Day 1: Review on Economics:

What is Economics?

 Economics -is a science of Scarcity, meaning people want it but

people get a very relatively limited supply.

Examples: Fish & Fresh water

 Economics is a decision making-how people make rational economic

decision related to scarcity

 Economics is a human action- essentially about how people &

economic behave

Ex. You decide to come & enroll at Santa Monica

 Economics is a cost (time & Effort) & benefits (Learning the subject)

 Efficiency- if we‘ve done with efficient production and production

allocation then we will reach our goals/objective or output objective

MACROECONOMICS

-means how the economy behaves in general or this is the thing that
people care the most such as:

1. Prices (inflation)

2. Interest Rate-the price of money (rent)

3. Government Fiscal Position/ Government Budget- how much the

government spends, taxes and fiscal policy

4. Productivity-amount of resources that the economy produce ( the

more output we get the more productive we are.

5. Value of currency- (the most complicated question in

macroeconomics and it’s a subject of Int’l Economics w/c fall into two
categories:
 1. International Trade- the movement of goods & services across the
countries boarders

2. International Finance – movements or flow of capital across the

national boarders & with the determinants of the value of the currency or
exchange rate.

What Economist love to do both Microeconomics & Macroeconomics?

Modeling: has a certain basic features:

a. Economic theory- Ex. Theory on increase on supply

b. Variables- something that can be measured

c. Assumption- is a key & always present in economic model

Ex. The govt. deficit does not increase

CETERIS PARIBUS- economists term for the analysis they made wherein
all things remain the same or equal/unchanged as all things are taken for
granted during their economic analysis.

GDP-Gross Domestic Product-

 Macroeconomics that measures the total output of the economy for a
given period of time. (typically 1 year or annual GDP) or the National
Output

How to compute GDP:

Three Fundamental Approach

1. Product Approach- goods & services output that producers produce.

2. Income Approach- Wages/Salary

3. Expenditure Approach- effectively measures what economy expense

 These 3 approaches produces “equivalent” or identical results
except:

a. Measurement errors

b. Lack of reporting

Major Issues of Macroeconomics

1. Economic Growth- how fast the economy grows over time.

(does the economy grow 1 % from 1 year to year

2. Output Fluctuations/Bus Cycles

3. Causes foe unemployment

– does there have to be unemployment

- What can the government do to reduce unemployment

4. Rising Prices – what causes Price Rise overtime

 Price(Inflation) Increase in money supply or Monetary Inflation

Increase in Price or Price Inflation

***How does global Economy Affects the National Economy?

Global Economy Effects:

There could be hundreds of examples: International Economics with

2 major areas: 1. Int’l. Economics 2. Int’l. Finance

1. Government Policy

-Can the govt. policy affects the economy?- YES

-Can the govt, Policy helps the burden of the economy? Yes

2. Fiscal Policy-how the govt. spending or revenues affects govt.

3. Regulatory Policy- Ex. Public Policy

II. What Economist do?(What is the Micro economist Business?)

A. Forecasting
2.