Lecture 2 (1-26) Flashcards
If both curves move in the same direction?
Quantity always moves in the same direction, and the demand curve will shift
If both curves move in opposite directions
Price will change, and the supply curve will shift
If both curves stay the same
Supply and demand are moving by the same amount in opposite directions
what is used to measure economic growth
GDP
Micro vs Macro
Micro is on the individual level and macro is the greater total or government level.
Circular flow diagram
A simple model of the economy that illustrates how households and businesses are linked
Interdependence principle
Your best choice depends on multiple other factors
Circular flow diagram ex
Goods
(households)—->Inputs provided—->(markets for input)—-> inputs bought—–> (Buisnesses) ——> Output sold —-> (Markets for output)—–> Output bought—–> (Households
Money
(Markets for input)—-> Income received—-> (households) —–> spending on output—-> (markets for output) —-> market value output —-> (Buisnesses) —–> wages + profit—-> (markets for input)
GDP
The market value of all final goods and services produced within a country in a given year
Market Value= Whatever the good or service is selling for
Of all= Includes all goods and services
Final goods and services= Count only final goods and services, omitting intermediate goods
Produced= omit resale of already purchased goods
within a country= includes all goods produced within the US
In a given year= add up the flow of output over a year
Three perspectives of GDP
Total spending
Total output
Total income
GDP equation
Y= C + I + G + NX
Y= GDP
C= Consumption
I= Investment
G= Gov purchases
NX= Net exports
Consumption
Household spending on final goods and services
Investment
Spending on new capital that increases the capital’s productive capacity
Gov. Purchases
Gov purchases of goods and services
Net Exports
Exports - spending on imports
