Lecture 1 The Polic and Practice of Macroeconomics

Lecture 1 The Polic and Practice of Macroeconomics - 1 1-1...

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Unformatted text preview: 1 1-1 The Policy and Practice of Macroeconomics 1-2 Agenda 1. The Practice of Macroeconomics 2. Macroeconomic Policy 1-3 The Practice of Macroeconomics • Macroeconomics is the study of economic activity and prices in the national economy. • Macroeconomics is the study of: 1. The structure, dynamic adjustment, and performance of national economies, and 2. The government policies that affect national economic performance. 1-4 The Practice of Macroeconomics • The Process: Developing Macro Models – Macroeconomist explain how the economy works by using economic theory and models. • An economic theory is a set of ideas about the economy, organized in a logical framework. • Economic models are simplified representations of the economic phenomenon under consideration. 2 1-5 The Practice of Macroeconomics • The Process: Developing Macro Models – Developing economic models requires 8 steps: 1. Identify an interesting economic question. 2. Specify the endogenous variables . 3. Specify the exogenous variables . 4. Hypothesize the relationship between them. 1-6 The Practice of Macroeconomics • The Process: Developing Macro Models – Developing economic models requires 8 steps: 5. Empirically test the relationship. 6. Evaluate the results. 7. Use the model to make further predictions and/or 8. Use the model to formulate policy. 1-7 The Practice of Macroeconomics • The Purpose: Interpreting Macro Data – Macroeconomics focuses on 3 main indicators: 1. Real GDP 2. The Unemployment Rate 3. Inflation 1-8 The Practice of Macroeconomics...
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Lecture 1 The Polic and Practice of Macroeconomics - 1 1-1...

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