Introduction to Macroeconomics

Course Description Principles of Macroeconomics deals with consumers as a whole, producers as a whole, the effects of government spending and taxation policies, and the effects of the monetary policy carried out by the Federal Reserve Bank. Macroeconomics is concerned with unemployment, inflation, and the business cycle. Text Required: Macroeconomics, Roger A. Arnold, 7th Edition, 2005 Recommended: Macroeconomics Study Guide, Roger A. Arnold, 7th

-The role and significance of prices in the market economy has to do with supply and demand. If there are the same amount of buyers as products, the price will settle. If there are more buyers than products, the price of the product will rise. And, if there are more products than buyers, the price of the product will decrease. This occurs until the supply of the product matches the demand of the product.

Banks pay higher interest on time deposits. These deposits can be withdrawn only after a specific time period is completed by providing a written notice to the bank. Based on this, commercial banks offer individuals the following accounts for depositing their money:

Economics is the study of scarcity, decision-making, and how people use their resources. Micro-Economics is the social science that deals with the allocation of scarce resources with unlimited wants. Moneyball is a movie about a professional small-league baseball team. The Oakland A’s who is in a financial hardship uses economics and statistical data to win the next championship. Moneyball the movie shows how one can use long-runs and short runs and marginal cost to change the way baseball franchises spend their money.

Peoples had accumulated assets of $556m. These assets were funded by short term consumer deposits, consisting largely of 3-month fixed rate savings certificates. These savings certificates were highly affected by interest rate fluctuations. The long term loans provided to people generate interest earnings which are do not increase or decrease with the interest rate fluctuations. Therefore, there was a mismatch between the interest rates earned by the bank and the interest rates that it had to give

In order to understand the Macroeconomic equilibrium, you must understand the aggregate supply which is the output total of good and services generated by the economy during a certain time. Macroeconomic equilibrium occurs when both the aggregate supply and demand balances at the same level. For example; If the government generously gives $500 to taxpayers then we will see an increase in the aggregate demand because people will use the money to purchase more items in the economy. In addition, the price level will start to increase due to consumers are buying more. Therefore if the consumers are buying more of the goods then the real wealth will increase and cause the suppliers to create more

What does this data suggest about financial market expectations of 1 year yields, 1 year from now? Explain…. (Assume investors are risk neutral in these short time horizons with default free treasuries.)

(Price level and the interest rate, are held constant). Increased saving, decreases consumption hence drops Y=PAE (C+I(p)) and increases withdrawals and hence saving curve increased.

The Economy is the backbone to society. There are many factors that operate in, and govern our society’s economical structure. Factors such as scarcity and choice, opportunity cost, marginal analysis, microeconomics, macroeconomics, factors of production, production possibilities, law of increasing opportunity cost, economic systems, circular flow model, money, and economic costs and profits all contribute to what is known as the economy. These properties as well as a few others, work together to influence the economy. Microeconomics and Macroeconomics are two major components. Both of these are broken down into several different components that dictate societal norms and views.

Economy holds great importance in our lives when it comes analyzing how money functions overall, what employment really means, and what kind of fluctuations affect the world we live in. It encompasses a great wealth of knowledge that allows us to understand and make sense of many occurrences and events in the world. Before delving into the details, this paper showcases the history behind how macroeconomics came into being and the main aspects of it.

This article applies to the section, "The Market for Loanable Funds." As factors like outlooks on economics, incentives on saving, government deficits, regulations, and expectations of businesses change, the supply and demand of loanable funds from the market also change. Because the quantity of loanable funds increases with higher real interest rates, the supply curve has a positive slope. Since the quantity of loanable funds decreases with higher real interest rates, the demand curve has a negative slope.

Public also like to deposit their savings with a popular and well-established company which can pay interest periodically and payback the deposit when due.

Microeconomics is a smaller window compared to macroeconomics; microeconomics focuses on things surrounding individual businesses and consumers whereas macroeconomics focuses on the bigger picture, or the whole aggregate. Microeconomics is the study of choices that individuals and businesses make, the way those choices interact in markets, and the influence of governments. Different studies within microeconomics include what to produce and how much to charge when it comes to an individual firm. When looking at a household microeconomics would be the study of what and how much of it to buy. Other areas of study for microeconomics would be poverty, income rate on jobs, consumption patterns, and distribution of output; overall microeconomics is “the branch of economics that examines the functioning of individual industries and the behavior of individual decision-making units that is firms and households.” (Case, Fair, & Oster, 2014)

The time value of money indicates the relationship between time and money because of the opportunity to invest today's dollar and receive interest on the investment in the future. A dollar received today is worth more than a dollar promised sometime in the future. Interest is the payment for the use of the money lent or borrowed (principal). Interest is figured on a rate basis. Any amount of money invested is worth more the sooner it is received (Time Value of Money - TVM, 2013).

The classical theorists regarded interest rate as an equilibrating factor between the demand for and the supply of investible funds. Investment represents the demand for investible funds, and interest rate is the price at which the two are equated. Interest rate establishes equality between aggregate savings and aggregate investment. If there are at any time more