Macro Economics Manual Ch1

Chapter 1

Introduction to Macroeconomics

 Learning Objectives

I. Goals of Part I

A) Introduce students to the main concepts in macroeconomics (Ch. 1)

B) Introduce national income accounting and major economic magnitudes (Ch. 2)

II. Goals of Chapter 1

A) Major macroeconomic issues—growth, business cycles, unemployment, inflation, the international economy, macroeconomic policy, aggregation (Sec. 1.1)

B) What macroeconomists do—forecasting, analysis, research, data development (Sec. 1.2)

C) Why macroeconomists disagree—classicals vs. Keynesians; the text’s approach (Sec. 1.3)

III. Notes to Fifth Edition Users: This chapter is little changed; the data were updated.

 Teaching Notes

I. What Macroeconomics Is About (Sec. 1.1)

Macroeconomics: the study of structure and performance of national economies and government policies that affect economic performance. Macroeconomists study:

A) Long-run economic growth

1. Growth of output in United States over time

a. Figure 1.1: Output of United States since 1869

b. Note decline in output in recessions; increase in output in some wars

2. Sources of growth—population, average labor productivity growth

This may be a good place to introduce students to the calculation of a growth rate, which is used throughout the textbook. You can write it first in general terms, as

%X  [(Xt+1 – Xt)/Xt]  100%  [(Xt+1/Xt) – 1]  100%.

Then you might use an example with something you’re talking about, such as real GDP growth over the past year, or the inflation rate.

Throughout the text, students may come across mathematical calculations that are unfamiliar to them. The Appendix to the textbook contains some helpful basic guidance to mathematical topics, including discussions of functions and graphs, slopes of functions, elasticities, functions of several variables, shifts of a curve, exponents, and growth-rate formulas.

3. Average labor productivity

a. Average labor productivity: output produced per unit of labor...