Unit 1: The Scope of Macroeconomics
The two clocks a whole economy runs on, and the trade-offs that show up whether you zoom in on one shopper or out to an entire country.
4 topics · 14 questions
Each topic is a path, not a menu: work down it in order and every question builds on the one above. Click any of them to watch the answer draw itself.
What Macroeconomics Studies
- How it worksHow do macroeconomists zoom out from individual choices to track a whole economy's total output, jobs, and prices?
- Common mistakeWhy isn't macroeconomics just microeconomics added up across every person in a country?
- Going furtherWhat changes about the questions economists ask once a country slides from a boom into a recession?
- Ties togetherHow do the same supply and demand curves from one market end up describing an entire national economy?
Your turn1 of 2
A student argues that macroeconomics is nothing more than microeconomics scaled up, just add together every individual's decisions and you get the whole economy. What is the flaw in this view?Positive and Normative Statements in Macroeconomics
- How it worksHow does a testable claim about inflation differ from a claim about how bad inflation is?
- Common mistakeWhy isn't a policy recommendation from an economist a scientific finding in the same way a data measurement is?
- Going furtherWhat happens to a policy debate once every disputed fact inside it gets settled by data?
Your turn1 of 2
One economist says, 'Inflation was 4 percent last year.' Another says, 'A 4 percent inflation rate is unacceptable and the central bank should be blamed.' What is the key difference between these two statements?Trade-offs and the Production Possibilities Frontier
- How it worksHow does plotting every combination of two goods a country can produce trace out its production frontier?
- Worked exampleFind the opportunity cost of moving a country from 60 units of healthcare and 40 of education to 50 healthcare and 55 education.
- Common mistakeWhy doesn't a point sitting inside a country's production frontier mean every resource in the country is being used?
- Going furtherWhat happens to a nation's production frontier when a new fertilizer doubles how much food each farmer can grow?
Your turn1 of 2
A country moves along its production possibilities frontier from 69 units of healthcare and 44 units of education to 45 units of healthcare and 56 units of education. What is the opportunity cost of one more unit of education, in units of healthcare?Growth Versus Fluctuations: The Two Timescales of Macroeconomics
- How it worksHow does the decades-long climb of an economy's growth trend differ from the up-and-down wiggle riding on top of it?
- Going furtherWhat happens to the split between trend and cycle during a depression that drags on for a decade?
- Ties togetherHow does splitting output into a growth trend and a cyclical wiggle organize everything the rest of a macroeconomics course covers?
Your turn1 of 2
A chart of a country's real GDP over eighty years shows a steadily rising line with small bumps and dips riding along it the whole way. What do the steadily rising line and the small bumps represent, respectively?