Introductory economics

741 Pages·1981·22.446 MB·English

by  Michael Veseth

Introductory
Economics
Michaevle seth
UNIVERSOIFTP YU GESTO UND
ACADEMIPCR ESS
NewY orLko ndoTno ronStyod neSya Fnr ancisco
A SubsidHiaacrroyuB rrotaf Jc oev anoPvuiibcslhsh, e r
Thboioskw assei tOn p tiFmrau,ta inOgdle iArvn,et ique
typebfyBa lcaDecoskt , T htIeen wxcatp.s r ianntbodeu dn d
byt hWe.A .K ruCeogmeprTa hnceyo .vw eaprsr ibnyLt eehdi gh
PreLsist hogTrhpaeup bhletiressaih.mn i cnlgu fdoeldl otwhien g:
SusEailnolL totr aicnqgu,i esdoiirStt;hi eornHisud gahdneei scr,t or
of proSduuzcatnBineoentn nat;re,d t ei crtCoars;Pi smuijre k,
G.
proejdeicCttoo vpreh.ro tobgyBr eaKnpa hnC nh.a potpeern ing
ilsltruabtySi touLnaesreT tde six.ltt l ruasptrieopnbasyr ed
VantAarIgtne,c .
Copy©r ighbtyA cadPerems,.lisncc .
1981,
Alrli grhetsse rved.
Nop aortfth piusb limcabayetr ieopnro duced
ort ransimanin ftyot orerbmd y a nmye ans,
elecotrmr eocnhiacin nicclpauhldo,it nogc opy,
recoorrad niiynn gf,o rsmtaoatrniardoge net rsiyesvtaelm ,
witpheorumtii wsnrs iiftorinton hmpge u blisher.
AcadPermeIisncs c,.
111F tiAhfv enNueeYw,o rNke,Yw o 1r0k0 03
UniKtiendgE ddoimpt uibolnbi ys hed
AcadPermeiIsnc(sc L,.o nLdtodn.)
OvRaola Ldo,n NdWoIn
24/28 ?DX
ISBN:
0-129-57615-3
LriaborCfyo ngCraetsCasal rNodug m ber:
80-69954
Priintnth eUedn iStteaodtAf em se rica
Preface
ThSeoc iSacli e.nc.weh. i cfnihd tsh see croeft
thiUsnv ierisne" supapnldyd eman.d."w e.
mighcta /b/y,w ayo fe minentcheed, i smal
science.
ThomCaasr l(y1l8e4 9)
Ise conomriaeclslt yhde i smsacli enCcaer?l fyilres Dtoe st heimsp haosnic so stst-roanod fefa-sn dl ost
appltihelidas b ael lo ntgi maeg oa,n idht a fsi rsmtluyc okp ponrittuies-ecmoankoem idciss mWaell?ml a,y be;
throtuhgyehe ars.t opTihofece sc onomics-ibnufntle avtboeirroi nnA,gn !di itas l waryeswr adibnogt,ih na n
unemploypmoevnetrts,yc ,a rcitsye-rairtoeou be s ,i ntellseecntsuea flra onamd w orlpodilnyo tf v iew.
surBeu.it ecs onomicst htceoh deaeyra lneddse sp reEssc­onoimasis ac lsi tvoeda asy w ais2t 0 0y eaargswo h en
insgt utdhyat thd ei msalna mseu ggests? AdamS miltaht ihdce o rnerosftt hodeni es msacli ence.
