Microeconomics
croChapter 1: A tour of the world
1.1 THE EUROPEAN UNION
When macroeconomists study an economy, they first look at three variables: * Output – the level of production of the economy as a whole – and its rate of growth. * The unemployment rate – the proportion of workers in the economy who are not employed and are looking for a job. * The inflation rate – the rate at which the average price of the goods in the economy is increasing over time.
The economic performance of European countries after the turn of the millennium has not been as good as it was in the 1990s:
• Average annual output growth reflected a significant slowdown in all of the largest European economies since 2008, and a recession in 2009.
• Low output growth was accompanied by persistently high unemployment.
• Average annual inflation was 2.2% in the EU and 2% in the euro area.
Three issues dominate the agenda of European macroeconomists:
• High unemployment
• Growth of income per person
• Common currency
How can European Unemployment be Reduced?
There is still disagreement about the causes of high European unemployment: * Politicians often blame macroeconomic policy. * Most economists believe, however, that the source of the problem is labour market institutions. * Some economists point to what they call labour market rigidities. * Other economists point to the fact that unemployment is not high everywhere in Europe.
What will The Euro do For Europe? * Supporters of the Euro point first to its enormous symbolic importance. * Others worry that the symbolism of the euro may come with some economic costs. * Equal Interest rates across the Euro Area
1.2 THE UNITED STATES
From an economic point of view, there is no question that the 1990s were amongst the best years in recent memory in the USA. In the recent past, however, the economy has slowed down. Projections do not seem to suggest that the economy has started growing again
1.1 THE EUROPEAN UNION
When macroeconomists study an economy, they first look at three variables: * Output – the level of production of the economy as a whole – and its rate of growth. * The unemployment rate – the proportion of workers in the economy who are not employed and are looking for a job. * The inflation rate – the rate at which the average price of the goods in the economy is increasing over time.
The economic performance of European countries after the turn of the millennium has not been as good as it was in the 1990s:
• Average annual output growth reflected a significant slowdown in all of the largest European economies since 2008, and a recession in 2009.
• Low output growth was accompanied by persistently high unemployment.
• Average annual inflation was 2.2% in the EU and 2% in the euro area.
Three issues dominate the agenda of European macroeconomists:
• High unemployment
• Growth of income per person
• Common currency
How can European Unemployment be Reduced?
There is still disagreement about the causes of high European unemployment: * Politicians often blame macroeconomic policy. * Most economists believe, however, that the source of the problem is labour market institutions. * Some economists point to what they call labour market rigidities. * Other economists point to the fact that unemployment is not high everywhere in Europe.
What will The Euro do For Europe? * Supporters of the Euro point first to its enormous symbolic importance. * Others worry that the symbolism of the euro may come with some economic costs. * Equal Interest rates across the Euro Area
1.2 THE UNITED STATES
From an economic point of view, there is no question that the 1990s were amongst the best years in recent memory in the USA. In the recent past, however, the economy has slowed down. Projections do not seem to suggest that the economy has started growing again