ECON 2000 Study Guide - Midterm Guide: Gross Domestic Product, Gdp Deflator, Imputed Rent
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18 Mar 2014
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Macroeconomics is the study of the economy as a whole. 3 variables: real gdp measures the total income of everyone in the economy (adjusted for the level of prices) Periods when it"s falling: mild= recession, severe= depression. Inflation rate measures how quickly prices are rising. In recent history, inflation has been the norm: unemployment rate measures the fraction of the labour force that is out of work. Recessions & depressions are usually associated with high levels of unemployment. When total spending is high, unemployment decreases and inflation increases. Unemployment increases when inflation decreases b/c of government policy that decreases total spending. Monetary policy: changes in the growth of the nation"s money supply. Models simplify the relationship between endogenous variables (those that the model tries to explain) and exogenous variables (those that the model takes as given: no universally correct model. A function shows how one variable depends on a set of other variables.