1402 Introduction to Macroeconomics - Lecture Notes

Key Topics

Microeconomics (1401): Focuses on smaller units like households, firms, and industries.
Macroeconomics (1402): Focuses on the entire economy, including aspects like national unemployment rates, inflation, and exchange rates.

Studying the whole economy is different from studying individual parts. Macroeconomics involves interactions and equilibrium states, making it more complex.
Macroeconomics often uses shortcuts and simpler models to capture the essence of complex problems.

Enable students to read and critically evaluate macroeconomic reports like the IMF's World Economic Outlook, Wall Street Journal, Financial Times, etc.
Prepare students for practical applications like internships in finance or work in macro hedge funds.

Lectures: Typical lectures will include discussions about current events and their macroeconomic implications using simple data visualizations.
Mathematical Complexity: Focus on understanding concepts without complex mathematics. Models used will be simple.

Wage Growth vs. Inflation: Example showing the high correlation between wage growth and inflation. Rising wages can lead to higher inflation.
Unemployment Rates: Focus on how high unemployment is a key feature of recessions, notably seen during the Great Recession and COVID-19 recession.

US Economy: Historically low unemployment rates, high wage growth causing high inflation (currently 6.5%-8% compared to the normal 2%). Efforts by the Federal Reserve to control inflation by raising interest rates.
Global Trends: Inflation is a worldwide issue exacerbated by different factors (e.g., high energy prices in Europe due to the Ukraine war). Most countries have inflation rates well above 2%.
China's Economic Policy: China's strict COVID-19 policy slowed down its economy, but recent policy changes suggest a potential boom. This could positively or negatively impact the global economy, depending on the state of other countries' inflation control measures.

Interest Rates: Central banks use interest rates to control inflation and impact economic activity. Lowering rates typically stimulates the economy, while raising rates suppresses it.
Impacts on Equity Markets: Interest rate changes by the Federal Reserve have significant effects on equity markets (e.g., S&P 500). Tightening of rates can lead to declines in stock market values.
Case Study: Recent non-farm payrolls report led to stock market decline due to fears of further interest rate hikes by the Federal Reserve.

Many professional forecasters anticipate a recession in the US due to continued interest rate hikes aimed at controlling inflation.

Next Lecture: Focus on definitions and foundational concepts.
Course Emphasis: Simple models to explain macroeconomic relationships, making it easier to read and understand macroeconomic reports and articles critically.

The course aims to provide a practical understanding of macroeconomics that is useful for both academic and real-world applications.