Studednotnses'e tm t ot hisnoEk.c onocmliacssas rees
amontgh meo spto pluaorn A mericcaamnp usEesn.­
rolelnmtisne conomciocusra sreaesta na ll-htiigmhOe. R GANIZATOIFOT NH ET EXT
Bunseissdeosn s'hta trhede i smvailee wi thBeurs.iE ­conoimasil cisav newd e laln,td h is ibdsoe oski gned to
nesisn teirnee csotn omics-lperaehraincnitgne,hga c­,t eylolua b oiuittn t hmeo suts ewfauylp ossiTbol ed.o
inagn,du ndtearsndinkge-eins. thtihsbe o oikds i viidnectdho a ptdeeriaslnw gi tmha c­
Icfo nsumseerees c onomaisac bosr inogrs omberr oeconomiacnstd h odseea lwiintmghi ocecronomics.
topiitcc,'e sri tnahlayr tdot lelN.ew spanpeorl so ngeCrh apt1e-6r1a sr ceo ncewrintethdhp er obloefm st he
hideceo nomiocnts h fei nanpacgieB.aa ln nheera dlinnaetsi oencaolno tmhyse:u bjecmatc rooefc oincoAsm .
annouenccoen oemviecnT thse. Wal/ St(rteehtme od Jeomu arnnaallyo sfmi asc ercoonomoicccsu ptiheess e
economniecwss pahpeargs)r owtnob eth el argseesltcl h­apters.
indga inleyw spaipnte hr eU neidtS tatTeesvl.ie sioTnh de iscuosfms aicornooe ncomiicnts h is ibso oukn ­
newsprofgeraatmeuscr oen omciocrsr espoMnadge­unstusia.nsl e verreaslpe cUtnsle.mi oksott hienrt roductory
azines, lebocotkusdr eeasl,wi inattgnhh d ee c onomtiecx tths,bi oosk taakc eosm pletea tbo ltoohok ft he
woralrdme o rpeo punloawr tehvaebenrf ore. macrcooenompirco bltehmapstl ague ouirn fwloar­ld:
Sttihldeli smlaalbeh la nso bte erne movPeedr.h atpiso ann du nemployOmtehnettre. x utssee conomic
thiibsse cauesceo nommiacksea s busoifnl eososk imnodge ldse sigpnreidm arily ectoon omeeixvcpe lnatisn
gihfotr siens the "mTohueitrnsheo f . r eleu ncsht"a toefst he1 390s-tehxei stoefnh ciegu hn employment
theec onomcirseteE'dvs.e t rhyihnagas c ost. ratTehs.il si emdiv tieiwsn oetn ouignha world of
xiv PREFACE
double-idnifgliatIt nifolna.at niduo nne mployamreenm ti nishrientgur nsa-rweae b le letaora n g readte al
giveenq uawlei ghtth deii ncs usshieornae n,d t hseo lua­bouhto wt heec onomwiocr lwdo rks.
tio(nasn tdr ade-thoaffttsh osseo lutciroenasat repe)a rt Thes tuodfym icroceonomiicsas l sdoid veidi ntfoo ur
andp arcoefol u ar nalysis. partTsh.ef irlsoto aktst heec onomoifec xsc hanagned
Thidsi scusosfmi aocnr oneocomiicsas l suon usualt hiem na rkemte chanitshmasit n ecarsteh eg ainfsro m
itesm phaosnii sn ternaetvieonntFasol.u c rh aptaerres t radAe s.e cond epxaarmti ntehsep robloefmc hoice
devotteodt hep robleomfts r adter,a dbea rrieexr­sf,r otmh vei ewosfc onsumaenrdps r oducienmr asr kets
chanrgaet aensd,t hceo mpaltiecwdo rlodfi tnernatiwointavhla rydienggr eoefcs o mpetiAt tihdoip nra.r lto oakts
econompiocl iTchyi.ds ic sussimoakne s thmiosr et perxotb lems inm arrekseostuusrc,ach se t hosfeol ra bor,
comptleae ndm orer ealitshtaointc h ebro oksa.l sIont a turreaslo uracnedes n,e rgFyi.n atlhlceyo ,n sequences
makecsl eaas ri mpflaeca t k:n owleodfgi en ternatoifom naarlk efta ilaunrdet her oloef g overnment are
economeivce nitsas s i mportiantn otd aiyn'csr easienxgalmyi nferdoa mn e conompiocio nftv i eiwn ftohuer th
interdepewnodrelnadts a knowledogfen ationpaalr t.
