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Macroeconomics: Understanding Economic Growth, Business Cycles, and Sustainability, Lecture notes of Macroeconomics

Academy of Vocal Arts Macroeconomics

An introduction to macroeconomics, focusing on economic growth, business cycles, and sustainability. Key topics include the role of governments in managing economic fluctuations, the differences between economic and living standards growth, and the importance of social and ecological sustainability. Students will learn about key concepts such as aggregate demand, Keynesian and Monetarist economics, and the impact of business cycles on unemployment and inflation.

What you will learn

How does the global economy impact macroeconomic trends?
Why is sustainability important in macroeconomics?
What is the difference between economic growth and living standards growth?

What are the key differences between Keynesian and Monetarist economics?
How do governments intervene in the economy to manage business cycles?

Typology: Lecture notes

2021/2022

Uploaded on 09/12/2022

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Chapter 19 – Introduction to Macroeconomics 1

CHAPTER 19

INTRODUCTION TO MACROECONOMICS

Principles of Economics in Context (Goodwin, et al.), 2nd Edition

Chapter Overview

This chapter introduces you to the basic topics of macroeconomics, and presents the main

macroeconomic goals: 1) living standards growth, 2) stability and security, and 3)

financial, social, and ecological sustainability. The chapter highlights that the goal of

living standards growth may or may not contribute to the general goal of human well-

being. The chapter also provides a brief overview of the major historical developments

in macroeconomics, from classical economics, to Keynesian and monetarist economics,

and finally to the challenges in the 21st century.

Chapter Objectives

After reading and reviewing this chapter, you should be able to:

1. Distinguish the concerns of macroeconomics from microeconomics.

2. Discuss the relationship between economics and well-being.

3. Identify and describe the three main macroeconomic goals.

4. Appreciate the usefulness and limitations of the theory of supply and demand in the

real world, and its relevance to macroeconomics.

5. Identify and distinguish the major historical traditions of economic thought.

Key Terms

macroeconomics

recession

unemployment

inflation

macroeconomy

global economy

economic actor (agent)

well-being

living standards growth

economic growth

economic development

labor productivity

business cycle

technological progress

conscious

consumption

restorative development

precautionary principle

contextual economics

quantity adjustments

menu costs

speculation

speculative bubble

classical economics

division of labor

specialization

capitalists

laissez-faire economy

Say’s Law

aggregate demand

Keynesian economics

monetarism

Partial preview of the text

Download Macroeconomics: Understanding Economic Growth, Business Cycles, and Sustainability and more Lecture notes Macroeconomics in PDF only on Docsity!

CHAPTER 19 INTRODUCTION TO MACROECONOMICS

Principles of Economics in Context (Goodwin, et al.), 2 nd^ Edition Chapter Overview This chapter introduces you to the basic topics of macroeconomics, and presents the main macroeconomic goals: 1) living standards growth, 2) stability and security, and 3) financial, social, and ecological sustainability. The chapter highlights that the goal of living standards growth may or may not contribute to the general goal of human well- being. The chapter also provides a brief overview of the major historical developments in macroeconomics, from classical economics, to Keynesian and monetarist economics, and finally to the challenges in the 2 1 st century. Chapter Objectives After reading and reviewing this chapter, you should be able to:

Distinguish the concerns of macroeconomics from microeconomics.
Discuss the relationship between economics and well-being.
Identify and describe the three main macroeconomic goals.
Appreciate the usefulness and limitations of the theory of supply and demand in the real world, and its relevance to macroeconomics.
Identify and distinguish the major historical traditions of economic thought. Key Terms macroeconomics recession unemployment inflation macroeconomy global economy economic actor (agent) well-being living standards growth economic growth economic development labor productivity business cycle technological progress conscious consumption restorative development precautionary principle contextual economics quantity adjustments menu costs speculation speculative bubble classical economics division of labor specialization capitalists laissez-faire economy Say’s Law aggregate demand Keynesian economics monetarism

Active Review Fill in the Blank

While the study of economic activities of individuals, households, and business at the sub-national level is the concern of the national and global level is the concern of , the study of economic activities of .
(^) The three main macroeconomic goals identified in this chapter are , , and.
The process of moving from a situation of poverty and deprivation to a situation of increased production and plenty is referred to as.
The increase in the level of production in a country or region is called growth while improvements in diet, housing, medical attention, education, working conditions, access to care, transportation, communication, entertainment, etc. is called growth.
The fluctuations in the level of production, including recessions on the one hand and booms on the other hand, is called.
The goal that recognizes a serious responsibility to future generations is the goal of .
When people rush to buy an asset because they expect the price to continue to rise and thereby expect to profit from the asset’s appreciation in value, this can cause the emergence of a _____________.
The school of economics that is associated with the idea that individual self-interest is a positive force and that governments should let markets function without interference is called.
The economist who argued that the market mechanism can fail by leaving insufficient demand and that governments could intervene by increasing aggregate demand was named.
The school of thought that argued that governments should aim for steadiness in the money supply rather than play an active role is called. True or False
Economic phenomena such as the rate of unemployment and inflation are studied in microeconomics.

