Lecture 1
Lecture 1
Lecture 1
INTRODUCTION TO
MACROECONOMICS
• The business cycle is the cycle of short-term ups and downs in the
economy.
• The main measure of how an economy is doing is aggregate output:
• Aggregate output is the total quantity of goods and services produced
in an economy in a given period.
CONT…
• There are three kinds of policy that the government has used to
influence the macroeconomy:
1. Fiscal policy
2. Monetary policy
3. Growth or supply-side policies
CONT…
• The circular flow diagram shows the income received and payments
made by each sector of the economy.
CONT…
• Households, firms, the government, and the rest of the world all
interact in three different market arenas:
1. Goods-and-services market
2. Labor market
3. Money (financial) market
CONT…
• Treasury bonds, notes, and bills are promissory notes issued by the
federal government when it borrows money.
• Corporate bonds are promissory notes issued by corporations when
they borrow money.
CONT…
• Connections to microeconomics:
Macroeconomic behavior is the sum of all the microeconomic
decisions made by individual households and firms. We cannot
understand the former without some knowledge of the factors that
influence the latter.
AGGREGATE SUPPLY
AND AGGREGATE
DEMAND
ANY QUESTIONS?