economhiacassl awybse en. Inscttrousrhs ounlodt teh awth,i lmea croeconomics
Thee mphaosnii sn flaatnidoo nnu nedrstantdhienp gr ecemdeicsr oceonomiicns ttheixesta ,c dhi visoifo n
concebephtis ntdh eh eadlimnakeests h itsr eatmoefn tth beo oikas c ompletely self-cofnottrah ien ed treatment
macrcooenomiac usn iqaunede xcitoinneg. topic witihdt e wahlTishc.oh sw eh ow isthod os oc an
Thes tudoyfm acronecoomipcrse senhteerdie sd i­swittchhoe r deorfp resaetnitboyns imprleya ditnhge
videidn tfoo upra rTthse.f irlsoto iknsd eptaht tprhoeb ­micrcoh apt(e7r1s- 32fi)r fsotl,l owbeytd h em acro
lemosf i nflaatniduo nne mpmleonyta ndu nloctkhse c hapt(e1r6-s) 1o,rb ys eleccthianpgt ferrosm baorteha s
princtiopololefs the econommairskmteo:td etlh eo offt het exttoc reaat dei scustshiasotun i itnsd ividual
demanadn ds upply. In ptahraets ,is mepcaolgnegd r et­astperse,rf eencaensd,s chedules.
gatdee manadn ds uppmloyd eolft hee conomiysd e­
velopewdh,i cihs utsoee dx lpaitnh ec ausoefsa nd
some cufroerms o derenc onomaiicml entsT.h e
economoifcg so vrenmenfti scpaoll iciisee xsa mneid SPECIFAELA TUROEFST HET EXT
withtihfner amewooftr kh aigsg regdaetmea nadn ds u­pThitse xitno crporasteevses rpaelc ifefatiucr deess igned
plmyo deIlnt. h teh dip rarotfm acrooencomctihsre,o letsom akee siptie calulsye ftuotl h set udepnrteo,sf soarn,d
ofm oneyc,r edaintdi, ne trersatt es are Meoxnpel­ocraesdur.ae la deEra.cc hh aptbeerg iwnist ahP review-a
tarpyo liicdsyi usscseadn dc omparweidtf hi spcoalli csye,ot f q uestitohnawsti lblea nswered cihna pttheer .
andt hem onetaristo fe mcoodneolma icct iviisdt ey­ Chapteenrdsw itahS ummartyh aatll owtsh set udae nt
taileFdi.n altlhyei, n ternatcioonnsaelq ueoncfe csh ancteoq uickrleyp rtihseem atercioavle raendd
economaicct iavrieetx yp leodi rnt hfeo urptahrw th,i chc hectkos eei fa lilm portpaonitna trser et ainEeadc.h
lookstr aadtee x,c hanrgaet aesn,dt hceo nsequeonfc cehsa pteenrd sa,sw ellw,i tah n umbero fD iscussion
thosraet oensn atioencaoln ompiocl icy. QuestioTnhse.sq eu estiboonttshe stth egar spo ft he
Microeconiosmt ihceos t hesri doef t hee conomicco ncejputssptr esenatnedd ask sttoau pdpeltnyht ess e
coiMni.c roeconloomoiakctsts h per obloefsm c arciitdye taosm attenrosdt s icussientd h tee xAt c.h antcoe
andc hoifcoeir ndiviedcuoanlo mdiecc isiaokne-rmsT.e sYto ursceolnfc luedaecsch h aptTehre.ss eo metimes
Thea nalyosfim si coreconomtiackseu sp C haptetrrsi ctkryu e/sftaaltseem geinvstets u deanc thsa ntcoer e­
1-73o2f t hiboso k. vieawn ds tudTyh.ea nswetrots h eqsuee stairopenr so ­
Wheretahsge o aolfm acrcooenomiircseas l tloyl earvndi edi nt hbea cokf t hbeo okA.l sion ucdleidn btahce k
threi gqhute stitohnsest ,u dofym icroeconyoimeilcdossf t heb ooka rea Ii sotfS uggested Further Readings,
somef iramn swerUss.i njgu sat f ewb asitco olsa­llowtihnesg t udetnolt o ok griena tdeerp tahtt he
princispulcaehss t rade-oopfpfo,r tucnoisattny,d d i-theorpireosb,l eamnsdi, d edaiscs ussientd h tee xt,a and
PREFACE xv
Glossoafur nyf ameicloinaorwm oircda sn dp hrases
ACKNOWLEDGMENTS
useidnt htee xt.
