What%20is%20macroeconomics?

1
What is macroeconomics?

• Macroeconomics studies the evolution of certain
  economic aggregates over time (what drives the
  trends in total production, consumption, the
  overall price level, unemployment, etc)
• In microeconomics the object of interest is a
  single firm or household. In macroeconomics we
  study countries or regions

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Why should you care about macroeconomics?

• The performance of the overall economy affects us
  every day at the individual level (interest
  rates, stock market, taxes, economic recessions)
• It will help you performing successful business
  (or professional) decisions
• It is useful for understanding and criticizing
  policy makers
• If you want a job in an international
  organization (IMF, World Bank, etc), or admission
  to the best law and business schools, economics
  will give you a competitive edge.

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Main topics we will discuss

• Why some countries are rich and others poor?
• Why the economy fluctuates over time?
• How do taxes and regulations affect the economy?
• International trade

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Midterm 1Economic Growth
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Cross country differences in per capita income

• Great disparity in average income per capita
• High income countries 29 450 US
• Subsaharan Africa 1 770
• Low income countries 2 190 US
• Medium income 6 000
• Latin America 7 080
• Middle income Europe central asia 7 570
• Why!

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Some countries just do not catch up
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What causes an economic disaster or an economic
miracle?
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Why do we care?

• The welfare implications of increasing the income
  of poor countries to the level of rich countries
  are staggering
• You will be able to use data and theory to
  analyze the current and expected performance of
  any country (which increases your professional
  market value)

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Midterm 2Business Cycles
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All economies experience expansions and
recessions. Why?
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Can something be done to avoid major economic
crisis?
Source Kehoe and Prescott (2001)
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Why do we care?

• A volatile economic environment complicates
  choices and may affect welfare
• Economic slowdowns come together with high
  unemployment, high bankruptcy rates, low
  consumption, increase in crime rates, etc.
• We want to understand what causes economic
  fluctuations to determine whether economic policy
  can and should be used to smooth them out

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Economic distortions and the macroeconomy
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Americans (particularly married women) work much
more
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Maybe do to better payment for women and lower
labor income taxes
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Midterm 3International Trade
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Main questions

• What are the implications of opening the borders
  to free trade? Who wins?, who looses?, what is
  the overall effect?