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Chapter 3.ppt

Chapter 3.ppt

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Published by Sneha Raut

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Published by: Sneha Raut on Oct 27, 2013
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1Chapter Three 
 
 
® 
CHAPTER 3National Income:Where It Comes From and Where It Goes
A PowerPoint
Tutorial
To Accompany
 
MACROECONOMICS, 7th. EditionN. Gregory Mankiw
Tutorial written by:
Mannig J. Simidian
B.A. in Economics with Distinction, Duke UniversityM.P.A., Harvard University Kennedy School of GovernmentM.B.A., Massachusetts Institute of Technology (MIT) Sloan School of Management
® 
 
Chapter Three 
 
Copyright 1997
 Dead Economists Society
 
It is a quite simple but powerful analytical model built around buyers and sellers pursuing their own self-interest (within
rules set by government). It’s emphasis is on the consequences
 of competition and
flexible wages/price
 
for total employmentand real output. Its roots go back to 1776
 —to Adam Smith’s
 
Wealth of Nations
. The
Wealth of Nations
suggested that the
economy was controlled by the ―invisible hand‖ whereby the
market system, instead of government would be the bestmechanism for a healthy economy.
 
3Chapter Three 
 
The heart of the market system lies in the
―market clearing‖ process and the
consequences of individuals pursuing self-interest. In this module, we will develop a basic classical model to explain variouseconomic interactions.

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