Anyw orokft hniast buernee ffriottmsh c eo ntributions
Econoimasil cisv sicnige Tnhciiesd. ei ahs i ghlighted
ofa h osotf indiwvhiodsnueaa mledsson oat,l aasp,­
by tsweoro ife ss pedciisaclu sisnicolniusndt ehtdie sx t.
peart hoteni ptalgeew .a nttot hatnhkae d ministration
Thaen aloyfms aicsr oeconiodsmo itctwsei dts hp ecial I
oft hUeni verosfPi utgySe otu fnodpr r oviadnai tnmgo ­
EconomCiocn trovesresicetsEi iogndshi.tf fdeerbeantte s
spheofrf er eeadnocdmr eatiinv iwtthyowi ocrhtk h,i nk,
arper eseSnpteeadko.en br ost shi deesa codhfe bate
adw riTthea.n gkoas,s w eltlom, y c olles,ae sgpeu­e
prestehnevtii re wwsi,tt hh ree admeark itnhgfe i na�l
ciatlhlteyr oifoE rnCioem bBsr,u Mcaen na,nDd o ug
choiMciec.r ooneocmicchsa pteearcishn clRuedael
GodomanEa.c cho mmenotnte hdce o ncoeftp htte e xt
WorlEd conomiscesc tiHoenrfsei. oc ntainle wspaper
and provided utsoie nfduilv cirhdeauapactlte irosn.s
sto(rmiaebnsay s oenda cteuvaelns thsos)wt udents how
Severreavli eawlesprors o vicdoends trcurcittiivcei sm
econopmriicn cciapbnle ue sset dop reduincdte,r stand,
and detshearnvAke ps a.r aodfee d itoArcsa daetm ic
anedv alhuaaptpeen iinntg hrsee waolr ld.
Press comnutcrahis,bw uetlbelod,ti hn diviadnuda lly
Asa f inal, altnhoootub gvhi soppeuecsri haalp sf ea­
asa g rouFpi.n atlhlayng,ko ts om yw ifSeu,ew ,h o
turteht,ie six wstr ittbeeen a stuionl dye rsJtaorodig.so n
addteodt hwer itoiftn hbgio so ikne vewrayyp ossible.
avoiadnecddo mpelceoxn oimdiecaa rsee x preisns ed
lasbtu,nt o lte atshta,ng kots om ys tudaetnt thes
waytsh maatk teh eema styou ndersTthaiensmd p.h asis
UniveorfsP iutgySe otu nwdh,o w ilgllisyun jebcted
onr eadability healnpdfs o roctfeht eh e power
temseltsvoe xperimmeantteadrlui raitlnh pegr epara­
econoimdiecta oss h otwh rough. � �
tioofnt hisT htibesox otik.ds e dictaott heedm .
1
Macorecnoomic
Problems
Thicsh aptweirli ln trodyuocuet oe conomiicngs e neraanld m acroeco­
nomicisn p articulIatwr i.l gli vey oua betterf eeflo ro urc urrent
econompirco bleamnsd h elypo uu ndersttahneds per oblewmist hai n
historciocnatle xtT.h isc haptewri lplr ovidteh ea nswertso the
followiimnpgo rtanqtu estions:
Whati se conomics?
How doesm acroeconodmiifcsf ferro mm icroeconomics?
Whata reo urc urremnatc roeconogmoiacl s?
