When you finish this chapter, you should: Define the key terms of economics and opportunity cost and understand how a production possibilities frontier exemplifies the trade-offs that exist in life, distinguish between increasing and constant opportunity cost and understand why each might happen in the real world, analyze an argument by thinking economically, while recognizing and avoiding logical traps. | Lecture Issues in economics today - Chapter 7 Chapter 7 Every Macroeconomic Word You Have Ever Heard Gross Domestic Product Inflation Unemployment Recession and Depression McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. Chapter Outline Measuring the Economy Real Gross Domestic Product and Why it is Not Synonymous with Social Welfare Measuring and Describing Unemployment Business Cycles McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. Microeconomics vs. Macroeconomics Microeconomics that part of the discipline of economics that deals with individual markets and firms Macroeconomics that part of the discipline of economics that deals with the economy as a whole McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. Gross Domestic Product Gross Domestic Product the dollar value of all of the goods and services produced for final sale in the United States in a year Final Sale avoids double counting of intermediate production Sale implies exclusively market activities the United States implies that Hondas produced in the US count but Fords produced in Mexico do not. McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. Measuring Prices Market Basket what average people buy and in what quantities they buy it Base Year year in which the market basket is established and year to which all other prices are compared Price of the Market Basket in the Base Year PBYMB national average of the total cost of the market basket for the first month in the first year. McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. Price Index Price Index a device that centers the price of the market basket around 100 Consumer Price Index the price index based on what average consumers buy PATMB CPI PBYMB 100 Where P MB is the price of the market basket at any time and AT PBYMB is the price of the market basket in the base year McGraw Hill Irwin 2002 The McGraw Hill .
