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Questions and Answers
What is the primary focus of macroeconomics?
What is the primary focus of macroeconomics?
Economy-wide phenomena, focusing on aggregated indicators such as GDP, inflation, and unemployment.
What is the definition of inflation?
What is the definition of inflation?
A sustained increase in the general price level of goods and services in an economy over time.
What is the purpose of fiscal policy in macroeconomics?
What is the purpose of fiscal policy in macroeconomics?
To influence the economy through government taxation and expenditure.
What is the law of supply and demand in microeconomics?
What is the law of supply and demand in microeconomics?
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What is the definition of opportunity cost in microeconomics?
What is the definition of opportunity cost in microeconomics?
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What is the theory of comparative advantage in international trade?
What is the theory of comparative advantage in international trade?
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What are the gains from trade in international trade?
What are the gains from trade in international trade?
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What is the definition of economic growth in development economics?
What is the definition of economic growth in development economics?
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What is the poverty trap in development economics?
What is the poverty trap in development economics?
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What is the role of institutional factors in promoting economic development?
What is the role of institutional factors in promoting economic development?
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Study Notes
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.
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Description
Test your understanding of economy-wide phenomena, including GDP, inflation, unemployment, and fiscal policy. Learn key concepts and study tips for macroeconomics.
