1. Macroeconomics & the World Economy
Day 1 – Macroeconomics
Sometimes bigger IS better

2. Objectives Understand the difference between Macro and Micro Economics
Terms:
Microeconomics
Macroeconomics
Fiscal Policy
Identify the 3 Measures of Performance
Conservative
Liberal
Monetary Policy
Compare inflation and deflation
Inflation
Deflation

3. Remind Me… What is the goal of Government in Economic Transactions?
How do they accomplish this?
How are governments NOT like businesses?
Today… what happens if we’re looking at larger countries, or the economies between countries…. Things are about to go MACRO

4. Two Types of Economics…
Micro
Macro
What we’ve been studying mostly
What we began with Governments
Individual Behavior
Aggregate (or total) behavior
Consumers, Producers
Governments and Countries
Small pieces
The entire Puzzle

5. How KFC is doing =
How all restaurants are doing =
What Sesante wants to buy =
What all Cadets are buying =
How an entire country is doing =
How the world economy is doing =
Micro
Macro
Micro*
Both
MACRO

6. Principles of Macroeconomics
How do we measure success in Macroeconomics?
Can we judge governments the same way we judge businesses?
3 Measures of Performance
Output (GDP)
Unemployment
Inflation

7. Principles of Macroeconomics
We will discuss GDP on Wednesday, and Unemployment next week, but the way a country is “graded” in Macro is…
3 Measures of Performance
Output (GDP)
Unemployment
Inflation

8. Principles of Macroeconomics
So governments, are usually in charge of running a “Macroeconomy” (Economy as a whole)
How do they do this?
Fiscal Policy
How a government changes spending levels and tax rates to influence the Economy
i.e. we need more “growth” and we charge less in tax so people will spend

9. Fiscal Policy Some are very Conservative Some more Liberal
They spend very little (get involved very little)
Some more Liberal
Spend a lot (and get involved a lot)
These are also where those terms come from politically…

10. Monetary Policy
Governments can also control the actual supply of money
Monetary Policy
How a Central “Authority” changes the money supply
Wait… how is that even possible?

11. Monetary Policy
We don’t mean just printing and giving out money, necessarily. We are talking about the “money” available to be borrowed.
Banks, you see, borrow money from a central source
In the U.S. it’s called the Federal Reserve
How much they are willing to loan affects how much banks are willing to loan, and that affects interest rates, homes, etc.

12. Monetary Policy
If the money supply grows too fast, inflation will result
A general increase in price
Decrease in purchasing value of money
If it grows too slowly, economic growth will slow down
So what does that actually mean? …

13. Inflation
Do NOT confuse it with just the price of one good going up (like gas prices)
But, for example, in 1950 a bottle of Coca-Cola was $0.05
Average in 2017 was $1.32
What’s the difference? Did the product change? Did the cost change?
NO, in fact the average price of ALL products has changed proportionally since 1950
Deflation is the opposite – the purchasing power of money increase, and average price decreases

15. Next Time…
GDP – How it measures an Economy as a whole and where does the U.S. rank
And Next Week – The Labor Force
And THAT will be it for Economics 101 

16. Objectives Understand the difference between Macro and Micro Economics
Terms:
Microeconomics
Macroeconomics
Fiscal Policy
Identify the 3 Measures of Performance
Conservative
Liberal
Monetary Policy
Compare inflation and deflation
Inflation
Deflation