Introduction to Macroeconomics


Intro… Intro… MACRO… Issues Addressed by Macroeconomics Intro…



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INFLATION
Issues Addressed by Macroeconomics

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Issues Addressed by Macroeconomics

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MACRO…
Issues Addressed by Macroeconomics

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An economy which has extensive trading and financial relationships with other national economies is an open economy. An economy with no relationships is a closed economy.

    • International trade and borrowing relationships can transmit business cycles from country to country.
    • Another issue for which international considerations are central is trade imbalances.

    • Trade imbalances (trade surplus and deficit) affect output and employment.
      • Trade surplus: exports exceed imports.
      • Trade deficit: imports exceed exports.
    • The trade balance is affected by the exchange rate

THE INTERNATIONAL ECONOMY
Issues Addressed by Macroeconomics

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A nation’s economic performance depends on:

    • natural and human resources;
    • capital stock;
    • technology
    • economic choices made by citizens;
    • macroeconomic policies of the government.

MACROECONOMIC POLICY
Issues Addressed by Macroeconomics

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Macroeconomic policies:

    • Fiscal policy: government spending and taxation at different government levels.
    • Monetary policy: the central bank’s control of short-term interest rates and the money supply.
    • Budget Deficits

    • The economy is affected when there are large budget deficits: the excess of government spending over tax collection


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