1. A Preview of
Macroeconomics

2. MACRO Topics Requires a theory of the whole economy Important
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

3. Put on your “Big Picture Glasses”

4. Growth and fluctuations during the last forty years

5. Important Definitions

8. Employment growth slows during recessions

9. Unemployment rises in recessions

10. Inflation falls during and after recessions

11. Interest rates rise before recessions and fall in recessions

12. A Longer Historical Perspective

13. Unemployment was massive during the Great Depression

14. 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

15. The Spending Approach Example 1998.3 (billions of dollars)

16. 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

17. End of Lecture