Is This Possible?
Lecture: September 2: Economic Growth Since Deep Time

Lecture: August 31: Thinking Like a Macroeconomist

Lecture: August 31: Thinking Like a Macroeconomist

U.C. Berkeley Economics 101b, Fall 2005

Macroeconomics and Microeconomics: Similarities

  • Retains focus on incentives and opportunity cost
  • Retains focus on aggregating up behavior
  • Retains focus on equilibrium conditions

Macroeconomics and Microeconomics: Differences

  • Ruthless simplification: representative agents
  • Focus on general equilibrium: this is a system, not a market
  • Differences in equilibrium conditions: balanced growth, quantity adjustment

Six Key Macroeconomic Variables

  • Real GDP (also per capita for living standards, and per worker for productivity)
  • The unemployment rate
  • The inflation rate
  • The real interest rate (term structure)
  • The real value of the stock market
  • The real exchange rate

Uncle Simon Kuznet and the Creation of the National Income and Product Accounts

The Circular Flow of Economic Activity

  • The flow of spending power
  • The flow of goods produced
  • The flow of incomes
  • All of these should add up to the same thing--a system with checks and balances