Focuses on the whole economy rather than individual households, firms, or industries
Studies big issues such as national inflation, unemployment rates, and exchange rates between countries
Differs from microeconomics, which deals with individual entities
Macroeconomics examines the aggregate of economic activities
Macroeconomics often requires shortcuts and is seen as an art due to its complexity
Course Goals
Provide an understanding of major macroeconomic relationships
Focus on simplified models rather than complex mathematical equations
Equip students to read and critically analyze macroeconomic publications such as the World Economic Outlook and financial newspapers like The Wall Street Journal and Financial Times
Aid students in succeeding in careers related to macroeconomic analysis, such as in macro hedge funds
Structure of Lectures
Current events: Each lecture will start with a discussion of relevant current economic events (after basic definitions are covered)
Examples: Visuals and data (e.g., wage growth vs. inflation) will be used to illustrate key points
Repetition: Important topics will be revisited to deepen understanding over time
Key Macroeconomic Issues
Employment and Unemployment
Unemployment Rate: High unemployment typically signals recessions
Great Recession (2007-2009): Significant rise in unemployment rates
COVID-19 pandemic: Caused a spike in unemployment, followed by rapid recovery
Inflation
Definition: Rate at which prices rise over time
Target: Central banks typically aim for around 2% inflation
Current Levels: Inflation is notably high, ranging from 6.5% to 8% in the US
Global Phenomenon: High inflation is a widespread issue, not just restricted to the US
Relationship Between Wage Growth and Inflation
Wage Growth: High wage growth tends to correlate with high inflation
Current Concern: US has high wage growth rates and low unemployment, leading to high inflation
Impact of Monetary Policy
Central Bank Tools
Interest Rates: Primary tool for controlling inflation
Lowering rates stimulates economic activity
Raising rates curbs economic activity
Recent Trends: Rapid increase in interest rates in response to high inflation
Effects on Financial Markets
Equity Markets: Sensitive to changes in interest rates
Equity values decrease when interest rates rise
Historical examples: Equity market plunge during COVID-19 and rapid rise due to low interest rates
Example: Equity market reaction to unexpected employment data can indicate future central bank actions
Future Outlooks
Potential Recession: Anticipation of a recession due to central bank actions to control inflation
Global Impact: Global trends in inflation and employment are interconnected
China's Role: China's economic policies during and post-COVID have significant global impacts
Summary and Expectations
Modeling and Analysis: Simplified models will be used to explain complex economic relationships
Applications: Course content aims to help students analyze real-world economic situations effectively
Next Lecture: Will cover basic definitions and foundational concepts