Kinh tế học - Chapter 1: Introduction

Chapter 1IntroductionMcGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.Learning ObjectivesUnderstand the importance of markets.Identify three of the main forces shaping today’s economy.Explain the debate over the role of government in the economy.Define economics and discuss how prosperity is measuredName some key disagreements in economics.1-2Objectives of TextbookTools of EconomicsRole of Market EconomyChanging Nature of Economy1-3Tools of EconomicsView the world from the perspective of an economistTo accomplish this, need to understand the key tools of analysis Some of these tools include: supply and demandelasticityproduction functionthe multiplier1-4Role of Market EconomyIn a market, buyers and sellers come together to voluntarily exchange goods and services for money. Market transactions are activities that produce and exchange goods and services for which other people are willing to pay. In this text we will study how markets work and how prices are set.1-5Changing Nature of EconomyIndividuals, businesses, and even countries are subject to limits and constraints.But these limits and constraints are constantly changing.Goods that were once expensive are now commonplace. Countries that were once poor are rapidly growing.1-6Key Forces Shaping Today’s EconomyNeed to understand forces driving changeThree main forces at work: Technological change Globalization Financial markets1-7Key Forces Shaping Today’s EconomyTechnological change is an improvement in knowledge that increases the range of products and services the economy can deliver.Examples: electricity, cars, and the InternetTechnology creates new ways of producing goods and services.Technology is the critical factor in raising living standards.Technology is also a possible solution to the energy crisis and global climate change.1-8Key Forces Shaping Today’s EconomyGlobalization is the exchange of goods, services, ideas, and people among countries. The world economy is becoming more global.Does this trend benefit the U.S. economy?There are many aspects to globalization, including:trade in goods and servicesflow of information and movement in moneyExample: impact of China on the global economy1-9 Key Forces Shaping Today’s EconomyFinancial markets encompass all those parts of the economy that have to do with borrowing, investing, or transferring money. Include the stock market, mortgages, banks, brokerage firms, and credit cardsFinancial markets are constantly evolving.Fuel economic growth by enabling companies, individuals, and government markets to raise money1-10Key Forces Shaping Today’s EconomyInterest rates are defined as the cost of money and are determined in the financial markets.The central bank plays a key role in determining interest rates.Subprime loans given to people who did not have enough income to qualify for ordinary mortgages are currently a major problem in the financial markets. 1-11The Role of GovernmentWho should guide the economy: government, or businesses and individuals? At one extreme is a centrally-planned economy, in which all economic activities are controlled from the top.At the other extreme is a laissez-faire economy, where no government regulations or laws exist at all.What is the role of competition in guiding the economy?1-12The Role of GovernmentCompetition is the most consistent force for growth and progress.The U.S. economy is the most competitive in the world.There are some concerns over excessive competition.Impact on job security, poverty, etc.1-13The Role of GovernmentGovernment plays a large role in the U.S. economy.Makes laws, regulates businesses, etc.Macroeconomic policy: making sure that the economy doesn’t fall into deep slumps where a lot of people lose their jobs, or overheat to the point where prices soar out of control.Key role in the economy played by Federal Reserve1-14The Role of GovernmentThe role played by the government and by private businesses differs across countries.There is a global trend toward deregulation.Deregulation is the process of reducing government control over industries.There is a need to find a balance.1-15Economics DefinedEconomics is the study of how individuals, businesses, and governments make decisions and make trade-offs in the face of scarce resources. Role of scarcity and choiceLimited resourcesNeed to make trade-offsOpportunity costs1-16Economics DefinedTwo main areas of focus:MacroeconomicsStudies the overall aggregate economy, focusing on issues such as growth, inflation, trade, and interest rates.MicroeconomicsStudies the behavior of individual units in the economy, such as households and businesses.1-17Measures of ProsperityImproving individual prosperity is a key goal of economics.Measure prosperity by using various indicators:One key measure is GDP.GDP is the dollar value of all the goods and services produced by the economy. Other indicators of prosperity include wages, income, and consumption.Use GDP to compare the level of prosperity among countries1-18World’s Largest Economies1-19Safety NetProvides a measure of security for the poor, sick, and vulnerableConsists of a wide array of government programs, including Social Security, Medicare, etc.Objective is to improve the lives of low-income householdsDebate among economists as to whether enough is being doneSafety net programs in Europe are more comprehensive than in U.S.1-20Economics – Not an Exact ScienceThere is considerable policy disagreement among economists.The role that government plays in the economy is one of the main debates.Some key questions include:How to fund Social Security and Medicare?How to solve the health care problem?How to improve the educational system?What is an appropriate tax policy?1-21Why the Disagreement?Reasons for policy disagreement are due to:Political agendaLack of dataWinners and losersThe objective of this textbook is to present both sides of the discussion.1-22Appendix: Learning ObjectivesRead data from a line graph or a bar graph.Plot points on a graph using data from a table.1-23Appendix: The Basics of Graphs Graphs have a horizontal axis (x-axis) and a vertical axis (y-axis).Bar and line graphs are two different types of graphs.A line graph can be upward-sloping or downward-sloping.1-24An Example of a Bar Graph1-25An Example of a Line Graph1-26Plotting Graphs from Data: Population of Cleveland1-27Plotting Graphs from Data: Population of Cleveland1-28