interestedindividuals makes an action that benefits in a social andeconomic stance


though it
was unintentional.


principle #7:Governments
->
can sometimes improve market
o utcomes #
* 5,6,7 are now ppl interact A

·Market failure:Asituation which a l eft on its
market own fails to allocate resources efficiently


·Externality:The impact
o f one persons actions on the wellbeing of a bystander/cost or benefit associatedw/ the production on consumption of a


producto r service:affect third parties.
others
for
-> positive:benefito f producing andconsuming a product. II E.g. Education is positive bic people learn anddevelop skills for careers andtheir lives


Negative:costo fproduction
->
or consumption. e.g. pollution -> results from both producing & consuming certain products

·Market power:The ability a
of single economic actor (or small group of actors) to have substantial influence on market prices
in levels of
-> Difference
treatments
Even
* when the outcomes are efficient, there can still be disparities in economic wellbeing

-> principle #8:A country's standard of living depends on its ability to produce goods and services

oproductivity:The quantity of goods and services produced from each hour of a workers time

-> principle #9:prices rise when the Government
prints too much money

oinflation:An increase in the overall iv) of prices in the economy #8,9,10
* as a whole
are now economy


-> principle #20:society
faces a short-run trade off btwn inflation and unemployment WORKS *


· This short run tradeoff plays a key role in the business cycle.

Business cycle:The irregular andlargely unpredictable fluctuations in economic activity, as measured by the production goods
of and


services or the num of pp/employed.

,FouNoR:mTONECONOMIS
Thursday January 12:Thinking like an economist (Chapter 2)


· methodology:what does itm ean to think like an economist
The field of


The scientific method:involves observation, theorey, and more observation -
the main challenge is that experiments in economics.
it is often difficult to conduct


->
ASSUMPtions:
The role of


· They can simplifix
t he complex is deciding which assumptions
world and make it easier to understand 11 the art in specific thinking to make


->
Economic models:economists have used models to learn about the world that are often composed of
most diagrams and ean's

OUR FIRST MODEL:The circular flow diagram

> visual
A model t he
of economy that shows how dollars flow through markets among households and firms




markets for goods L

and services

· Firms sell
>
Goods and serv Goods and serv
· Households buy
sold bought
v
V

F IR M S HOUSEHOLDS

a produce and sell goods and fIOW InPUTS
Of and outPUTS · Buy and consume goods &


services flow of dollars services

· Hire and use factors of · own and sell factors of


production production
-

f aC+OrS Of labour, land, and
Production capi al +




Markets for factors
L
production
of



0 HOUSehOlds sell
>

· Firms buy




-> OUR SECOND MODEL:The production possibilities frontier


>production possibilities frontier:Agraph thatshows the combinations o utputs that
of t he economy can possibly
produce given the available


① of computers prod production andthe available production technology.
factors of




280-
· C
PRODUCTION
so E(0,5000)
3880 point Example a find
->
a point thatrepresents 300comp &
On
X Y
Graph
computers wheat w heat (G). Is this
3500 tons of possible?
1000 - ·D(100, 4000)
* 500 ⑧ · (7 requires
> It 65,000 his in labor. It is impossible
1808


1888 2580
· · ((250,2900)
408
-


B bl) the economy doesnt have the hrz or tech


B(400, 1000) compieson
· E
C 258 2500 1888 - · -> 100 couldworkbut
not
very
300 680 700 1800
(s80,8)
180 4088 a
c ars
Quant of prod D A efficient
->
100
·
o 250300 400 508

E ⑧ 5000

-
F

-> whatwe know:Points A-E 11 points under
are possible and efficient are possible but not efficient
PPF are
as they underutilized (e.g. workers unemployed,

factors idle)//points above the PPFCG) is not possible.

PIF AND OPPORTUNITYCOST
THE



>The opportunity cost
o fan item is m ust
what be given up to obtain thati tem

·
moving
a long involves
PPF resources (e.g. labor) from
shifting the production of one good to the other


· society faces a tradeoff:Getting
more of one good requires sacrificing
some t he other
of



600
0
0 The slope of
t he PPF
tells on the opportunity
cost
ofone goodin terms oft heother the rise over run can calculate this, byone unit


5080 7
-1000 10
= -> Opportunity o fa comp is
cost w heat
10 tons of
188
V

4888 ⑲
-> keep note that with economic growth (improvement in tech), the pptg rowth can shift outwards


3088 -> can be
The shape of the PDF a straight line or bow shaped depending on the opportunity as the economy shifts
c ost

·
2808 >IfOP cost remains constantP PF
is a straight line


1808
*
· If OP cost
of a good rises produces
as the economy more of
the good, PPFis bow-shaped


·300
400 0 s00( 180288

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