Principles of Macroeconomics/Macroeconomic Principles

SECTION 1 Overview of economics
A study of economics usually begins by dividing the subject into microeconomics and macroeconomics. The former focuses on the exchanges between consumers and firms in markets for goods and services. In contrast, the latter focuses on exchanges that occur across all markets within a country, taking into account the interrelated actions of consumers, businesses, government agencies, financial intermediaries, and global trading partners as they exchange resources, goods, and services as well as facilitate currency and quantity flows.

Furthermore, microeconomics concerns itself narrowly with the profit maximization goal, and macroeconomics addresses what should be done to achieve a greater, broader set of goals. Moreover, a feature common to a successful study of economics is your ability to distinguish changes that occur moving along a curve versus those that occur shifting a curve outward or inward.

1.1 Basic introduction to marketplace economics

1.2 Markets in aggregate form: An introduction to macroeconomics

SECTION 2 Macroeconomics: Goals, measures, and challenges
A major focal point of macroeconomics is the total output generated within an economy. Measurement of that output includes Gross Domestic Product (GDP), which is the dollar value of all final goods and services produced within a nation's borders during the course of one year. Macroeconomics also focuses on the difference between nominal GDP and real GDP. The latter version removes the effect of inflation, which increases its importance as a useful measure because total output might be increasing in terms of current dollars but not in constant dollars.

Economic growth, which is the increase in real GDP over time, is one of three major goals. The other two goals are full employment and price level stability. Fiscal and monetary policies, which are introduced in Unit 5, are formed, implemented, and evaluated against those three goals. You will likely find that macroeconomics focuses on what should be done to achieve those goals as opposed to what is done. Accordingly, this unit and those that follow will uncover scenarios and philosophical debates about the role of government in a market-based economy and whether the GDP is an accurate measure of societal well-being, quality of life, and the standard of living.

2.1 Rationale for GDP: A monetary measure

2.2 Avoidance of double counting

2.3 Calculating GDP: Expenditure and income approaches

2.4 Calculating nominal GDP vs. real GDP

2.5 Problems using GDP as a measure of well-being

SECTION 3 Unemployment and inflation
Most individuals probably understand the economic concepts of unemployment and inflation. Unemployment reflects the number of people out of work who are actively seeking work, and inflation indicates an overall rise in the price level of most, but not all, goods and services. This unit will give you a deeper look at these concepts, as well as their interrelationship.

Consider first that inflation erodes the purchasing power of the dollar - or any other monetary unit, like the euro, yen, or pound. By distinguishing between nominal income, or the actual amount of money, and real income, or the amount of goods and services it can buy, macroeconomics helps measure the effects that inflation has on an economy and on its constituents' standards of living. Second, consider some details about unemployment. There is the labor force, which includes both the employed and unemployed, or those able and willing to work but not currently working, and those not in the labor force, including full time students, nonworking spouses, and retirees. Third, adding another layer of evolving depth, this unit defines and describes three types of unemployment: frictional unemployment (or temporary unemployment); structural unemployment (affecting whole sectors of the economy); and cyclical unemployment (caused by downturns in the economy).

To better understand the interrelationship between unemployment and inflation consider the following unlikely event. Suppose everyone who was seeking a job got one tomorrow, began earning income, and spent their income. As it would take longer for the products to arrive in retail stores, there would be a lot of money chasing a few goods. Consequently, unemployment would fall and the overall price level would rise. Gaining further depth in the progression of this course, the differences between our expectations for inflation and our observations of it tend to reinforce the notion that expectations play a large role in macroeconomics.

3.1 Measuring unemployment

3.2 Types of unemployment

3.3 A macroeconomic goal: Full employment

3.4 Inflation, hyperinflation, deflation, and stagflation

3.5 Redistributive effects of inflation

3.6 Money illusion

3.7 Measurements of inflation

3.8 Tensions between macroeconomic goals: Price stability and unemployment

3.9 Inflation trends and causes: Demand-pull inflation and cost-push inflation