A Brief Introduction to Macroeconomics

14 Pages Posted: 30 May 2017 Last revised: 8 Jun 2019

See all articles by Daniel Murphy

Daniel Murphy

University of Virginia - Darden School of Business

Abstract

This technical note sets the groundwork for a module on macroeconomics by introducing concepts and definitions that will be revisited in subsequent technical notes. The note begins by introducing national income accounting and the components of gross domestic product (GDP), and by discussing why economists care about GDP. It then discusses how the determinants of the components of GDP interact on the market, and how we can predict GDP and interest rates through the lens of a model—a framework that maps assumptions into outcomes. The note introduces students to basic economic modeling by walking them through examples of how to determine endogenous variables from systems of equations and exogenous variables. The note concludes by discussing the role of assumptions in macroeconomics and by listing some of the assumptions that we will maintain in subsequent technical notes.

Excerpt

UVA-GEM-0125

Rev. Jun. 3, 2019

A Brief Introduction to Macroeconomics

What determines gross domestic product (GDP), unemployment, exchange rates, interest rates, and inflation? Why do some countries grow quickly while others stagnate? These are the types of questions that the study of macroeconomics addresses. The answers to these questions are important to policymakers, firms, and households. For example:

Policymakers attempt to understand the forces causing recessions and booms so they can steer the economy away from prolonged episodes of high unemployment or excess inflation.

Firm managers want to understand how demand for their product evolves with the macroeconomy, as well as how changes in interest rates, inflation, and exchange rates affect their costs and revenues.

. . .

Keywords: macroeconomics, national income accounting, GDP, macroeconomic modeling

Suggested Citation

Murphy, Daniel, A Brief Introduction to Macroeconomics. Darden Case No. UVA-GEM-0125, Available at SSRN: https://ssrn.com/abstract=2974636

Daniel Murphy (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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