The Macroeconomics Course

Explore the basics of demand and supply, how price determines quantity and how markets reach equilibrium, with elasticity and curve shifts.

Learn how price, income, and cross price elasticities measure demand responsiveness and guide revenue decisions, with examples of elastic, inelastic, normal and inferior goods, and substitutes versus complements.

Define gdp as the total market value of final goods and services produced domestically in a year, including government services and owner-occupied housing, but excluding transfer payments.

explains GDP calculation via expenditure and income approaches, contrasts value of final output and value added methods, and shows how every production stage adds value to reach the final price.

Explore how nominal and real GDP differ with inflation, learn to use the GDP deflator to convert between them, and compare economies using real GDP per capita.

Measure GDP with the expenditure approach by summing consumption, investment (capital goods and inventories), government spending, and net exports (exports minus imports).

Explore how the income approach measures GDP by adding national income, capital consumption allowance, and a statistical discrepancy, and outline personal income and personal disposable income components.

Combine the expenditure and income approaches to link savings, investments, and the fiscal and trade balances, showing how the government budget balance arises from revenues, spending, and net exports.

Construct aggregate demand from consumption, investment, government spending, and net exports via goods and money markets, showing downward slope as higher prices reduce real wealth and raise real interest rates.

Explore how aggregate demand and supply determine market equilibrium, price level, and output, and how the very-short-run supply is horizontal, the short-run is upward-sloping, and the long-run is vertical.

Explore the factors that shift the aggregate demand curve and movements along it, including wealth effects, expectations, capacity utilization, monetary and fiscal policy, global growth, and exchange rates.

Examine how the aggregate supply curve shifts in the short run and long run, driven by wages, input costs, subsidies or taxes, and technological progress.

Explore macroeconomic equilibrium where aggregate demand and supply intersect, and examine short-run recessionary and inflationary gaps, stagflation, and the paths to long-run full employment.

Explore how combined changes in aggregate demand and supply affect real GDP, unemployment, and the price level across scenarios of simultaneous increases, decreases, or opposite movements, including stagflation.

Explore the sources of long-run sustainable economic growth by examining potential gdp and how labor, capital, technology, and human capital drive growth through productivity and productive capacity.

Explore the neoclassical production function, linking output to labor, capital, and total factor productivity, and examine diminishing marginal returns, growth sources, and technology's role in long-run growth.

Explore how business cycles drive expansion, peak, contraction, and trough, and how GDP, unemployment, spending, and inflation fluctuate through recovery.

Examine how labor and physical capital shape production across expansion and contraction, and how the inventory-to-sales ratio signals these cycle phases and housing-market responses.

Explore how interest rates and mortgage costs drive housing market cycles, while income, demographics, and migration shape demand, and learn how bubbles form near peak and fade into recoveries.

Explore how the external trade sector moves with the business cycle, driven by GDP growth and currency movements, and how currency changes affect imports, exports, and the trade balance.

Explore why business cycles emerge and persist by comparing neoclassical, Austrian, Keynesian, monetarist, and new classical theories and their views on government roles and money supply.

Explore frictional, structural, and cyclical unemployment and how their relationship to business cycle phases shapes peak, trough, and the natural rate of unemployment.

Learn how the unemployment rate is defined and measured by the labor force, and explore the roles of participation rate, discouraged workers, and underemployment.

Define inflation as the general rise in prices over time, including hyperinflation, disinflation, and deflation, with price indexes measuring its rate and central banks using monetary policy to keep it stable.

Explore how inflation is measured through price indexes like CPI, PC, PPI and WPI, including basket weights, base years, and the calculation of cost changes.

Explore the uses and limits of inflation measures, including the LA Spare's index and its substitution, quality, and new-product biases, and how hedonic pricing and the Fisher index address them.

Explain cost-push and demand-pull inflation, showing how rising input costs or higher aggregate demand lift prices, affect output, unemployment, wages, and how monetary and fiscal policies address shifts.

Explore how leading, coincident, and lagging economic indicators illuminate the business cycle with examples like stock prices, unemployment, inflation, inventory to sales ratio, and industrial production.

Define monetary and fiscal policy and show how money supply, interest rates, spending, and taxes steer aggregate demand, growth, inflation, and unemployment.

Money serves as a medium of exchange, a unit of account, and a store of value, replacing barter's double coincidence of wants; digital payments and currencies shape supervision questions.

Identify narrow money as currency in circulation, checking account deposits, and traveler’s checks; broad money as M2, including savings, money market deposits, time deposits under $100,000, and money market funds.

Explore how banks create money through fractional reserve banking, reserve requirements, and the money multiplier, starting with an initial deposit and resulting in increased money in circulation.

