Transcript Lecture 1: Introduction

L11200 Introduction to Macroeconomics 2009/10
Lecture 1:
Introduction
Reading: Barro Ch.1
26 January 2010
Introduction
• L11200 Introduction to Macroeconomics
– Year 1, 20 credit, economics-only module
– Follows on from Introduction to Microeconomics
– 25 one-hour lectures
– 7 one-hour small group tutorials
– 1 mid-term exam (30%), 1 final exam (70%)
– All electronic material available on WebCT
Textbook
• As with micro, the course follows a textbook
‘Macroeconomics: A
Modern Approach’
(International Edition)
R.J. Barro (2008)
Thomson SouthWestern
What is macroeconomics?
• Microeconomics
– ’That branch of economics that deals with small-scale
economic factors; the economics of the individual firm,
product, consumer, etc., rather than the aggregate of
such individuals’
• Macroeconomics
– ‘The branch of economics that deals with large-scale
economic factors; the economics of a national
economy as a whole.’
(both from Oxford English Dictionary)
Two big questions in macro
1. What determines economic growth?
2. Why does output fluctuate between
expansions and contractions?
Economic Growth
• Why do economies ‘grow’ over time?
• Why do the U.K. and U.S. exhibit steady longrun growth, but Ethiopia no growth?
• Section 2 (Lectures 3-9) builds a model of
economic growth to explain these patterns.
Economic Fluctuations
• Why do economies with steady long-term
growth exhibit volatile short-term growth?
• What can governments do about ‘boom’ and
‘bust’, is a ‘fiscal stimulus’ a good idea?
• Sections 2-5 (Lectures 10-24) develops a
model of fluctuations and government policy
to answer these questions
Building a macro model
• Microeconomics is concerned with individual
agents and markets
• Macroeconomics is concerned with the
aggregate implications of microeconomics
• i.e. macroeconomic outcomes (GDP,
unemployment inflation) are the result of
microeconomic actions.
‘Microfoundations’
• So good macroeconomic models have
‘microfoundations’
• We will build-up a macroeconomic model by
putting together consumers, workers,
entrepreneurs and capital owners etc.
• That is why you study micro before macro
• This is not A-level macro
Summary
• Two key topics in the course
– Economic growth
– Economic fluctuations
• Models built on microeconomics, so don’t
forget everything you learned last semester
• Next time: introduction to aggregate statistics
(GDP etc) before we start on the theory.