ECN 204 Lecture Notes - Lecture 1: Full Employment, Aggregate Supply, Longrun
Document Summary
Reference: chapter 1 (pages 14-15), chapter 2 (pages 50-51), and chapter 6. *three important variables to assess the economy: gdp, unemployment, and inflation. * economic growth -sustained increases in living standards are historically recent phenomena. *saving and investment are key factors in promoting rising living standards. *expectations, shocks, and sticky prices are responsible for business cycles. *prices have greater flexibility in the lr - use different macroeconomic models for different time horizons. Three important principles in economics: people are rational. The economic problem that all societies must solve: Individual units (household, firm or industry) and their decision making process. So(cid:272)iety"s problem: to allocate scarce resources efficiently in order to obtain the maximum benefit. E(cid:374)trepre(cid:374)eurs" eco(cid:374)o(cid:373)ic fu(cid:374)ctio(cid:374)s: takes initiative: makes business decisions innovates, bears risk. To represent the production possibilities curve we need to make the following assumptions: Fixed resources (scarce resources are in limited supply and it is not possible to increase the amount)