Havew e beens uccesisnfa uclh ievtihnegs geo als?
Whati st heP hillips Hcouwrv deo?e si tw ork?
Why hasnt'hte P hillciuprvsew orkerde cently?
4 MACROENCOOMIPCR OBLEMS
Manoyf o umro sitm oprtsanotc piraolb laermfesu ndamlelenyct oanomic
problTeomu sn.d erstthwaeon rdal ndmd a kien tiegleclnhto itcheesr,e fore,
iitns e cestsoua nrdye rsstoamnedt ohfie ncgo nomics.
Iits as otundtionc go nsihdoewmr u cehc onoemviecnh tasvc eo mteo
monopooluitrzi em e iannfdl uoeunlrci evT ehsfe.e dleg roavernwmaesn t
oncper imaarl ialwym aakneddre e fnder.m uNcoohwfC ongretsismi'ess
speantettm ptitnorg ge utleap rospearnidet nyh anecceo nowmeilcf are.
Newspatpheuarstse tdoc ouonnts toroiffe isrm eusdr,e rasn,kd i dnasp ping
toi necarsceic rutliaonnow r ely on pirneifdcltaiatoninudosn n e mployment
statiBsutnsieicssst.eh sao tn csep eanltol f their timeg rwoosrsr ying about
profniotwws o rry abfoigurrtso tns ast ipornodaulcF ta.r maerreesx peirnt s
excharnagtee Psr.i vcaittei wzheonf si vyee ars diadgonk 'ntow t he
difrefenbceet weaep nr irmaeta en dp rai rmiehb a vdesi covetrhetadht e y
musmta stseorm per etstoyp histeiccoantoemdio crsd teoirm n a keev en
relatsiivmepdlleyec iswiiotcnhos n fidence.
Economiisic mspo rtsatnutaff n,dt his ibosdo eks igtnohe edl ypo u
undersetcaonndo emviecn atnsdp olicIitie sts h.ge o alt hotifes x tto
increasue ndyeoruisrtn oagfn o durcu rreecnotn ompirco bletmhse,i r
causaenssd, o me poscsuirbeSlste.r omnegd icihnoewse,voe frt,he anv e
undesisriadebeflfe ecs toas pe ,r fepcrter sicptfiotorhn ee c onommayyn ot
exiPsotl.i tchiareteusd c oen ee conopmriocb lmeamyi nflaanmoet hbee r,
polituincwailsley, uonra chcaevpseto acbciloaenl s ueeqncPeasat.n swers
arhea rtdo cboymb,eu t uannd enrdsitonaftg h oep tiaovnasi lwaibhllelel p
usm akmeo rien teenldtle icgisiinto hncesh oitcheawset face.
Thicsh apwtiealrnl s wseorm bea sqiuce sttihoamntas n syt udents have
regianredgc onomainmcdas c roemciocnason,bd r iedfilsyco uusnrsa tional
econogmoiacal nsd problweimalssll.ot aWkaese h otrrtdi opw mne mory
lane aws imtadhlo lso efr eceencto nohmitisocr tyoh elypo uu nderstand
nootn lwyh atto dapyr'osb laermebs,u h to ww eg ohte raesw ell.
Suppoysoewu e rteop osteh qeu est"iWohnai tes c onomtioca hs u?n"ed dr
WHAT
"peopolnte h se treienat " m ajocri tiyn aatnt etmopf ti nodu wth at
IS
economiiascl aslbo utT.h rese ulmtisg ht be lseoi mktehtsohhsioenwi gnn
ECONOMSI?C
Tab1l1e- .
Mosotft hpeeo plieno uhry potthiecsaalm pglreo duopn h'atv aev ery
cleiadreo afw haetc onomiiasc laslb out.a sl Buucwtko ulhda viet , one
econompircosf esstsuomrb ilnettdoh s ea mpalnedg avues t htee xtbook
WHAT EICSO NOMICSl
5
TABL1E- 1
WHATI SE CONOMICS?
