Gordon’s Macroeconomics

Objectives of Chapter 1

· What are the “Big Three” Concepts of Macroeconomics?

o Achieving the natural rate of unemployment

o Stable inflation when actual output equals the natural rate

o Productivity growth x inputs determines growth in the natural rate of output

· How does the actual rate of real GDP differ from the natural rate of real GDP?

o Why too little or too much real GDP is undesirable?

o How does the GDP “gap” affect unemployment and inflation

· How does the short-run differ from the long-run?

o The business cycle in the short-run

o The growth trend in the long-run

· Three extremes

o The Great Depression

o Hyperinflation in Germany

o Fast and slow growth in Asia

· How do you tame a business cycle through stabilization policy?

o The role of policy instruments to affect target variables

o Monetary and fiscal policy

· How has the Macroeconomics become “internationalized”?

o A closed economy versus an open economy

o Policy impacts of an open economy (large versus small economy)

o How does the U.S. economy rank?

Questions for consideration:

1. Analysis of U.S. economic performance: http://www.economagic.com/