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The Nature of Macroeconomics
Member rating: No Rating | Words: | Submitted: Mon Sep 15 2003
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1. The Nature of Macroeconomics Macroeconomics * Macroeconomics deals with the economy as a whole * To gain an overview of the whole economy and relationships between its parts --> allow policy makers to develop policies to achieve stable, sustainable economic growth and maximise human welfare * 3 interrelated measures of economic activity or aggregates o Total output --> (production) of goods and services o Total spending --> on goods and services o Total income --> paid to owners of all factors of production * John Maynard Keynes challenged mainstream (neoclassical) --> Say's Law = supply creates its own demand * Neoclassical = all markets work by themselves through a flexible price mechanism which automatically adjusts in response to market forces and guarantees full employment of resources = assumes perfectly flexible prices, therefore no need for government intervention. * Keynes = no such automatic mechanism and markets are imperfect, therefore equilibrium could exist at a level below full employment of...
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