Module 2

1. Module 2 Introduction to Macroeconomics

2. Goes up during…. • Goes down during …. Connection to Business Cycle

3. What is a business cycle ? • How are employment and unemployment measured and how do they change over the business cycle? • Define aggregate output and how does it change with the business cycle? • What is the meaning of inflation and deflation and why do we prefer price stability? • How does economic growth determine a countries standard of living? • Why do models play a crucial role in economics? M2 Quiz

4. Economic Upturns and Downturns • The time of recession to expansion and back to recession Business Cycle

6. Employment is the total number of people currently working for pay. • Unemployment is the total number of people who are actively looking for work but aren’t currently employed. • During recession unemployment rates generally rise, during expansion they generally fall. Employment and Unemployment

8. The economy’s total production of goods and services for a given time period, usually a year. • Aggregate output falls in a recession, rises during expansion. Aggregate Output

10. Inflation – rise in the overall price level • Deflation – a fall in the overall price level. • Inflation discourages people from holding cash, Deflation more attractive to hold on to cash. • We want price stability because it keeps the economy stable. Inflation/Deflation and Price Stability

12. Economic growth allows for higher wages which allows people to afford more of what they want and “need” thus a rising standard of living. Economic Growth and Standard of Living

14. Models are important to economics because they allow us to make situations more simple so we can focus on analyzing one change at a time. • Ceteris Paribus – Other things equal assumption. Models and Economics

15. Unit 1 Test On Wednesday • -Review Modules 1-4 • Unit 1 Vocabulary • Unit 1 Review