Analyze the quantity theory of money, linking money supply and velocity to price level and real output via m×v = p×y. Examine monetarist views on inflation control and money neutrality.

Explore the three money-demand types—transactions, precautionary, and speculative—and how a vertical money supply sets equilibrium interest and money balance under policy shifts.

Explain how the Fisher effect states that the nominal interest rate equals the real rate plus expected inflation and a risk premium.

Differentiate expected from unexpected inflation to show costs: expected inflation erodes cash, raises menu and shoeleather costs; unexpected inflation causes wealth transfers and investment uncertainty.

Central banks use open market operations to adjust money supply and influence interest rates. They also set the refinancing rate and adjust reserve requirements to steer lending and economic activity.

Explore how the central bank's policy rate transmits through market rates, asset prices, expectations, and exchange rates to shape inflation and aggregate demand under contractionary and expansionary policy.

Explore how independence, credibility, and transparency empower central banks to control inflation, set credible targets, and communicate forecasts to shape expectations and policy effectiveness.

Explore how monetary policy shapes economic growth, inflation, and exchange rates; understand money neutrality, the fisher effect, and expansionary versus contractionary tools that drive aggregate demand.

Explore how inflation targeting, interest rate targeting, and exchange rate targeting shape money supply, inflation, and economic growth across countries.

Compare the neutral rate with the policy rate to identify contractionary or expansionary monetary policy and explain how this relationship affects money supply and inflation.

Examines the practical limits of monetary policy, showing how interest rate changes may fail to boost inflation due to liquidity traps, bond vigilantes, and banks' reluctance to lend.

Explore the roles and objectives of fiscal policy, including expansionary and contractionary tools, discretionary policy, automatic stabilizers, and effects on budget deficits, aggregate demand, and growth.

Explore fiscal policy tools, including spending tools—transfer payments, current spending, capital expenditure—and revenue instruments—direct and indirect taxes—along with their advantages, disadvantages, and effects on growth and equity.

Explore four criteria of effective tax policy: simplicity, efficiency, fairness, and revenue efficiency, and how they balance government needs with households and businesses for sustainable economic growth.

Analyze how government spending and taxes drive GDP through the fiscal multiplier. Examine the balanced budget multiplier and the role of marginal propensity to consume and tax rate.

Examine the Ricardian equivalence: deficits funded by debt leave aggregate demand unchanged. Lower taxes slightly boost consumption, but savers anticipate higher taxes, keeping the net effect on aggregate demand zero.

Compare a country's national debt to its GDP to assess sustainability, noting that if real interest rates exceed GDP growth, the debt ratio rises and deficits may fund productive capital.

Explore the major limitations of fiscal policy, including recognition lag, action lag, and impact lag, and how delays can mute the fiscal multiplier effects on growth and stability.

Analyze whether fiscal policy is expansionary or contractionary by tracking changes in budget deficits or surpluses, including structural or cyclically adjusted deficits and automatic stabilizers.

Explore four scenarios of monetary and fiscal policy—expansionary and contractionary, plus opposing directions—and see how they affect aggregate demand, GDP growth, interest rates, and private versus public sector activity.

Compare GDP and GNP: GDP is the value of final goods and services produced within borders; GNP is the value of goods and services produced by citizens regardless of location.

International trade expands markets, lowers import costs, and promotes specialization and economies of scale, boosting exports and overall well-being despite short-term job losses.

Explore how comparative and absolute advantage drive international trade, using a Brazil–United States example to explain opportunity costs, production possibility frontier, and the benefits of specialization.

Examine the Ricardian and Heckscher-Ohlin trade theories, linking comparative advantage to labor and capital endowments. See how wealth redistribution emerges through exports and imports shaped by abundance of resources.

Analyze how tariffs, quotas, minimum domestic content, voluntary export restraints, and export subsidies affect prices, domestic welfare, and cross-border trade, and why protectionism supports domestic industries.

Explore how trading blocs reduce trade barriers and boost welfare. Learn about free trade areas, customs unions, common markets, and economic and monetary unions with examples like NAFTA, EU, Mercosur.

Explore capital restrictions that govern financial capital inflows and outflows, including safeguards for national security and strategic industries, and assess short-term stabilizing effects versus long-term welfare costs.

Learn how the balance of payments records all international transactions across current, capital, and financial accounts, including goods, services, income, and transfers, with debits matching credits in theory.

Examine how consumer, firm, and government decisions affect the balance of payments and current account deficits or surpluses, through trade and capital and financial accounts.

Explore how the World Bank, with IBRD and IDA, fights poverty and promotes growth with loans; the IMF supports monetary stability, and the WTO regulates trade.