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Big news in the week : Big news in the week Recession concern Home Prices Fell in ’07 for First Time in Decades New York Times National home sales down 22% Los Angeles Times, CA - 4 hours ago


Stock crash all over the world : Stock crash all over the world See the chart What should government do?


Policy: Tax rebate package : Policy: Tax rebate package Congress Unites on Economic Stimulus Package TheStreet.com  To stimulate the economy Why? What is the theory behind it?


1102-Lecture 1 : 1102-Lecture 1 Jia Yuan Spring 2008


Slide5 : CHAPTER 1 What Is Economics?


Chap1: What is Economics : Chap1: What is Economics Introduction to Science of Economics Definition Scientific method Questions economists try to answer Types of Economics Macroeconomics


Economics : Economics Social science: studies aspects of human behavior Economics studies the systems of coordinating a society’s production and consumption activities page 2


Scientific Method : Scientific Method Observe some aspect of universe, data. Create hypothesis that is consistent with your data Use hypothesis to make predictions about other observations that you don’t have yet Test the hypothesis by gathering data and compare it to the predictions of hypothesis If hypothesis fails test, create new hypothesis If hypothesis passes, called theory, and create new predictions and tests


Types of Economics : Types of Economics Micro Ex. People, firms, countries as single decision makers Macro Ex. Countries composed of individuals


Macroeconomics : Macroeconomics Focus on the economy of a country Studies growth of economy, production possibilities over time Usefulness of Government Policy


Macro Topics : Macro Topics Economic Growth Unemployment Business Cycles Money, Banking and Inflation Government Policy


Slide12 : CHAPTER 2 The Economy: Myth and Reality


Slide13 : Chapter 2 first introduces some of the key characteristics of the U.S. economy a) The U.S. is a private-enterprise economy where most goods and services are exchanged in free markets. b) The U.S. economy is relatively closed, as exports and imports account for a relatively small share of GDP. c) The U.S. economy is growing over time, but this growth is not stable. The economy experiences businesses cycles—periods of economic recession and expansion.


Some numbers : Some numbers Population: 300 Million Working Population: 140 Million GDP ranking of all the countries: See pic US economy is more and more open, but still relatively closed.


Figure 2 Real Gross Domestic Product (GDP) Since 1959 : Figure 2 Real Gross Domestic Product (GDP) Since 1959


Figure 3 The Growth Rate of Real Gross Domestic Product (GDP) in the United States Since 1959 : Figure 3 The Growth Rate of Real Gross Domestic Product (GDP) in the United States Since 1959


Figure 1 Share of U.S. Gross Domestic Product (GDP) Exported and Imported, 1959–2004 : Figure 1 Share of U.S. Gross Domestic Product (GDP) Exported and Imported, 1959–2004


Labor and capital : Labor and capital Wages, payments to labor, account for the largest share of national income. Payments to capital (interest and profits) account for the remainder.


Figure 11 The Circular Flow of Goods and Money : Figure 11 The Circular Flow of Goods and Money


Figure 4 The Unemployment Rate in the United States, 1929–2004 : Figure 4 The Unemployment Rate in the United States, 1929–2004


Figure 5 The Composition of Employment by Sex, 1950 and 2004. : Figure 5 The Composition of Employment by Sex, 1950 and 2004.


Figure 6 Working Women as a Percentage of the Labor Force, 1960 versus 2002 : Figure 6 Working Women as a Percentage of the Labor Force, 1960 versus 2002


Figure 7 Teenage Employment as a Percentage of Total Employment, 1950–2003 : Figure 7 Teenage Employment as a Percentage of Total Employment, 1950–2003


Figure 8 Civilian Employment by Sector, 2003 : Figure 8 Civilian Employment by Sector, 2003


Figure 9 The Growing Share of Service Sector Jobs, 1967 versus 2003 : Figure 9 The Growing Share of Service Sector Jobs, 1967 versus 2003


FigurE 10 Average Hourly Compensation Rates in Manufacturing, 2002 : FigurE 10 Average Hourly Compensation Rates in Manufacturing, 2002


Government : Government An economic system is made up of people, businesses, and the government. These three parties interact in a variety of ways through markets. In addition to enforcing laws and regulation, federal, state, and local governments finance expenditures through collecting taxes. Some taxes are used to redistributed income through progressive taxation and transfer payments.


Figure 12 The Allocation of Government Expenditures : Figure 12 The Allocation of Government Expenditures


Figure 13 Government Spending as a Percentage of GDP, 2002 : Figure 13 Government Spending as a Percentage of GDP, 2002


Figure 14 The Tax Burden in Selected Countries, 2002 : Figure 14 The Tax Burden in Selected Countries, 2002


Slide32 : CHAPTER 3 The Fundamental Economic Problem: Scarcity and Choice


Review of the Three Key Concepts : Review of the Three Key Concepts Scarcity Opportunity cost and production possibility frontier Specialization and the comparative advantage


Scarcity page 42 : Scarcity page 42 Resources are scarce Since cannot have all wants, agents make decisions on what they do get and what they don’t Creates a tradeoff for making any decision


Opportunity Cost pages 7-11 : Opportunity Cost pages 7-11 Defination “Free lunch”- College Opportunity cost vs accounting cost


FIGURE 1Production Possibilities Frontier for Production by a Single Farmer : FIGURE 1 Production Possibilities Frontier for Production by a Single Farmer


FIGURE 2 Production Possibilities Frontier with No Specialized Resources : FIGURE 2 Production Possibilities Frontier with No Specialized Resources


FIGURE 3 Production Possibilities Frontier for the Entire Economy : FIGURE 3 Production Possibilities Frontier for the Entire Economy