1. MACROECONOMIC QUESTIONS
LESSON
ONE

2. WHY DOES OUTPUT FLUCTUATE?

3. Chapter 8 Figure 8.3(a)

4. OUTPUT HAS FLUCTUATED FROM 1982 THRU 2002
AS OUTPUT RISES AND FALLS, THE AMOUNT OF GOODS AND SERVICES PEOPLE HAVE, INCREASES AND DECREASES
THE STANDARD OF LIVING RISES OR FALLS – PEOPLE ARE BETTER OFF OR WORSE OFF
CHANGES IN OUTPUT CAUSE CHANGES IN EMPLOYMENT and CHANGES IN INCOME

5. #1 MACROECONOMICS LOOKS AT
THE DETERMINANTS OF OUTPUT FLUCTUATION AND HOW THESE FACTORS CAN BE CONTROLLED.

6. Causation
Most economists agree on changes in the total level of spending which will affect output, employment and income
Some see
Major innovations
Changes in productivity
Changes in money supply

7. FROM MICRO WE KNOW
POSITIVE CHANGES IN THE DETERMINANTS OF DEMAND OR THE DETERMINANTS OF SUPPLY –
WILL INCREASE THE OUTPUT: QUANTITY SUPPLIED OR THE SUPPLY RESPECTFULLY
FOR A PARTICULAR GOOD

8. NEGATIVE CHANGES IN THE DETERMINANTS OF DEMAND OR THE DETERMINANTS OF SUPPLY –
WILL DECREASE THE OUTPUT: QUANTITY SUPPLIED OR THE SUPPLY RESPECTFULLY
FOR A PARTICULAR GOOD

9. WHAT DETERMINES ECONOMIC GROWTH?

10. GROWTH DEPENDS ON THE NUMBER OF WORKERS(LABOR)
EDUCATION & SKILLS OF WORKERS
THE LEVEL OF TECHNOLOGY
THE AMOUNT OF MACHINERY AND TECHNOLOGY LABOR HAS TO WORK WITH (CAPITAL)
THE BASIC MATERIAL RESOURCES AVAILABLE (LAND)

11. #2 MACROECONOMICS ADDRESSES
HOW SOCIETY CAN ENCOURAGE THE DEVELOPMENT OF THESE FACTORS, WHICH DETERMINE ECONOMIC GROWTH

12. WHY DO WE HAVE UNEMPLOYMENT, AND WHY IS IT A PROBLEM?

13. THE UNEMPLOYED ARE
PEOPLE ACTIVELY SEEKING JOBS OR TEMPORARILY LAID OFF BUT
WHY WON’T THESE PEOPLE WORK FOR A LOWER WAGE AND THUS GET A JOB?

14. SOME DO NOT HAVE THE SKILLS FIRMS REQUIRE TO TAKE LOWER PAYING JOBS
SOME WITH SKILLS ARE WILLING TO WAIT FOR THE JOB AT THE MARKET RATE FOR THEIR SKILL
THE JOBS ARE NOT AVAILABLE BECAUSE DEMAND FOR THE GOOD IS DOWN

15. UNEMPLOYMENT IMPOSES A PROBLEM FOR THE UNEMPLOYED
A SOCIAL COST ON SOCIETY
A PSYCHOLOGICAL COST ON SOCIETY

16. WHY DO WE HAVE INFLATION, AND WHY IS INFLATION A PROBLEM?

17. There’s too much money chasing too few goods RESOURCES ARE LIMITED
AS OUTPUT INCREASES, THE INCREASED DEMAND FOR RESOURCES WILL CAUSE THE PRICE TO RISE

18. INFLATION IS AN INCEASE IN THE AVERAGE PRICE LEVEL OVER TIME
ONE OF THE PROBLEMS IS UNPREDICTABILITY
IF WE KNEW WHAT INFLATION WAS GOING TO BE, WE COULD BUILD IN ADJUSTMENTS FOR ITS AFFECTS

19. #3 MACROECONOMICS STUDIES
THE CAUSES OF INFLATION
THE MISALLOCATION OF RESOURCES THAT RESULT FROM INFLATION
METHODS FOR CONTROLLING INFLATION

20. WHICH GOVERNMENT POLICY AFFECTS OUTPUT, GROWTH, UNEMPLOYMENT AND INFLATION?

21. FISCAL POLICY GOV’T DECISIONS ABOUT EXPENDITURES AND TAXATION
THESE DECISIONS AFFECT THE LEVEL OF
GROWTH
OUTPUT
UNEMPLOYMENT
INFLATION

22. HOW DO CHANGES IN THE AMOUNT OF MONEY IN THE ECONOMY AFFECT OUTPUT, GROWTH, UNEMPLOYMENT AND INFLATION?

23. THE AMOUNT OF MONEY IN AN ECONOMIC SYSTEM
DETERMINS TO A GREAT EXTENT THE AMOUNT OR LEVEL OF ECONOMIC ACTIVITY
THE AMOUNT OF MONEY IN THE ECONOMY (MONEY SUPPLY) AND THE AMOUNT SOCIETY WANTS TO USE DETERMINES THE INTEREST RATE

24. THE FEDERAL RESERVE SYSTEM IN THE UNITED STATES
DECISIONS OF THE CENTRAL BANK DETERMINE THE AMOUNT OF MONEY IN THE ECONOMY
MONETARY POLICY
IS THE SUM OF FED DECISIONS ABOUT
MONEY
INTEREST RATES

25. HOW DO DOMESTIC ECONOMIC ACTIVITIES AFFECT OTHER COUNTRIES AND OUR TRADE?

26. A NATION’S ECONOMY DOES NOT OPERATE INDEPENDENT OF OTHER COUNTRIES’ ECONOMIES
TRADE POLICY
IMPORTS & EXPORTS
TARIFFS AND QUOTAS
FREE TRADE &/OR FAIR TRADE
TRADE ZONES
TRADE SANCTIONS

27. #4 OUR TRADE POLICY, MONETARY POLICY & FISCAL POLICY
ALL AFFECT THE IMPACT OF OUR DOMESTIC ECONOMY ON THE ECONOMIES OF OTHER NATIONS