Introductory Macroeconomics Lecture Notes

Introduction

• Speaker: Jacob Clifford from ACDC Econ
• Purpose: Quick overview for introductory/AP macroeconomics prep
  • Not intended to re-teach concepts, but to prepare for exams
  • Encouragement to support the channel by purchasing additional review materials

Fundamental Concepts

• Scarcity: Unlimited wants vs. limited resources
• Opportunity Costs: The cost of any decision or production is what you give up
• Production Possibilities Curve (PPC): Illustrates efficiency, inefficiency, and impossibilities
  • Points on the curve: Efficient
  • Points inside the curve: Inefficient
  • Points outside the curve: Impossible
  • Shapes:
    • Straight Line: Constant opportunity cost
    • Bowed Out: Increasing opportunity cost
  • Shifts in PPC:
    • More/less resources
    • Better technology
    • Trade (affects consumption)

Comparative Advantage

• Comparative vs. Absolute Advantage:
  • Absolute: Producing more
  • Comparative: Lower opportunity cost
• Terms of Trade: Number of units exchanged benefiting both countries

Economic Systems

• Types:
  • Free Market (Capitalism)
  • Command Economy
  • Mixed Economy
• Circular Flow Model: Interaction among businesses, individuals, and government
  • Product Market: Businesses sell products
  • Resource Market: Businesses buy resources
  • Government: Provides services, transfer payments, subsidies

Unit 1 Summary

• Demand and Supply:
  • Law of Demand: Price ↑, Quantity Demanded ↓
  • Law of Supply: Price ↑, Quantity Supplied ↑
  • Equilibrium: Intersection of demand and supply
  • Shifts: Demand or supply can increase or decrease
• Difficulty: 5/10 due to multiple concepts

Unit 2: Macroeconomic Measures

• Goals of Economies:
  • Economic Growth
  • Low Unemployment
  • Price Stability
• GDP: Total value of final goods/services
  • Real vs. Nominal GDP (adjusted for inflation)
  • Expenditure vs. Income Approach
• Unemployment:
  • Types: Frictional, Structural, Cyclical
  • Natural Rate: Includes only frictional and structural
  • Discouraged Workers & Part-Time Workers Issues
• Inflation:
  • Types: Inflation, Deflation, Disinflation
  • CPI: Consumer Price Index for measuring inflation
  • Causes: Money supply, demand-pull, cost-push
• Difficulty: 4/10, key concepts are crucial

Unit 3: Aggregate Demand and Supply

• Aggregate Demand (AD):
  • Downward sloping due to wealth effect, interest rate effect, foreign trade effect
• Aggregate Supply (AS):
  • Short Run: Upward sloping
  • Long Run: Vertical at full employment
• Economic Scenarios:
  • Recessionary Gap
  • Inflationary Gap
  • Full Employment
• Policy Tools:
  • Fiscal Policy: Government spending and taxes
  • Multiplier Effect: Spending multiplier, tax multiplier
• Difficulty: 8/10 due to complexity and volume

Unit 4: Money and Banking

• Nature of Money:
  • Commodity vs. Fiat Money
  • Functions: Medium of exchange, unit of account, store of value
• Banking Concepts:
  • Fractional Reserve Banking
  • Money Multiplier
• Monetary Policy:
  • Money Supply: Controlled by the Fed
  • Policy Tools: Reserve requirement, discount rate, open market operations
• Loanable Funds Market: Demand and supply of loans
• Difficulty: 8/10, involves complex graphs and calculations

Unit 5: International Trade

• Balance of Payments:
  • Current Account: Trade balance, investment income, transfers
  • Financial Account: Financial assets inflow/outflow
• Foreign Exchange:
  • Currency appreciation/depreciation
  • Exchange Rate Determination: Supply and demand of currency
• Exchange Rate Systems:
  • Floating vs. Fixed Exchange Rates
• Difficulty: 6/10, important yet intricate

Conclusion

• Encouragement for exam preparation
• Reminder to support the content creator's efforts