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Macro Economics Cheat Sheet (DRAFT) by

2nd year econ

This is a draft cheat sheet. It is a work in progress and is not finished yet.

10 Macroe­con­omics principles

#1 Trade-offs are a given
The world has scarce resources: time, oil, food. When we choose to do one thing, we sacrifice another.
#2 Opport­unity Costs
The cost of something is what you gave up to acquire it. I.E. "The next best thing" It is almost never just a monetary cost
#3 Rational People Think at the Margin
Rational People (Rational Choice theory): Assumes that people act in a manner that gives them the greatest benefit in the most logical way that are in their best self interest.
Marginal thinking/ change: Small and often increm­ental adjust­ments
#4 People respond to incentives
Incentive: A thing that motivates or encourages someone to do something. It can be both positive or negative (bribe­/pu­nis­hment)
#5 Trade can better everyone
#6 Markets usually are a good way to organise economic activity
They may not always be physical locations (e.g. online)
#7 Govern­ments can sometimes improve market outcomes
E.g. Property Rights (Allowing people to exercise control over scarce resour­ces), laws etc.
#8 A country's SOL depends on its ability to produce goods and services
#9 Inflation
Prices rise when the government prints too much money
#10 Society faces a short-run trade-off between inflation and unempl­oyment
See the Phillips curve


Chapter 1:

SOL = Standard of Living

Phillips Curve = A curve that shows the short-run trade-off between inflation and unempl­oyment

Business Cycle =