Introduction to Macroeconomics

A measure of total income and output of the economy in a given period usually express in per-capita terms as an average income

Total income - taxes + government transfers

Represent the sustained rapid growth in GDP per capita experienced by countries worldwide

Britain - 1650. Japan - 1870. China and India - second half of the 20th century. In some economies, subtantial improvements did not occur until they gained independence from colonial rule or interference from European nations

A process that uses inputs that produce an output

Reducing the amount of work-time for production allows for significant increases in living standards. Scientific and technological advances occured in the middle of the 18th century

A wave of technological advances starting in Britain in the 18th century, which transformed an agrarian and craft-based economy into a commercial and industrial economy

The laws and social customes governing the production and distribution of goods and services

An economic system where the main institutions are private property, markets and firms

Ownership rights over possessions

Non-labour inputs used in production

A way for people to exchange products and services for their mutual benefit. Markets are reciprocated transfers, voluntary and usually there is competition

Business organisation that uses inputs to produce outputs and sets prices to at least cover prouduction costs

Capitalism led to growth in living standard becasue of the impact on technology and specialisation

The division of Germany at the end of World War II into two separte economic systems, capitalist in the west and centrally planned in the east

Situation that is self-perpetuating. Something of interest does not change unless an external force is introduced that alters the model's description of the situation

Holding other thing constant

Economic rewards or pounishments which influence the benefits and costs of alternative courses of action

The benefit received from a choice, taking into account the next best alternative (reservation option)

Combinations of inputs that give the same cost (slope relative price of inputs)

The change in profit is equal to the fall in costs associated with adopting the new technology

The process by which old technologies and the firms that do not adapt are swept away by the new because they cannot compete in the market

Gives maximum output for a given set of inputs

Population expands if living standards increase. The law of diminishing average production of labout implies that as more peope work on the land, their income will fall. In equilbrium, living standards fall to subsistence level

Diminishing average product of labout, rising population in response to increases in wages. An absence of improvemnts in technology to offset the diminishing avrage product of labour