intro to macroeconomics define macroeconomics and contrast with microeconomics

Download Intro to Macroeconomics Define Macroeconomics and Contrast with Microeconomics

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  • Slide 1
  • Intro to Macroeconomics Define Macroeconomics and Contrast with Microeconomics
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  • U.S. Economic Confidence We often hear about our economy being bad, unhealthy, etc. What do YOU think makes an economy healthy or unhealthy?
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  • Economic Confidence Do YOU think our economy is getting better, or getting worse? Why? How would YOU rate the economic conditions in the U.S.? Excellent, very good, good, bad, very bad, terrible Why?
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  • Do YOU think the United States is in a Recession or not? Why? One year from now, do you think the national economy will be better, the same, or getting worse? Why?
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  • Macroeconomics focuses on the ENTIRE economy (all people and all goods) at once. Some questions to consider - How healthy is the economy? -What is the unemployment rate? -Is the economy growing? -How does inflation affect us?
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  • Lets meet our key players in Macroeconomics: GovernmentFederal Reserve Banks People
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  • There are three major goals of Macroeconomics for an economy to be healthy. Full Employment Stable Prices Economic Growth
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  • The Labor Force (work force) consists of the people the government considers to be employed or unemployed.
  • Slide 9
  • The labor force includes anyone that is (or could be) working In the labor force 16-65 year-olds Are counted as being either EMPLOYED or UNEMPLOYED NOT in the labor force 65 -in jail -full-time students choosing not to work -disabled/hospitalized -housewife/stay-at- home parents -retired
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  • One method the government uses to research unemployment is the labor force phone survey
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  • Full employment (95-96%) is one element of a healthy economy. Why is Full Employment not 100%???
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  • The current unemployment rate is 5.9% (Sept 2014) Is this good or bad? It depends 9.3 Million Unemployed in September What about those discouraged workers? What types of jobs are being added to the work force?
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  • Discouraged workers are NOT counted as being unemployed There were 698,000 discouraged workers in February. Is this a big deal? It depends on how long they are discouraged for!
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  • An UNDEREMPLOYED person works full-time, but receives no healthcare/vacation benefits Then
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  • Does Unemployment mirror poverty? RACEUNEMPLOYMENT RATE POVERTY RATE White5.1% Sept 20149.6% Black11% Sept 201427% Hispanic6.9% Sept 201424% Asian4.3% Sept 201410%
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  • Table Talk: Discuss with a partner What is the ideal rate for full employment? Why cant it be at 100%? Who is in the labor force? Who is not in the labor force? What is the difference between an underemployed worker and a discouraged worker?
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  • The second goal of a healthy economy is stable (unchanging) prices. Inflation: Sustained and continuous increase in the average of all prices over time. Deflation: A decrease in the average of all prices over time. VS.
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  • The ideal rate of price stability is 3.5% INFLATION
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  • Inflation and Purchasing Power Purchasing Power- the ability to purchase goods and services As prices rise, the purchasing power of money declines.
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  • The government uses two methods to measure price changes. 1.Producer Price Index (PPI) Producers are randomly chosen and monitored to analyze price changes 2. Consumer Price Index (CPI) Thousands of consumer goods analyzed over time for changes that occur
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  • The current CPI is 1.6% INFLATION February Is this good or bad? Who gains from prices increasing? -Producers make more money! Who loses from prices increasing? -Consumers pay higher prices!
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  • Slide 23
  • To Review, discuss with a partner What is inflation? Deflation? What is the ideal rate of price stability? How do we measure price stability?
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  • A third goal for a healthy economy is economic growth, which is measured as Gross Domestic Product (GDP). GDP is the value of all goods and services produced inside a countrys borders within one years time.
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  • The ideal rate of economic growth is approximately 3.5% real GDP Why do you think the government pays attention to the amount and value of all things produced in the U.S. in a years time? If more goods/services are produced, what MIGHT this tell us about whats going on in the rest of the economy?
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  • Is Economic growth a good thing? Theory says -More goods/services being produced -More productivity -More jobs (lower unemployment level) But, reality tells us -Wasted resources/goods we dont need? -Happy workers? -Workers replaced by technology?
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  • What happens when GDP decreases? -Recession: negative growth in GDP for 6 to 9 months -Depression: negative growth in GDP for 1 year +
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  • Current Figures@ GDP 2 nd Quarter 2014 increase to 4.6% Seasonally adjusted annual rate (Sept ) Highest growth rate in 2.5 years What might be reasons? I
  • Slide 29
  • There are some PROBLEMS with using GDP to measure the growth of an economy. 1.It doesnt measure illegal activities (babysitting, under the counter payments) 2.It doesnt measure well-being and quality of life (leisure time is not measured, etc.) 3.Negative outcomes are rewarded (ex. Depleting/destroying the environment can lead to an increase in GDP!)
  • Slide 30
  • To review, discuss with a partner What is GDP? What does it mean when GDP increases? Decreases? What are the problems with GDP?
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  • To Review. For the categories below, explain the main idea and compare the optimal rates with their current rates: 1.Employment/unemployment: 2.Inflation: 3.Economic growth:


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