Introduction to Macroeconomics

* Goes up during…. * Goes down during ….

* What is a business cycle ? * How are employment and unemployment measured and how do they change over the business cycle? * Define aggregate output and how does it change with the business cycle? * What is the meaning of inflation and deflation and why do we prefer price stability? * How does economic growth determine a countries standard of living? * Why do models play a crucial role in economics?

* Economic Upturns and Downturns * The time of recession to expansion and back to recession

* Employment is the total number of people currently working for pay. * Unemployment is the total number of people who are actively looking for work but aren’t currently employed. * During recession unemployment rates generally rise, during expansion they generally fall.

* The economy’s total production of goods and services for a given time period, usually a year. * Aggregate output falls in a recession, rises during expansion.

* Inflation – rise in the overall price level * Deflation – a fall in the overall price level. * Inflation discourages people from holding cash, Deflation more attractive to hold on to cash. * We want price stability because it keeps the economy stable.

* Economic growth allows for higher wages which allows people to afford more of what they want and “need” thus a rising standard of living.

* Models are important to economics because they allow us to make situations more simple so we can focus on analyzing one change at a time. * Ceteris Paribus – Other things equal assumption.