Macroeconomics Fundamentals

Macroeconomics

Definition

Study of economy-wide phenomena, focusing on aggregated indicators such as GDP, inflation, and unemployment.

Key Concepts

• GDP (Gross Domestic Product): Total value of goods and services produced within a country's borders.
• Inflation: Sustained increase in general price level of goods and services in an economy over time.
• Fiscal Policy: Government's use of taxation and expenditure to influence economy.
• Business Cycle: Fluctuations in economic activity, typically involving expansion and contraction.

Microeconomics

Definition

Study of individual economic units such as households, firms, and markets.

Key Concepts

• Supply and Demand: Price determination based on interaction between quantity supplied and quantity demanded.
• Opportunity Cost: Value of next best alternative forgone when a choice is made.
• Market Equilibrium: Point at which supply equals demand.
• Consumer Behavior: Study of how households allocate resources to meet their needs and wants.

International Trade

Definition

Exchange of goods and services between countries.

Key Concepts

• Comparative Advantage: Theory that countries should specialize in producing goods for which they have lower opportunity costs.
• Gains from Trade: Increase in economic welfare resulting from trade.
• Tariffs: Taxes imposed on imported goods.
• Trade Agreements: Formal agreements between countries to reduce trade barriers.

Development Economics

Definition

Study of economic growth and development in low-income countries.

Key Concepts

• Economic Growth: Sustained increase in per capita GDP over time.
• Economic Development: Improvement in economic well-being, often measured by Human Development Index (HDI).
• Poverty Trap: Self-reinforcing mechanisms that keep people or countries in poverty.
• Institutional Factors: Role of institutions, policies, and governance in promoting economic development.

Monetary Policy

Definition

Actions of a central bank to control money supply and interest rates to promote economic growth and stability.

Key Concepts

• Monetary Policy Tools: Open market operations, reserve requirements, and discount rates.
• Money Supply: Total amount of money circulating in an economy.
• Inflation Targeting: Monetary policy framework that sets a specific inflation rate as its primary goal.
• Central Bank Independence: Ability of a central bank to make decisions without government interference.

Macroeconomics

• Study of economy-wide phenomena, focusing on aggregated indicators such as GDP, inflation, and unemployment.

Key Concepts

• GDP (Gross Domestic Product) is the total value of goods and services produced within a country's borders.
• Inflation is a sustained increase in the general price level of goods and services in an economy over time.
• Fiscal Policy is the government's use of taxation and expenditure to influence the economy.
• Business Cycle refers to fluctuations in economic activity, typically involving expansion and contraction.

Microeconomics

• Study of individual economic units such as households, firms, and markets.

Key Concepts

• Supply and Demand is the price determination based on the interaction between the quantity supplied and quantity demanded.
• Opportunity Cost is the value of the next best alternative forgone when a choice is made.
• Market Equilibrium is the point at which supply equals demand.
• Consumer Behavior is the study of how households allocate resources to meet their needs and wants.

International Trade

• Exchange of goods and services between countries.

Key Concepts

• Comparative Advantage is the theory that countries should specialize in producing goods for which they have lower opportunity costs.
• Gains from Trade result in an increase in economic welfare due to trade.
• Tariffs are taxes imposed on imported goods.
• Trade Agreements are formal agreements between countries to reduce trade barriers.

Development Economics

• Study of economic growth and development in low-income countries.

Key Concepts

• Economic Growth is a sustained increase in per capita GDP over time.
• Economic Development is an improvement in economic well-being, often measured by the Human Development Index (HDI).
• Poverty Trap refers to self-reinforcing mechanisms that keep people or countries in poverty.
• Institutional Factors refer to the role of institutions, policies, and governance in promoting economic development.

Monetary Policy

• Actions of a central bank to control the money supply and interest rates to promote economic growth and stability.

Key Concepts

• Monetary Policy Tools include open market operations, reserve requirements, and discount rates.
• Money Supply is the total amount of money circulating in an economy.
• Inflation Targeting is a monetary policy framework that sets a specific inflation rate as its primary goal.
• Central Bank Independence refers to the ability of a central bank to make decisions without government interference.