Response Percentraegsepo nding
"Economiist chsse t uodfyt hpreo ductainoddn i striobfu tion
goodsa ndserv ices ina worolfds carrcees ources." 1
"Econoimsi cbslu iskien esst-omh aokwae buck." 37
"Economiisacl alsbo utin lfaiton andu nemployamnedsn ttu ff
litkhea t."
23
"Economiisca s b uncohf c hartasn dg raphs."
1
6
raeldloyn k'nto w." 15
"I
"Leamveea loonreI 'clall alc op." 6
defini"tEicoonn:oi mstih csest uodfhy o ws ociecthyo otsoep sr oduacned Economicsa: s ocsicaile dnecael ing with the
produacntdi ond isotfrg ioboudtsi oann d serv­
distrgioobdusat neds erviicnea ws o rolfds carrcees ourEcceosn.o"mi isc s
icieansw orolfsd c arrecseo urces
essentainaa lnlayl yosfci hso icHeosw.d oess ocicehtoyo wshea tto
produacnehd o wt oa llotchafetr eu oiftt hspe r oduction process? Since our
resourcleism iawtreece da ,n nporto duacltelh iongrss a tiasldfley s ires. We
facteh per obloefcm h oiEcceo.n omhieclsup ssu nderstancdh otihceesse
andt hter adet-hoaafftrsm e a dweh eneavc ehro iicsme a de.
A lootft hpeeo plieno uhry pothetpiocltalhl o utghhaettc onomwiacss
basicbaulsliynI enas s se.n steh,ai nss wiescr o rrIencm ta.r ketec onomiesMa rl<ete conomya: ne conosmyisctw ehme re
produacntddii osnt ridbeuctiisaorimneoa ndse
likteh e Unitebdu sSitnfaeitsresms s, makoeft hmpeor sodtu ctainodn
in delciezmneatdrr kaets
distridbeuctiisoTinho endiser.c isairomena sdi enr espontsooe u wri shes as
expreisnst ehde markIesfto .c iweatnyst ksa tebionasrtdoesfoa pedr a,
free
thefni rwmislr le spotnodt hper ofaivtasi liansb klaet eboparrodd ucatnido n
thleo ssiensh erienon petr aa nda llocsactaerr cees ousroca ests os atisfy
society's Wdee "sviortfeeos"wr. h awte w anwti tohu rd ollianrt sh e
market.
Inac ommaencdo nomtyh iinsso tth cea sAec .o mmaencdo noimosyn e Command economay:n ecownhoemrpyer o­
whereec onodmeciics imoank iinscg e ntrailnai g zreoduo pfp lannneortsd ,u ctainoddni stridbeuctiisaoirmnoea n dsbe y
centprlaalns n er
decentraamloinizgne ddi viadnudfa ilrsam sis n a m arkeecto noImnyt .h e
commaecnodn omnye eadrsde e ciadnedcd h oimcaedsbe y p lannaenrds ,
busineascmstee rse tlocy a roruytt h "ep lan."
A numbeorf pe oplieno uirm agipnoalrslya itdh aetc onomwiacsts h e
studoyfi nflaatniduo nne mployTmheinistst . r uteoo,. I nflaatnido n
unemployamretenh twteo most visibelceo nnoapmtriiocob nlatelhm ast
wef acMeu.c ohf t hbioso ikds e vottoea dna naloyfts hicsea usaenscd u res
ofi nflaatniduo nne mployment.