What two developments are demanding new ways of looking at the economic world in the 21 st century? What kinds of sustainability questions do they raise? Self Test
With what kinds of topics does macroeconomics concern itself? a. Economic activities of individual firms, households, and other organizations b. Forces of supply and demand in a particular market c. Consumer behavior and firms output decisions d. The labor market, wages, and hiring decisions e. Aggregate economic phenomena like the rate of unemployment and inflation
Which of the following is one of the three macroeconomic goals discussed in the text? a. Growth in the size of corporations b. Living standards growth c. Growth in trade and globalization d. Technological innovation e. None of the above
Which of the following is not an example of one of the three macroeconomic goals discussed in the text? a. Preventing the economy from experiencing too much unemployment. b. Preventing the economy from experiencing too much inflation. c. Keeping living standards high enough for people to live decent, meaningful lives. d. Making sure the economy is sustainable into the future. e. Providing the best environment for corporations.
What explains the fact that the value of global production grew by a factor of 6. between 1960 and 201 5 , while the value of global production per capita has grown by a factor of 2. 8? a. Global population also grew, though not as fast as total production. b. The increase in global production has occurred simultaneously with a decline in global population. c. The increase in global production has occurred simultaneously with growth in the global workforce. d. The increase in global production has occurred simultaneously with decline in the global workforce. e. The growth in the global population has been greater than the growth in global production.

How is labor productivity defined? a. The level of output produced per capita. b. The level of output produced per worker (or worker-hour). c. The level of output produced as a share of GDP. d. The level of human capital in the workforce. e. The level of output produced per capital input.
What problems are we most likely to see at which stage of the business cycle? a. High inflation during recessions. b. High unemployment during booms. c. Low inflation during booms. d. High unemployment during recessions. e. Both high unemployment and high inflation during booms.
Why is the instability of the business cycle a problem? a. During recessions there is high unemployment, and resources are underutilized. b. High unemployment is associated with individual and social stress, such as suicide, domestic violence, illness and crime. c. During booms, high inflation can erode purchasing power, savings and pensions. d. Unpredictable fluctuations in rates of inflation, interest rates, and foreign exchange rates make it difficult for individuals and organizations to plan for the future. e. All of the above.
Which of the following does not describe the economic events of the Great Depression? a. Stock markets plummeted in the 1929 stock market crash. b. A lack of confidence in banks led to runs on the banks and bank failures. c. Production dropped by about 30% between 1929 and 1933. d. The unemployment rate peaked to 25% at the height of the depression. e. The economic crises was short lived and markets quickly adjusted back to equilibrium.
Which of the following are the three dimensions of sustainability as discussed in the text? a. Ecological, financial, and social sustainability b. Ecological, financial, and political sustainability c. Ecological, financial, and cultural sustainability d. Ecological, technological, and human sustainability e. Ecological, technological, and social sustainability

Which of the following is not one of the ideas of Keynesian economics? a. An economy can experience insufficient demand b. Governments can step in to help boost aggregate demand c. Changes in government spending and taxation can help keep employment rates up d. Governments should focus on keeping the money supply steady e. Lowering interest rates alone may be insufficient if investors lack the confidence to engage in spending.
Which of the following was one of Keynes’s suggested solutions, and was not generally adopted in the U.S. in the post-war era? a. Changes in government spending to stabilize the business cycle. b. The role of government in keeping interest rates low to stimulate investment. c. The involvement of government in controlling of the level and direction of national investment. d. The role of government in purchasing goods and services to stimulate aggregate demand. e. The role of government in manipulating taxation to stimulate aggregate demand.
Which of the following contributed to rising unemployment and increased inflation in the 1970s? a. Declining profits of U.S. firms due to increased competition from other industrialized nations b. Decline in wages c. High expenditures by the government d. (a) and (c) only e. (a) and (b) only
Which of the following is not one of the ideas associated with monetarist economics? a. Free-market economy drives out inefficiencies in the economic system. b. A smaller government is good for the economy as it encourages private initiatives. c. Efforts by the government to push unemployment too low could lead to inflation. d. Governments should keep the money supply stable. e. There are times when the government should take an active role by changing its spending policies.
According to the text, which of the following issues, not previously a major concern of macroeconomics, must macroeconomics confront in the 2 1 st^ century? a. The ecological sustainability of our reliance on fossil-fuel based economic growth b. The social sustainability of the traditional model of economic development with the persistence of global poverty. c. The problem of business cycle fluctuations in unemployment and inflation.

d. (a) and (b) only e. None of the above.

Which of the following characterizes the environmental challenges of the 2 1 st century? a. The impressive growth of global GDP in the 2 0 th century was accompanied by a dramatic increase in CO 2 emissions. b. There are limits to the capacity of the environment to absorb the by-products of economic growth. c. It is becoming more difficult for technological advancements to keep problems of resource depletion and pollution at bay. d. If continued at the current rate, the emissions of CO 2 and other greenhouse gasses may lead to dramatic disturbances to our environment and economy. e. All of the above.

intervene, especially in boosting aggregate demand during downturns.

Monetarist economics believes that the government should pursue a steady money supply and not intervene in the market actively over the course of the business cycle.
Since the 1980s, there have been periods of long economic expansions, through the rate of growth during these expansions have been lower than that in previous decades. Also, the occurrence of large asset bubbles, driven by speculation, has become more common, real wages have remained stagnant, inequality has increased, and big corporations have grown and more powerful.
Two developments that are demanding new ways of looking at the economic world in the 21st^ century are 1) the environmental impact of long-term fossil-fuel based economic growth, particularly with the dramatic rise in CO 2 emissions; and 2) the persistence of substantial global poverty and its threat to social sustainability. Answers to Self Test Questions
e
b
e
a
b
d
e
e
a
c
b
c
e
e
d
c
d
e
d
e

Macroeconomics: Understanding Economic Growth, Business Cycles, and Sustainability, Lecture notes of Macroeconomics

Related documents

Partial preview of the text

Download Macroeconomics: Understanding Economic Growth, Business Cycles, and Sustainability and more Lecture notes Macroeconomics in PDF only on Docsity!

CHAPTER 19

INTRODUCTION TO MACROECONOMICS