Welcome to Unit III. In this Unit, we are moving more from microeconomics (the study of the individual) to macroeconomics (the study of the economy as a whole). In Unit III, you will examine the different ways we can calculate the final price of a product (using the value added and income approaches). We will also look at how to perform the calculations of several key economic indicators that show us the health of an economy. These economic indicators are used every day by policy makers when making decisions. In particular, you will find much news today regarding net exports. Pay special attention to how net exports are calculated as it will help you understand why there is such a debate over trade policy in today’s economic environment.
Along with calculating the final product price and key economic indicators, we will also begin discussion of inflation. Inflation is nothing but the rise in all prices over time. You will be asked in the Unit III Assignment to calculate the consumer price index and indicate the level of inflation for specific goods. Take your time on this question. While the information is detailed, the calculations are relatively easy to make and are spelled out in the textbook.