Economics The study of how society chooses to use scarce resources - Time, money, other resources - Microeconomics decisions of a small number of firms or households - Macroeconomics entire economy o Growth and fluctuations (business cycles) - Micro and Macro have grown closer o Unifying theme Equilibrium Approach Agents optimize given preferences and technology Agents actions are compatible with each other o Must be explicit about assumptions o Use models as abstractions The Scope of Macroeconomics - Many subfields of macroeconomics Disagreements in Macroeconomics - Many different people in a single field naturally spawns different ideas - Most research macroeconomists agree on a wide set of issues o Wide agreement on growth theory o Less agreement on business cycle theory - What drives disagreements? o Incomplete understanding about quantitative issues that we want to learn about o Potentially vested interests (financial/emotional bias) behind some opinions - Focus on separating opinion and science Outline - Measurement o GDP, inflation, etc. - Growth Models o Slow Growth Model o Endogenous Growth Model - One Period and Two Period Model o Understand choices made by consumers - Credit Market Imperfections o Models with Asymmetric Information o Different Social Security Programs - Monetary Intertemporal Model o Cash-in advanced constraint - Business Cycle Models vs new Keynesian o Fully flexible prices vs sticky prices - Xx - Xx -