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Introduction to Macroeconomics Lecture Notes

Introduction to Macroeconomics Lecture Notes Robert M. Kunst March 2006. 1 Macroeconomics Macroeconomics (Greek makro = big') describes and explains economic processes that concern aggregates. An aggregate is a multitude of economic subjects that share some common features. By contrast, microeconomics treats economic processes that concern individuals. Example: The decision of a firm to purchase a new o ce chair from com- pany X is not a macroeconomic problem. The reaction of Austrian house- holds to an increased rate of capital taxation is a macroeconomic problem. Why Macroeconomics and not only microeconomics? The whole is more complex than the sum of independent parts. It is not possible to de- scribe an economy by forming models for all firms and persons and all their cross-e ects. Macroeconomics investigates aggregate behavior by imposing simplifying assumptions ( assume there are many identical firms that pro- duce the same good ) but without abstracting from the essential features.

Introduction to Macroeconomics Lecture Notes Robert M. Kunst March 2006. 1 Macroeconomics Macroeconomics (Greek makro = ‘big’) describes and explains economic processes that concern aggregates. An aggregate is a multitude of economic subjects that share some common features. By contrast, microeconomics

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