1. the Science of Macroeconomics

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Mikro Ekonomi Mankiw Chapter 01
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  1 Chapter One      CHAPTER 1 The Science of Macroeconomics ® A PowerPoint   Tutorial To Accompany   MACROECONOMICS,   6th. ed. N. Gregory Mankiw By Mannig J. Simidian  2 Chapter One      I would like to thank Greg Mankiw for creating another macroeconomics masterpiece! It is none other than an honor to be a part of his prolific work. To Mike McElroy (North Carolina State University), I express eternal gratitude for his continued interest in my endeavors. For almost 10 years, he has been reading and contributing to my macroeconomics modules. I also want to thank Mark Rush (University of Florida), David Denslow (University of Florida) and “the director” for making my earliest experiences in economics so entertaining. Jeffrey Frankel (Harvard University), Ed Tower (Duke University), and Roberto Rigobon (M.I.T) also encouraged my love for economics. I thank Peter Max, America’s painter  -laureate, for all he has taught me through his wisdom and art. Lawrence Brockman, D.M.D, an economist in spirit, has been my teacher and great friend throughout the years. Thanks go to my former colleagues at the Massachusetts Institute of Technology (MIT), Michele Rubino, Guido Meardi and Stewart Brazil. I also thank Franco Modigliani (MIT) and Rudi Dornbusch (MIT) posthumously, for their courageous tutelage until the very end. I also want to thank my sweet two year old daughter Elle (perhaps a future economist) for being my beautiful inspiration in teaching macroeconomics. Of course, I thank my Dad for his best friendship and unending love and support. Through the thousand hours of discussing economics and business, he showed me how love and learning are inextricably linked. Mannig J. Simidian January 2006  Acknowledgements  3 Chapter One    Everyone has reason to think critically about macroeconomic issues. It is imperative that we seek to understand why some countries are growing faster or slower than others or why some have greater fluctuations in inflation or unemployment. The state of the macroeconomy affects everyone  in many ways. It plays a significant role in the political sphere while also affecting public  policy and societal well-being, at the national and global levels. Some of the most important variables macroeconomists use to measure the performance of the economy are real GDP, the inflation rate, and the unemployment rate. Macroeconomists are also concerned with matters such as monetary and fiscal policy  —   both of which, will be discussed at length in Macroeconomics, 6th ed.,  Mankiw’s Macroeconomics Modules,   and in your macroeconomics course. Good luck!   Welcome to Macroeconomics!  4 Chapter One    Economists use models   to understand what goes on in the economy. Here are two important points about models: endogenous variables    and   exogenous variables  . Endogenous variables are those which the model tries to explain. Exogenous variables are those variables that a model takes as given. In short, endogenous are variables within a model, and exogenous are the variables outside the model. Price Demand   Q * P Supply   Quantity * This is the most famous economic model. It describes the ubiquitous relationship  between buyers and sellers in the market. The point of intersection is called an equilibrium.
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