Three important ideas: People are rational. People respond to incentives. Optimal decisions are made at the margin. How an economy answers these questions: What goods and services will be produced? How will they be produced? Who will receive the goods and services? Role of models in economic analysis.
Distinguish between microeconomics and macroeconomics.
People must make choices as they try to attain their goals. The choices people make reflect the trade-offs made necessary by scarcity. Become familiar with important economic term:
-Scarcity and tradeoff
-Positive and normative economics
-Efficiency of markets
Factors of production (labor, capital, natural resources, and entrepreneurship) The Bureau of Economic Analysis (BEA) divides its statistics on GDP into four major categories of expenditures: consumption, investment, government purchases, and net exports. GDP measurement
Real GDP versus Nominal GDP
Components of spending in GDP of the United States
Federal budget deficit
Federal government debt
Measures of total Income
Labor force and Unemployment
Types of unemployment
Labor force participation rate
Factors that determine the unemployment rate
Inflation and unemployment are key macroeconomic problems. It is essential to understand how these concepts are defined and computed. The U.S. Bureau of Labor Statistics uses the results of the monthly household survey to calculate the unemployment rate and the labor force participation rate.
The U.S. economy has experienced both long-run economic growth and the business cycle. Long-Run Economic Growth
Saving vs. investment
Real interest rate
The Great Depression