All Terrain Thinking

A Compendium of things I think are Important

Economics: It's not just whats' in your wallet

"Incumbent parties almost always keep the White House if inflation is moderate and the unemployment rate is falling in the year leading up to the election."

The Basics of Macroeconomic

Overview

Units

• Macroeconomics and Macroeconomics Models
• Macroeconomic Measurement

Abstract

To understand macroeconomics, we must begin with some of the basics, which is the subject matter of this unit.  We begin with an introduction to the concepts that we will be discussing all semester, the measures of the macroeconomy.  Here we will look at a number of issues including closely at how we calculate GDP, how the inflation rate is measured, what the CPI is and why people are concerned about its validity, how earnings are measured, what the measures are of international flows of goods, services, and capital, and how we adjust data to account for the distorting effect of inflation.

In the second section we will examine three models that will be used throughout the course.  The first is a picture, the circular flow diagram, that proves useful for identifying the key players and markets - output, labor, capital, and foreign exchange.  The second is the income identity, a little bit of algebra that describes the output market.  The third is the AS-AD model, a close cousin to the S-D model introduced in microeconomics. 

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