Download Economics/Personal Finance Mr. Nielsen

Moving from Microeconomics to Macroeconomics
 Our textbook defines microeconomics as the area of
economics that deals with behavior and decision
making by small units, such as individuals and firms.
 What are some examples of microeconomic behaviors
that we have discussed in class?
 What are some microeconomic behaviors you have
taken part in during the last month?
 Deciding what goods and services you have demand
for based on careful decision-making.
 Deciding whether to save your money or spend it while
considering the opportunity cost involved.
 Budgeting your money so that your “needs” are met
first and your “wants” are met if there is anything
leftover.
 Why do we have to employ decision-making with
opportunity costs and trade-offs?
 Our text defines macroeconomics as the branch of
economics that deals with the economy as a whole,
including employment, gross domestic product
(GDP), inflation, economic growth, and the
distribution of income.
 Let’s break this definition down into some of its parts.
Some parts we are familiar with and some not so
much.
 Inflation- a rise in the general price level of goods and
services over a period of time.
 Good News! You just got a 10% raise at work.
 However, the inflation rate this year is approximately
8% on goods and services you buy.
 How much was your raise actually worth?
 Employment: at the Macro level, employment refers
to the percentage of people who have jobs at a national
level. It also refers to the percentage of people who are
unemployed at the national level.
 What impact do employed or unemployed people have
on the economy?
 Gross Domestic Product (GDP): the dollar amount of
all final goods and services produced within a
country’s borders in a year. It is the most important
measure of the economy’s overall economic
performance.
 How is the final dollar amount of goods and services a
reflection of the economy?
 If you own a small business, how does the dollar
amount of goods and services reflect your success?
 Economic Growth: refers to a sustained period during
which a nation’s total output of goods and services
increases.
 Remember, the bigger the value of the final goods and
services at the end of the year, the better the economy
is doing. Therefore, it makes sense that a period of
economic growth deals with an increase in those good
and services.
 Distribution of Income: the way in which income is
allocated among families, individuals, or other
designated groups in the economy.
 When you choose to shop at grocery store rather than
a convenience store, it has an impact on the
distribution of income. If people stop spending their
money at a convenience store, it can cost jobs or even
cause the store to close. Financial choices impact
individuals, businesses, cities, states, nations………
 Economic growth, decline, recession, and depression
happen in a continuous cycle.
 More people choose to shop at store A than store B.
 Store B has to fire employees and eventually closes.
 Those unemployed people can no longer buy goods
and services or pay taxes.
 With a decrease in taxes, the local government has to
fire employees and cancel projects.
 With a decrease in taxes, the state government may
have to fire employees and cancel projects.
 Individual decisions can make a difference at much
higher levels. Micro and Macro don’t exist separately.
 Imagine the last time you saw a television show
involving an emergency room (hospital). Imagine all
of the machines and people trying to determine how
the patient is doing. What vital signs do they look at?
 Now, we are going to look at the three most important
vital signs of the United States Economy. (Hint: you
already wrote down their definitions today)
 Economic Indicator:
 A statistic that describes the current performance of the
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U.S. economy.
Three Main Economic Indicators:
1. Real Gross Domestic Product (GDP)
This indicator measures the output of the final goods and
services produced in the U.S. economy in a given time
period (typically, one year).
2. The Inflation Rate
This indicator measures how rapidly the overall price level
is changing in the U.S. economy.
3. The Unemployment Rate
This indicator measures the percentage of the U.S. labor
force that wishes to work, but are currently without jobs.
 VISUAL 18.2
 LETTER FROM A CLIENT
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275
From the Desk Of:
J. Q. Public,
CEO
Acme Industries, Inc.
November 19, 2008
The Economic Forecasters, Inc.
123 Any Street
Muncie, Indiana
 To Whom It May Concern:
 I am the CEO of a successful business. My firm manufactures and distributes
many consumer products. I would like to have the company open another
factory, but our Board of Directors is concerned that the U. S. economy is too
weak to support its expansion. Recent economic reports—especially in the
popular media—paint a mixed picture. Therefore, I would like to hire your
firm to produce a report that describes the current state of the U.S. economy
and forecasts the performance of the economy over the next 12 months. I
would appreciate a complete report, so please include several charts or graphs
that will help me see the trends in the economy. I will then share these results
with the Board of Directors.
 I look forward to receiving your report.
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Sincerely,
Jocelyn Q. Public
Chief Executive Officer
Acme Industries, In