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Questions and Answers
When did macroeconomics emerge as a separate branch of economics?
When did macroeconomics emerge as a separate branch of economics?
What is the main focus of macroeconomics?
What is the main focus of macroeconomics?
What is Gross Domestic Product (GDP) used to measure?
What is Gross Domestic Product (GDP) used to measure?
What is the term used to describe short-run contractions and expansions in economic output?
What is the term used to describe short-run contractions and expansions in economic output?
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What is the upward phase of the business cycle called?
What is the upward phase of the business cycle called?
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Why might an increase in GDP not necessarily indicate economic improvement?
Why might an increase in GDP not necessarily indicate economic improvement?
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What is the study of macroeconomics concerned with?
What is the study of macroeconomics concerned with?
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What are the two main concerns of macroeconomics?
What are the two main concerns of macroeconomics?
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What is the term for a situation where a person is willing to work but cannot get a job?
What is the term for a situation where a person is willing to work but cannot get a job?
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What is a rapid increase in prices of goods and services called?
What is a rapid increase in prices of goods and services called?
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What is the term for a trade situation where exports exceed imports?
What is the term for a trade situation where exports exceed imports?
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What is the term for a policy that concerns government spending and taxation?
What is the term for a policy that concerns government spending and taxation?
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What is the term for a situation where prices of most goods and services are falling?
What is the term for a situation where prices of most goods and services are falling?
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What is the term for an economy that has extensive trading and financial relationships with other national economies?
What is the term for an economy that has extensive trading and financial relationships with other national economies?
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What is the term for a situation where a country's inflation rate exceeds 50% per month?
What is the term for a situation where a country's inflation rate exceeds 50% per month?
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What is the term for a policy that influences the growth of money supply?
What is the term for a policy that influences the growth of money supply?
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What is a shock in the economy?
What is a shock in the economy?
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What determines how demand shocks affect the economy?
What determines how demand shocks affect the economy?
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What is the crucial assumption of the classical approach?
What is the crucial assumption of the classical approach?
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What happens when prices adjust quickly in response to a demand shock?
What happens when prices adjust quickly in response to a demand shock?
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What happens when prices adjust slowly in response to a demand shock?
What happens when prices adjust slowly in response to a demand shock?
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Who introduced the Keynesian approach through a book?
Who introduced the Keynesian approach through a book?
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What is critical to the model's implications about demand shocks?
What is critical to the model's implications about demand shocks?
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What was the prevailing economic condition during the period when Keynes wrote his book?
What was the prevailing economic condition during the period when Keynes wrote his book?
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Why do Keynesians argue that persistent unemployment occurs?
Why do Keynesians argue that persistent unemployment occurs?
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Who introduced the idea of the invisible hand?
Who introduced the idea of the invisible hand?
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According to Adam Smith, what leads to the maximization of the general welfare of everyone in the economy?
According to Adam Smith, what leads to the maximization of the general welfare of everyone in the economy?
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What is the solution to high unemployment proposed by Keynes?
What is the solution to high unemployment proposed by Keynes?
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What is a key assumption of the classical approach?
What is a key assumption of the classical approach?
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What event led to a reduction in confidence in the Keynesian approach?
What event led to a reduction in confidence in the Keynesian approach?
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What is the term used to describe the combination of high unemployment and high inflation?
What is the term used to describe the combination of high unemployment and high inflation?
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What happened to the classical approach in the 1970s?
What happened to the classical approach in the 1970s?
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What happened to the total output of goods and services in some countries despite their standard of living not improving?
What happened to the total output of goods and services in some countries despite their standard of living not improving?
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What is the primary reason for the vast differences in living standards between rich and poor countries?
What is the primary reason for the vast differences in living standards between rich and poor countries?
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What is the income group of Malaysia according to the World Bank data in 2021?
What is the income group of Malaysia according to the World Bank data in 2021?
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What is the characteristic of countries that have experienced modern economic growth?
What is the characteristic of countries that have experienced modern economic growth?
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Which of the following countries has the highest GDP per capita in 2021 according to Table 1?
Which of the following countries has the highest GDP per capita in 2021 according to Table 1?
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What is the primary reason why some countries have not experienced an improvement in their standard of living despite an increase in their total output of goods and services?
What is the primary reason why some countries have not experienced an improvement in their standard of living despite an increase in their total output of goods and services?
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Which of the following countries is classified as Low Income according to Table 1?
Which of the following countries is classified as Low Income according to Table 1?
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What is the characteristic of countries that have not experienced modern economic growth?
What is the characteristic of countries that have not experienced modern economic growth?
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Study Notes
Introduction to Macroeconomics
- Macroeconomics is the study of the structure and performance of national economies and the policies that governments use to affect economic performance.
- Macroeconomics attempts to answer questions about long-run economic growth, short-run fluctuations in output and employment, and the causes of business cycles.
Macroeconomic Concerns
- Economic growth: an increase in a country's output of goods and services, measured by Gross Domestic Product (GDP).
- Business cycle: short-run fluctuations in economic output, including recessions and expansions.
- Unemployment: a state where a person is willing to work but cannot find a job.
- Inflation: a sustained increase in the general price level of goods and services in an economy over time.
Classical Approach
- Originated from Adam Smith's "The Wealth of Nations" (1776).
- Introduced the concept of the "invisible hand," where individuals pursuing their own self-interest leads to the maximum welfare of everyone in the economy.
- Assumes that free markets and individual self-interest will lead to economic well-being.
Keynesian Approach
- Introduced by John Maynard Keynes in "The General Theory of Employment, Interest, and Money" (1936).
- Argues that wages and prices adjust slowly, leading to persistent unemployment.
- Proposes that government intervention, such as increasing government purchases of goods and services, can help alleviate unemployment.
Classical vs. Keynesian Debate
- Keynesian approach dominated from WWII to 1970.
- Stagflation (high unemployment and inflation) in the 1970s led to a resurgence of classical macroeconomics.
- Modern classical macroeconomics emphasizes the importance of microfoundations and the role of expectations in macroeconomic outcomes.
Modern Economic Growth
- Rapid and sustained economic growth is a modern phenomenon.
- Started with the Industrial Revolution in England.
- Countries with output per person rising are experiencing modern economic growth.
International Economy
- Every major economy is an open economy, with extensive trading and financial relationships with other national economies.
- International trade and borrowing relationships can transmit business cycles from one country to another.
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Description
Explore the basics of macroeconomics, including the study of national economies, economic growth, and business cycles. Learn about the policies that affect economic performance.
