This is a draft cheat sheet. It is a work in progress and is not finished yet.
10 Macroeconomics principles
#1 Trade-offs are a given |
The world has scarce resources: time, oil, food. When we choose to do one thing, we sacrifice another. |
#2 Opportunity Costs |
The cost of something is what you gave up to acquire it. I.E. "The next best thing" It is almost never just a monetary cost |
#3 Rational People Think at the Margin |
Rational People (Rational Choice theory): Assumes that people act in a manner that gives them the greatest benefit in the most logical way that are in their best self interest. |
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Marginal thinking/ change: Small and often incremental adjustments |
#4 People respond to incentives |
Incentive: A thing that motivates or encourages someone to do something. It can be both positive or negative (bribe/punishment) |
#5 Trade can better everyone |
#6 Markets usually are a good way to organise economic activity |
They may not always be physical locations (e.g. online) |
#7 Governments can sometimes improve market outcomes |
E.g. Property Rights (Allowing people to exercise control over scarce resources), laws etc. |
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#8 A country's SOL depends on its ability to produce goods and services |
#9 Inflation |
Prices rise when the government prints too much money |
#10 Society faces a short-run trade-off between inflation and unemployment |
See the Phillips curve |
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Keywords
Chapter 1:
SOL = Standard of Living
Phillips Curve = A curve that shows the short-run trade-off between inflation and unemployment
Business Cycle = |
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