ECON 4002 Note 1
Lecture Note # 1
Measuring the Key Economic Indicators
Microeconomics: Looks at how individual economic agents (i.e. consumers/households and producers/firms) make their day-to-day decisions.
Macroeconomics: Looks at the overall behavior of the entire economy of a country. So in addition to households and firms, it also looks at the government and frequently at the rest of the world.
The four target variables that all macroeconomists are concerned about are:
(1) Gross Domestic Product (GDP): This looks at how much goods and services are being produced in the country (or how much is everyone’s income taken together). They try to maximize this.
(2) Unemployment: This has to do with how many people have jobs and how many don’t. They try to minimize this.
(3) Inflation: This looks at how the prices of goods and services are changing. They try to minimize this.
(4) Economic Growth: This looks at the rate at which GDP is going up or down. They try to maximize this.
Gross Domestic Product (GDP)
Goods: Tangible things firms produce and consumers buy. An example is a Philly cheese steak.
Services: Intangible activities firms provide and consumers buy. An example is a haircut. Definition of GDP: It is the value of new final goods and services intended for the marketplace produced within a country in a given period of time.
(Note: We will concentrate only on gross domestic product in this class. The book also talks about the related concepts of gross national product, net national product, national income, personal income, etc. You do not need to study them.)
Keywords in the definition:
Value: This refers to the market price.
New: Only newly produced goods and services are counted as part of the GDP.
So if you buy a second hand 2010 Toyota Camry, then that will not be counted as a part of the GDP for the year 2014. The reason is that this car had already been counted once in the GDP for the year 2010 and to count your purchase again
Measuring the Key Economic Indicators
Microeconomics: Looks at how individual economic agents (i.e. consumers/households and producers/firms) make their day-to-day decisions.
Macroeconomics: Looks at the overall behavior of the entire economy of a country. So in addition to households and firms, it also looks at the government and frequently at the rest of the world.
The four target variables that all macroeconomists are concerned about are:
(1) Gross Domestic Product (GDP): This looks at how much goods and services are being produced in the country (or how much is everyone’s income taken together). They try to maximize this.
(2) Unemployment: This has to do with how many people have jobs and how many don’t. They try to minimize this.
(3) Inflation: This looks at how the prices of goods and services are changing. They try to minimize this.
(4) Economic Growth: This looks at the rate at which GDP is going up or down. They try to maximize this.
Gross Domestic Product (GDP)
Goods: Tangible things firms produce and consumers buy. An example is a Philly cheese steak.
Services: Intangible activities firms provide and consumers buy. An example is a haircut. Definition of GDP: It is the value of new final goods and services intended for the marketplace produced within a country in a given period of time.
(Note: We will concentrate only on gross domestic product in this class. The book also talks about the related concepts of gross national product, net national product, national income, personal income, etc. You do not need to study them.)
Keywords in the definition:
Value: This refers to the market price.
New: Only newly produced goods and services are counted as part of the GDP.
So if you buy a second hand 2010 Toyota Camry, then that will not be counted as a part of the GDP for the year 2014. The reason is that this car had already been counted once in the GDP for the year 2010 and to count your purchase again