Principles of Macroeconomics

Learn what GDP measures, including its definition and components (consumption, investment, government spending, net exports), and how GDP relates to standard of living and real versus nominal GDP.

Outline the GDP components - consumption, investment, government purchases, and net exports - excluding transfers. Explain how real and nominal GDP adjust for inflation using the GDP deflator.

Explore how the consumer price index measures inflation using a fixed base year and a standard basket of goods. Compare CPI with the GDP deflator and learn practical calculation methods.

Explain how the CPI underpins indexing of Social Security and show why it overstates inflation due to substitution, quality changes, and new goods bias. Note costs such as tax distortions.

Explore how labor market measures—unemployment rate and participation rate—reveal economic health, and examine frictional and structural unemployment, its causes, and policy responses such as training programs.

Explain how unemployment is decomposed into structural, frictional, and cyclical components, define the natural rate, and show how marginally attached workers and involuntary part-time workers reveal a weaker labor market.

Analyze physical capital, human capital, natural resources, entrepreneurship, and technology as drivers of GDP per capita within the Solow growth model.

The lecture shows how the capital-to-labor ratio grows through investment, offset by depreciation and population growth, with savings and total factor productivity shaping the steady-state and standard of living.

Explore convergence theory in macroeconomics, focusing on conditional convergence and how savings, productivity, technology, depreciation, and population growth influence steady-state growth and consumption.

Examine how labor supply and demand determine equilibrium wages, highlighting diminishing marginal product of labor, fixed capital assumptions, and marginal cost in a competitive market.

Explore labor supply and demand, including substitution and income effects, shifts in supply and demand, and the impact of the minimum wage on employment and wages.

Explore how consumption and savings interact in the two-period consumer model, linking income, wealth, and interest rates to explain saving behavior and the present-value lifetime budget constraint.

Examine a two-period consumption model with a downward-sloping budget constraint and how income and the real interest rate affect consumption smoothing, saving, and the substitution and wealth effects.

Illustrates how investment and savings interact in closed and open economies, including loanable funds, real interest rates, net exports, and net capital outflows.

Explain the user cost of capital as depreciation plus the real interest rate, show diminishing marginal product of capital, and relate savings, investment, net exports, and net capital outflows.

Explore money, its roles, and how central banks use tools like open market operations, reserve requirements, and the discount rate to influence exchange rates, net exports, and net capital outflows.

Explain how aggregate supply and demand interact to form business cycles and long-run potential GDP, and why long-run supply is vertical while short-run supply is upward sloping.

Explore the government's role in the economy through Pareto optimality, fiscal and monetary policy tools, and structural policy, including monopolies and pollution.

Explore how government spending, corporate tax cuts, and income tax cuts drive expansionary fiscal policy, their crowding out effects, and how monetary policy and structural policies shape long run growth.