Macro 2/3/25

Introduction to Macroeconomics

• Overview of Course

  • Macroeconomics focuses on economy-wide phenomena.

  • Continuous learning is encouraged; even the instructor is constantly expanding their knowledge.

  • Commitment to stay within the framework of introductory principles of economics.

Structure of the Course

• Weekly Topics

  • Deep dive into various topics step-by-step throughout the semester.

  • Future chapters will address:

    • Long-run economic growth

    • Inflation, deflation, and price stability

    • International macroeconomics and trade deficits.

• Key Learning Expectations

  • Students are responsible for homework and assignments based on the primary textbook by Krugman (7th edition).

Macroeconomic Fundamentals

• Distinction Between Macro and Micro

  • Macroeconomics: Studies the economy as a whole (aggregate focus).

  • Microeconomics: Examines individual consumer and producer behaviors.

• Business Cycles

  • Understanding fluctuations in economic output, including recessions and expansions.

  • Policymakers' roles in stabilizing economic fluctuations.

Key Economic Indicators

• Current Economic Health Discussion

  • Class engagement discusses the current state of the U.S. economy.

  • Factors influencing economic conditions include market performance and inflation in grocery goods.

Economic Recession and Recovery

• Identifying Economic Trends

  • Recognizing signs of a recession versus a boom; questioning whether the economy is in decline or stable.

  • Past case studies include the 2008 recession and historical references to economic downturns.

• Recession Characteristics

  • GDP decline and rising unemployment indicates recessionary periods.

  • Recovery involves policies aimed at stimulating economic growth.

AS-AD Model Introduction

• Aggregate Supply and Demand Model (AS-AD)

  • Foundation for understanding how macroeconomic theory maps out economic conditions.

  • Interaction of aggregate supply and demand determines overall output and price levels.

Business Cycle Components

• Expansion, Peak, Recession, Trough

  • Expansion: Period of growth in economic output;

  • Peak: Max economic performance before a decline;

  • Recession: Decline in national output;

  • Trough: Lowest point in economic activity before recovery.

Demand and Supply Response

• Policy Responses to Economic Changes

  • Policymakers use fiscal and monetary policy to stimulate economies during downturns.

  • Policies include adjusting interest rates and government spending.

Historical Context and Economic Theories

• Classical vs. Keynesian Economics

  • Classical economists believed in limited government intervention.

  • Keynesians argue for government spending to reactivate economic activity during slumps.

• Impact of Government Policies

  • Notable historical movements include responses to the Great Depression and recent events.

  • Understanding the role of fiscal stimulus during crises like the COVID-19 pandemic.

Long-Run Economic Growth

• Importance of Sustained Growth

  • Long-run growth leads to improved living standards and technological advancements.

  • Historical growth comparisons highlight the U.S.'s development trajectory relative to other nations.

Conclusion

• Further Exploration

  • Upcoming classes will delve deeper into inflation and changes in economic activity.

  • Continuous encouragement to engage and understand the broader economic environment.

• Closing Encouragement

  • Students are thanked for participation and reminded of the importance of questioning and critical thinking in economics.