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Macroeconomics

A Preview of Macroeconomics Topics Economic Growth Economic Fluctuations Inflation Unemployment Monetary Policy Fiscal Policy Requires a theory of the whole economy not one firm not one consumer not one industry not one market Important Different Fascinating Even controversial

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Macroeconomics

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  1. A Preview of Macroeconomics

  2. Topics Economic Growth Economic Fluctuations Inflation Unemployment Monetary Policy Fiscal Policy Requires a theory of the whole economy not one firm not one consumer not one industry not one market Important Different Fascinating Even controversial MACRO

  3. Put on your “Big Picture Glasses”

  4. Growth and fluctuations during the last forty years

  5. Important Definitions

  6. Employment growth slows during recessions

  7. Unemployment rises in recessions

  8. Inflation falls during and after recessions

  9. Interest rates rise before recessions and fall in recessions

  10. A Longer Historical Perspective

  11. Unemployment was massive during the Great Depression

  12. Measuring GDP • Look at the most recent GDP (CNNfn) • The market value of all the final goods and services newly produced in a country during some time period • Three approaches to measuring GDP • Spending • Income • Production

  13. The Spending ApproachExample 1998.3 (billions of dollars)

  14. Key Ideas of the Spending Approach • keep your eye on the ball: we want to measure production • four spending groups: • households, firms, governments, foreigners • consumption by households • investment by firms • why add inventory investment? • why add net exports? • government purchases only--not transfers

  15. End of Lecture

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