1、Questions How much richer are we than our parents?How much richer will our children be than our grandparents were?Will changing jobs be easy or hard in five years?How many of us will have jobs in five years?1Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Questions Will the busin
2、esses we work for vanish as demand for the products they make dries up?Will inflation make us poor by destroying our savings or rich by eliminating our debts?2Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Macroeconomics.is the subdiscipline of economics that tries to answer the
3、se six questions is the branch of economics related to the economy as a whole3Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Macroeconomists.try to figure out why overall economic activity rises and falls try to understand what determines the level and rate of change of the pric
4、e level study other variables that play a major role in determining the overall levels of production,income,employment,and prices4Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Why Macroeconomics Matters Cultural Literacyability to follow and participate in public debates and di
5、scussionsunderstanding of news reports on changes in the economy5Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Figure 1.1-The Daily Flow of Economic News6Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Why Macroeconomics Matters Self-Interesteffects of macro
6、economy on our daily livesunderstanding of changing opportunities as the economy fluctuates7Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Why Macroeconomics Matters Civic Responsibilitymore informed votingmore responsible macroeconomic policy8Copyright 2002 by The McGraw-Hill C
7、ompanies,Inc.All rights reserved.Macroeconomic Policy Growth Policypolicies to accelerate or decelerate long-run economic growthmost important policies for the long-run9Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Figure 1.2-Long-Run Economic Growth:Sweden and Argentina,1900-2
8、00010Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Macroeconomic Policy Stabilization Policypolicies to smooth out the business cycle by diminishing the depth of recessions and depressionsbusiness cycles are fluctuations in production and employment booms or expansions occur wh
9、en production grows and unemployment falls recessions or depressions occur when production falls and unemployment rises11Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Figure 1.3-The American Business Cycle:Fluctuations in Total Production Relative to the Long-Run Growth Trend12
10、Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Macroeconomics versus Microeconomics Macroeconomistsexamine the economy as a wholefocus on the feedback from one component of the economy to anotherstudy the total level of production and employmentbelieve that imbalances between su
11、pply and demand may be resolved by changes in quantities rather than prices13Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Macroeconomics versus Microeconomics Microeconomistsstudy the markets for single commodities and the behavior of individual households and firmsfocus on ho
12、w competitive markets allocate resources to create consumer and producer surplusassume that imbalances between demand and supply are resolved by changes in prices14Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Economic Statistics and Economic Activity Economic activity is the p
13、attern of transactions in which things of real,useful value are created,transformed,and exchanged.National Income and Product Accounts(NIPA)reported by the U.S.Commerce Departments Bureau of Economic Analysis15Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Table 1.2-The Flow of
14、Economic Data,2000-200116Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Six Key Economic Variables Real Gross Domestic Product(GDP)is corrected for changes in the price level(real)includes the replacement of worn-out and obsolete equipment and structures as well as new investmen
15、t(gross)counts economic activity that happens in the United States(domestic)represents the production of final goods and services(product)17Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Six Key Economic Variables Real Gross Domestic Productoften divided by the number of workers
16、 in the economymeasures how well the economy produces goods and services that people find usefuldoes not indicate the relative distribution of the nations economic productis an imperfect measure of economic well-being18Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Figure 1.4-Of
17、ficially Measured Real GDP per Worker in the United States19Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Six Key Economic Variables The Unemployment Rateto be unemployed,a person must want to work and be actively looking for a job(but have not yet found one)the labor force con
18、sists of those who are employed and those who are unemployedthe unemployment rate is equal to the number of unemployed people divided by the labor force20Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Figure 1.5-The U.S.Unemployment Rate21Copyright 2002 by The McGraw-Hill Compan
19、ies,Inc.All rights reserved.Six Key Economic Variables The Unemployment Ratefrictional unemployment occurs because workers and firms spend time searching for the best matchcyclical unemployment occurs during recessions and depressionsthe unemployment rate is the best indicator of how well the econom
20、y is doing relative to its productive potential22Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Six Key Economic Variables The Inflation Rateis a measure of how fast the overall price level is risinghyperinflation occurs when the price level is rising by more than 20%per month23
21、Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Figure 1.6-Inflation in the United States24Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Six Key Economic Variables The Interest Rateis important because it governs the redistribution of purchasing power across
22、 timethe many different interest rates in the economy vary by duration and degree of risk often move up and down together25Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Six Key Economic Variables The Interest Ratenominal interest rate is the interest rate in terms of money does
23、 not take into account the effects of inflationreal interest rate is the interest rate in terms of goods and services does take into account the effects of inflation26Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Figure 1.7-U.S.Real Interest Rates,1960-199927Copyright 2002 by T
24、he McGraw-Hill Companies,Inc.All rights reserved.Six Key Economic Variables The Stock Marketis heard about most often(every day)is an index of expectations for the future a high value means that investors expect economic growth to be rapid,profits to be high,and unemployment to be low28Copyright 200
25、2 by The McGraw-Hill Companies,Inc.All rights reserved.Figure 1.8-Real Stock Index Prices29Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Six Key Economic Variables The Exchange Rategoverns the terms on which international trade and investment take placenominal exchange rate is
26、the rate at which monies of different countries can be exchanged for one anotherreal exchange rate is the rate at which the goods and services produced in different countries can be exchanged for one another30Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Six Key Economic Variab
27、les The Exchange Rateif domestic currency appreciates its value in terms of other currencies increases foreign-produced goods are relatively cheap for domestic buyers imports are likely to be high domestic-made goods are relatively expensive for foreigners exports are likely to be low31Copyright 200
28、2 by The McGraw-Hill Companies,Inc.All rights reserved.Six Key Economic Variables The Exchange Rateif domestic currency depreciates its value in terms of other currencies declines domestic-produced goods are relatively cheap for foreign buyers exports are likely to be high foreign-made goods are rel
29、atively expensive for domestic buyers imports are likely to be low32Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Figure 1.9-The U.S.Real Exchange Rate:The Dollar against a Composite Indexof Foreign Currencies33Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved
30、.The CurrentMacroeconomic Situation The United States-2001economic growth has slowed to a very weak pace forecast for 2001 is that real GDP will grow by no more than 1.8%interest rates lowered through Fed policy due to lags,effects of lower interest rates will not be felt until end of 2001(at the ea
31、rliest)inflation continues to be low34Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.The CurrentMacroeconomic Situation The United States-recent pastfrom early 1990s to 2000,there was an economic boomunemployment fell during the 1990s lowest unemployment rate in two decades(4%)r
32、eal wages increased only slightly helped to keep inflation low35Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.The CurrentMacroeconomic Situation Europeeconomic growth in countries belonging to the European Monetary Union slowinglow inflation less than 2%per yearrelatively high
33、unemployment near 10%36Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.The CurrentMacroeconomic Situation Japanslow growth rate real GDP grew only 1.8%in 2000 real GDP is expected to grow only by 1.4%in 2001deflation is occurring the overall price level fell by 0.7%in 200037Copyr
34、ight 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Chapter Summary Macroeconomics is the study of the overall economy.There are three key reasons to study macroeconomicsto gain cultural literacyto understand how economic trends affect you personallyto exercise your responsibility as a vo
35、ter and citizen38Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.Chapter Summary The key indicators in macroeconomics arereal GDPthe unemployment ratethe inflation ratethe interest ratethe level of the stock marketthe exchange rate39Copyright 2002 by The McGraw-Hill Companies,Inc.All rights reserved.