Sevepreaolp rlees pondtehdae tc onomiisjc usas b tu ncohfc hartsa nd
6 MACROECONOPMRIOCB LEMS
grapThhse.s e poor ofbovlikosbeu eshnlea yxv peo sead c otuor isne
economsiocmse whaelroetn hgle ei .nE conomliosvctehs a ratnsdg raphs
Modeslism:p ldiefsicerdio pftr ieoanls- wborelcda eucsoen omliosvmteos d e.El csonomuismseot dse tloms a kteh weo rld
procedsesseisgt noi endc rtehauesn ed erstmanodr­uen derstaAnm doadbeilljse u .as s ti mipflicaBtyti aoknai.c n ogm plex
inogfr eal-bewhoarvlido r
procaensdrse udciinttgo i tssmi plefsotr mwsec, a nus elflauyn altyhzee
actiaonndis n teratchtaaitrop eno ss sainbdll eei lkyWe. c anl eamronr e
frotmh is isfiipmeipdc lttuhrawene e vecro ublyds tariincn ogn fuastti hoen
exetmrecloym plperxo cetshstaehtsm e od eld escribes.
Thiboso ku sesse vlemr odaels itiasnt tetmopu tn covtehreb asic
workionftg hsne a tieocnoanlo Tmhyfe.i rstm osduetclhh,me a rkmeotd el
ofs uppalnydd e manadp,pe airnts h nee xcth apter. Obuerc amuosdee ls,
theayr sei mipclaitficoannsneo,mt b odaylo lft hdee toafit lhre e law orld.
Somethiilsno gis ntt hter anslBautatis wo en .ga ol ownegw ibluli olnd
thessiem ipclaitfuinotnaistl ,t hoef t hetene dxw tew, ihlalv aes impyleet
accurmaotdeeo lft heec onopmrioeccs s.
MACRO­Microecoannodmm iaccsrc ooenomaircneso t otpwpoo ssicnhgoo olfs
economIincsstt.eh aeadyr t ew doi ffewraeynostfv ieweicnogn oemviecn ts.
VERSUS
Microecofnocoumsioecnsis n divdiedcuiaslMi iocnrso.e coansokmsi cs
MICROEOCNOMISC
questliiokHneos:w m ucshh oualf di rpmr oduacnesd elWhla?pt r iwciel l
be chrage?Hd owm uclha bwoirtl hlfe i rhmi rHeo?ww icloln sudmeecrisd e
Microecontohmseit csu:d yi nodfi veicdou­halo wm uchs pteoan nddh o wm ucthos avTeh?ee m phaisosin is n dividual
nomdiecc isfioocnusos nim nagr keptsr,o duc­
choictehfsea, c twohrisci hn flutehneccsheeo icaentsd,h t er adet-hoaffts
tioann,cd o nsumer behavior
musbtem ade.
Trade-off:o ccwuhreson n iet eomrg oal bmeu stM acroeconoomnti hcoest ,h hearn d, alttoo hkbesr oaids soufet sh e
givuepin no rdteoor b tiaann otihteeormrg oal
natieocnoanlo Imetyx. a minnoeitsn divaicdtuiaoln s,c obmubti ntehde
Macroecontohmseit csuo:df ty h feu nctioinmianpcgt osf thiensdei vaicdtuiaoIlnn ss.to efaa ds king muhcohaw n
oft he naetcioonnoamly
indivfiidrwumia sllel lm alc,r cooenomtircitseod s ee trmihnoewm ucthh e
econoamsay w holwei plrlo duacnesd e lWhle.r mei ocercnoomimcisg ht
be interienws htaeddtee trminepsr itochfoee i l maankdei srt i osref l al,
macrooencomiicissn e tsetriewndh adtee trmitnhegese nelreavolef pl r ices
andc ausiensf loartd ieofnl aWthieornme.i ocerconiocmissi nterienst ed
howm anrye souars ciensfg ilruems emsa,c rcoeonomiiiscn set setrietndh e
natieomnlpaoly maenndut n emplooyfmr eensto urces.
Macraon-dm iocercnoomihcasv meu chi nc ommotnh;e fyo couns
dffierepnatr otfst hse amsec enMei.oc erconiocmlso oaktst hte rees,
macroneocmoiwcast chtehfseo reEsatc.h ivsii nefwo rmaantdui svelef. u
Thibsoo cko ncentprraitmeaosrn mi alcyr oneocmoics.
