▪ Why does the cost of living keep rising? ▪ Why are so many countries poor? What policies
might help them grow out of poverty?
▪ What is the trade rate 7.7% 7.1% 7.5% 5.5% 7.5% 5.4% 4.0% 5.5% 7.2%
inflation rate 5.8%
13.5% 4.3% 4.1% 3.0% 3.3% 3.4% 3.3% 3.8%
elec. outcome Carter (D) Reagan (R) Reagan (R) Bush I (R) Clinton (D) Clinton (D) Bush II (R) Bush II (R) Obama (D)
How does it affect workers, consumers, businesses, and taxpayers?
CHAPTER 1 The Science of Macroeconomics
2
Important issues in macroeconomics
Macroeconomics, the study of the economy as a whole, addresses many topical issues, e.g.:
analysis
Important issues in macroeconomics
Macroeconomics, the study of the economy as a whole, addresses many topical issues, e.g.:
▪ What causes recessions? What is
For example…
Unemployment (left scale)
Why learn macroeconomics?
2. The macroeconomy affects your well-being.
change from 12 mos earlier percent change from 12 mos earlier
Economic models
…are simplified versions of a more complex reality
▪ irrelevant details are stripped away
…are used to
▪ show relationships between variables ▪ explain the economy’s behavior ▪ devise policies to improve economic
Why learn macroeconomics?
1. The macroeconomy affects society’s well-being.
U.S. Unemployment and Property Crime Rates
Social problems like homelessness, domestic violence, cPrirmopee,rtayncdrimes poverty are linked to th(reighetcsocnaolem) y.
“government stimulus” and why might it help?
▪ How can problems in the housing market spread
to the rest of the economy?
▪ What is the government budget deficit?
CHAPTER 1 The Science of Macroeconomics
0
In this chapter, you will learn:
▪ about the issues macroeconomists study ▪ the tools macroeconomists use ▪ some important concepts in macroeconomic
Great Depression
World War II
Second oil price shock
U.S. Inflation Rate
(% per year)
U.S. Unemployment Rate
(% of labor force)
percent of labor force
crimes per 100,000 population
Why learn macroeconomics?
3. The macroeconomy affects election outcomes.
Unemployment & inflation in election years
year 1976 1980 1984 1988 1992 1996 2000 2004 2008
country’s well-being?
CHAPTER 1 The Science of Macroeconomics
3
U.S. Real GDP per capita
(2000 dollars)
9/11/2001
First oil long-run upwardprtirceendsh…ock
performance
CHAPTER 1 The Science of Macroeconomics
5
In most years, wage growth falls 5
when unemployment is rising.
4 3
3
1 2
1
-1
0 -3
-1 -5
-2
-3
-7
1965 1970 1975 1980 1985 1990 1995 2000 2005
unemployment rate inflation-adjusted mean wage (right scale)