Economics notes - free study

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Competing schools of economics in 1992: post-Keynesian eclecticism, monetarism, rational expectations,

Chicago libertarianism, Marxism, and radical economics (which of those are still significant today? What
other schools have emerged since then?)

A loose list of economics giants: Adam Smith, Karl Marx, John Maynard Keynes, Milton Friedman, James
Tobin, Robert Lucas, Hyman Minsky

Books worth reading: "The Wealth of Nations", :The General Theory of Employment, Interest and
Money", "Das Kapital"

PART ONE: BASIC CONCEPTS

Chapter 1 - Introduction

A general definition of economics:

"Economics is the study of how people and society choose to employ scarce resources that could have
alternative uses in order to produce various commodities and to distribute them for consumtion, now or
in the future, among various persons and groups in society."

· Economics is vitally concerned with the measurement of important phenomena -

unemployment, prices etc.

· Macroeconomics - the branch of economics concerned with large-scale or general economic

factors, such as interest rates and national productivity.

· Microeconomics - the branch of economics concerned with single factors andthe effects of
individual decisions.

· GNP (Gross National Product) - one of the best summary measures of the real economic
performance of a country; the total value of all finished goods and services produced by a
country's citizens in a given financial year, irrespective of their location.

· NEW (Net Economic Welfare) - a proposed alternative national income measure that attempts to
put a value on the costs of pollutiom, crime, congestion, and other negative spinoffs, in order to
find a better measure of true national income.

· The two main fuctions of economics:

1. Describing, explaining, and predicting the behaviour of production, inflation, incomes.

2. Improving economic performance.

· Normative economics - economics that focuses on the value judgments, or what the economy
"ought to be"

· Positive economics - an objective stream of economics based on facts which cannot be approved
or disapproved.