Introduction to Macroeconomics

I. Macroeconomics: What is it?

Definition: Macroeconomics studies the economy as a whole – general equilibrium. It studies the outcomes of the interactions of all microeconomic agents.

Households Firms

Government

II. Long-Standing Macroeconomic Issues A. Long-Run Growth

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1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010year

Real GDP Per Capita in 2013 Dollars

B. Standards of Living Map of GDP Per Capita in 2013, PPP

C. Business Cycles

Shaded areas are official recessions.

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Real GDP Deviations from Potential

D. Inequality

III. Where we are now in the business cycle A. Unemployment Rate

B. GDP relative to potential

C. Stock Prices

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1990 1995 2000 2005 2010 2015Year

S&P 500, Adjusted for Inflation

D. Median Household Income

E. Interest Rates

F. Government: U.S. Federal Debt as a % of GDP

Summary

We have made good progress on a number of fronts since the Great Recession, but haven’t done so well on some other fronts.

Areas of worry include stagnation of household incomes and high federal debt.