Micro & Macroeconomics: Concepts and Key Indicators
Microeconomics
Focuses on the analysis of individual units within the economic system, such as households and firms. It examines how these units make economic decisions and how they interact in markets.
Macroeconomics
Studies the overall performance, structure, and behavior of a country's economy as a whole. Key macroeconomic objectives include:
- Inflation < 2%
- Higher GDP growth
- Full employment
- Fair income distribution
- Balanced budget (no deficit)
National Accounts
A system of interconnected accounts that records the evolution of fundamental economic data for a country.
Key Economic Indicators
GDP (Gross Domestic Product)
The value of all final, legal goods and services produced within a country's borders in a given period (usually one year), regardless of the producer's nationality.
Inflation
A sustained increase in the general price level of goods and services.
Types of Inflation
- Demand-Pull Inflation: Occurs when demand for goods increases without a corresponding increase in supply.
- Cost-Push Inflation: Occurs when rising production costs (e.g., labor, raw materials) lead to higher prices for finished goods.
- Expected Inflation: Occurs when economic agents anticipate future price increases and adjust their current behavior accordingly.
GNP (Gross National Product)
The total income earned by permanent residents of a nation. The key difference between GNP and GDP lies in the geographic criterion: GDP considers location of production, while GNP considers nationality of the producer.
NNP (Net National Product)
GNP minus depreciation (the wear and tear on capital goods during production).
NI (National Income)
GDP minus depreciation (similar to NNP, but derived from GDP instead of GNP).
Personal Income (PI)
The total income received by households before taxes.
Disposable Personal Income (DPI)
The income households have available to spend after paying taxes.
Needs and Goods
Classification of Needs
- Importance: Vital (primary) or secondary
- Source: Individual (natural or social) or collective (group, private, or public)
- Relevance to Economics: Economic or non-economic
Maslow's Hierarchy of Needs
- Physiological
- Safety
- Social
- Esteem
- Self-Actualization
Types of Goods
- By Achievement: Goods or services
- By Character: Free or economic
Classification of Economic Goods
- By Function: Consumption (durable or non-durable) or capital
- By Degree of Processing: Intermediate or final
- Relationship to Other Goods: Complementary, substitute, or independent
- By Use: Private or public