MACROOENCOMICGSO ALASN DP ROBLEMS 7
In1 496C ongroefisfsc iaplultty h en atiionntt oh em acroeconoMmiAcCsR OECONOIMCS
businTehseEs m.lp oymAecnottf 1 496s emta crooneocmgioca flostr h e
GOALS
natiaonmnda dteh fee degroavrlen mernets psoinbfloterh aec hievoefm ent
AND
thogsoea ls.A crtTe hdaesi ,np art:
PROBLEMS
TheC ongrehsesr edbeyc latrheasit ti st hce ontinpuoilnigac nydr espsoin­
biliotfty heF ederaGlo vernmenttou sea lplr acticmaebalne.s . t.o
promomtaex imuemm ploymepnrto,dcu tioann,dp urchaspoiwnegr .
Thegsoea alrsde i fftioac cuhlviteae nadr seo metmimuetlsul acyo ntradicto­
Wec arne sttahteems aec rooneocmoibcj ecatsif voelsl ows:
ry.
GOAL1 :F ULL EMPLOYMNET.T hef irasitom f n atieocnoanlo mic
poliitcsoy a titnha iglhe voefel msp loy(mweinrtteh s ulltouiwnn eg myp­lo
menrta teTsh)ii.sasd iffigcouatlloat c hviee because uniesm pnlooty ment
as impplreo blTehmep. r eidcamoefna tno ut-ofm-awcohrikisi ntsm uch
dffierefnrtot mh aofta nu nslkeildla boorrae c ro llegset udjeunestnt t ering
thjeo mba rkEeatc.mh a ybe unemlpoyebdue,ta cihsu nemopylefdo ar
differreensato n. uSnienmcpel oiyrsme eanmltal nydy i ffeprreonbtl neomts ,
jusotn ei,tw ilrleuq ier mandyi fferesnotl utiownsi.ld li sWcetu hses
probolfeu mn emploaytml eenntgi tnCh h ap3te.r
GOAL2 :E CONOMIGCR OWTH.F uelmlp loyimase nuts egloeaislfs
thersees ouarrcee spn uottto a productuisveTe.h eD eprseiso"nm ake­
works"c hem(elesdi ikggdiintgca hnetdsh efni ltlhienimgtn o p rovwiodrek
fodre spemreanth)ee ldpe achoiuefrvi erg sotab lu,at d dendo thtiotn hge
econoTmhyee.c onommuysg tr ow parnouddc timounsr ti stehC,eo ngress
telulsis,wf e a rteo s ustoauirn loefev ceoln owmeilcl -beTihniggso. a l
transtloaag toeaoslf rriesgairolns gns atipornoadl(u RcGtN RPe)aG.lN Pi sR eal natipornoadl(u RcGtN Pa)m :e asure
am easurteh aeom fo utnhta te caonn opmryo duicnaey se aErc.o nomoiftc hgt roseos t aanln uparlo duicntain eo cno nomy;
thGeN Pa djustiendf lfbaoyutr sio eoft n h GeN P
grow(trhi sRiGNnPg)m aybe thbees tw ayt oi mprovteh wee lfoafr Ien dex
low-ingcroomuwepi st han iant iSotnu.dh iaevsseh owtnh tahtde i sadvan­
tagceadbn e sitne carsteh esihrao rfte h nea tipoinweah le tnh een etp iiries
grwoinIgna.g roiwnegc onoemvye,or nyes'ilsco eft hpei cea inn craeta se
thsea mtei mIena.s tagnoarsn htr inekcionngow moircls do,mm eu slto se
thoatth egrasi n.
so
GOAL3 :S TABLEP RICEHSi.ge hm lpoymaenntdr ispirnodgu ction
maym ealnti tilfe inefrloadtoeiusogr na iAn s.c ondoifst tiaobpnrl iec es
(loiwn flatciloenan)re lciyes si sna roytr oad cehri tehvgeeo aolf" maximum
purchaposwienrg. "