Macroeconomics analyzes how policy changes and economic shocks affect the economy as a whole. Because it is grounded in microeconomics, which studies issues that individuals and firms are concerned with, this chapter begins with an introduction to basic microeconomic principles. The production possibilities frontier (PPF) is used in the subsequent section to introduce macroeconomics, and to acquaint readers with concepts like GDP, potential output, unemployment, and the natural rate of unemployment. Since macroeconomic performance is assessed using these and other macrovariables, they are covered in great depth in the final section of this chapter.
Basic Microeconomic Principles
Microeconomics studies the ...
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