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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
Copyright:Attribution Non-commercial


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1Chapter Three 
CHAPTER 3National Income:Where It Comes From and Where It Goes
A PowerPoint
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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