Macroeconomics (OpenStax)

Macroeconomics (OpenStax)

Principles of Macroeconomics covers the scope and sequence of most introductory macroeconomics courses. While microeconomics is the study of individuals and business decisions, macroeconomics focuses on economic decisions made at the macro level, such as by countries and governments. Macroeconomics analyzes entire industries and economies, and the policies which affect them. This course includes many current examples, which are handled in a politically equitable way. The outcome is a balanced approach to the theory and application of economics concepts.

MindEdge has enhanced OpenStax courses with interactive games, video commentary, adaptive learning segments, additional practice questions, and a robust question database.

 

Module 1: Welcome to Economics!

  • Discuss the importance of studying economics
  • Explain the relationship between production and division of labor
  • Evaluate the significance of scarcity
  • Describe macroeconomics
  • Contrast monetary policy and fiscal policy
  • Contrast traditional economies, command economies, and market economies
  • Explain gross domestic product (GDP)
  • Assess the importance and effects of globalization

 

Module 2: Choice in a World of Scarcity

  • Calculate and graph budget constraints
  • Explain opportunity sets and opportunity costs
  • Evaluate the law of diminishing marginal utility
  • Explain how marginal analysis and utility influence choices
  • Interpret production possibilities frontier graphs
  • Contrast a budget constraint and a production possibilities frontier
  • Explain the relationship between a production possibilities frontier and the law of diminishing returns
  • Contrast productive efficiency and allocative efficiency
  • Define comparative advantage
  • Analyze arguments against economic approaches to decision-making

 

Module 3: Demand and Supply

  • Explain demand, quantity demanded, and the law of demand
  • Identify a demand curve and a supply curve
  • Explain supply, quantity supplied, and the law of supply
  • Explain equilibrium, equilibrium price, and equilibrium quantity
  • Identify factors that affect demand
  • Graph demand curves and demand shifts
  • Identify factors that affect supply
  • Graph supply curves and supply shifts
  • Identify equilibrium price and quantity through the four-step process
  • Graph equilibrium price and quantity
  • Contrast shifts of demand or supply and movements along a demand or supply curve
  • Graph demand and supply curves, including equilibrium price and quantity, based on real-world examples
  • Explain price controls, price ceilings, and price floors
  • Analyze demand and supply as a social adjustment mechanism
  • Contrast consumer surplus, producer surplus, and social surplus
  • Explain why price floors and price ceilings can be inefficient
  • Analyze demand and supply as a social adjustment mechanism

 

Module 4: Labor and Financial Markets

  • Predict shifts in the demand and supply curves of the labor market
  • Explain the impact of new technology on the demand and supply curves of the labor market
  • Explain price floors in the labor market such as minimum wage or a living wage
  • Identify the demanders and suppliers in a financial market
  • Explain how interest rates can affect supply and demand
  • Analyze the economic effects of U.S. debt in terms of domestic financial markets
  • Explain the role of price ceilings and usury laws in the U.S.
  • Apply demand and supply models to analyze prices and quantities
  • Explain the effects of price controls on the equilibrium of prices and quantities

 

Module 5: Elasticity

  • Calculate the price elasticity of demand
  • Calculate the price elasticity of supply
  • Differentiate between infinite and zero elasticity
  • Analyze graphs in order to classify elasticity as constant unitary, infinite, or zero
  • Analyze how price elasticities impact revenue
  • Evaluate how elasticity can cause shifts in demand and supply
  • Predict how the long-run and short-run impacts of elasticity affect equilibrium
  • Explain how the elasticity of demand and supply determine the incidence of a tax on buyers and sellers
  • Calculate the income elasticity of demand and the cross-price elasticity of demand
  • Calculate the elasticity in labor and financial capital markets through an understanding of the elasticity of labor supply and the elasticity of savings
  • Apply concepts of price elasticity to real-world situations

 

Module 6: The Macroeconomic Perspective

  • Identify the components of GDP on the demand side and on the supply side
  • Evaluate how economists measure gross domestic product (GDP)
  • Contrast and calculate GDP, net exports, and net national product
  • Contrast nominal GDP and real GDP
  • Explain GDP deflator
  • Calculate real GDP based on nominal GDP values
  • Explain recessions, depressions, peaks, and troughs
  • Evaluate the importance of tracking real GDP over time
  • Explain how we can use GDP to compare the economic welfare of different nations
  • Calculate the conversion of GDP to a common currency by using exchange rates
  • Calculate GDP per capita using population data
  • Discuss how productivity influences the standard of living
  • Explain the limitations of GDP as a measure of the standard of living
  • Analyze the relationship between GDP data and fluctuations in the standard of living

 

Module 7: Economic Growth

  • Explain the conditions that have allowed for modern economic growth in the last two centuries
  • Analyze the influence of public policies on an economy’s long-run economic growth
  • Identify the role of labor productivity in promoting economic growth
  • Analyze the sources of economic growth using the aggregate production function
  • Measure an economy’s rate of productivity growth
  • Evaluate the power of sustained growth
  • Discuss the components of economic growth, including physical capital, human capital, and technology
  • Explain capital deepening and its significance
  • Analyze the methods employed in economic growth accounting studies
  • Identify factors that contribute to a healthy climate for economic growth
  • Explain economic convergence
  • Analyze various arguments for and against economic convergence
  • Evaluate the speed of economic convergence between high-income countries and the rest of the world

 

Module 8: Unemployment

  • Calculate the labor force participation rate and the unemployment rate
  • Explain hidden unemployment and what it means to be in or out of the labor force
  • Evaluate the collection and interpretation of unemployment data
  • Explain historical patterns of unemployment in the U.S.
  • Identify trends of unemployment based on demographics
  • Evaluate global unemployment rates
  • Analyze cyclical unemployment
  • Explain the relationship between sticky wages and employment using various economic arguments
  • Apply supply and demand models to unemployment and wages
  • Explain frictional and structural unemployment
  • Assess relationships between the natural rate of employment and potential real GDP, productivity, and public policy
  • Identify recent patterns in the natural rate of employment
  • Propose ways to combat unemployment

 

Module 9: Inflation

  • Calculate the annual rate of inflation
  • Explain and use index numbers and base years when simplifying the total quantity spent over a year for products
  • Calculate inflation rates using index numbers
  • Use the Consumer Price Index (CPI) to calculate U.S. inflation rates
  • Identify several ways the Bureau of Labor Statistics avoids biases in the Consumer Price Index (CPI)
  • Differentiate among the Consumer Price Index (CPI), the Producer Price Index (PPI), the International Price Index, the Employment Cost Index, and the GDP deflator.
  • Identify patterns of inflation for the United States using data from the Consumer Price Index
  • Identify patterns of inflation on an international level
  • Explain how inflation can cause redistributions of purchasing power
  • Identify ways inflation can blur the perception of supply and demand
  • Explain the economic benefits and challenges of inflation
  • Explain the relationship between indexing and inflation
  • Identify three ways the government can control inflation through macroeconomic policy

 

Module 10: The International Trade and Capital Flows

  • Explain merchandise trade balance, current account balance, and unilateral transfers
  • Identify components of the U.S. current account balance
  • Calculate the merchandise trade balance and current account balance using import and export data for a country
  • Analyze graphs of the current account balance and the merchandise trade balance
  • Identify patterns in U.S. trade surpluses and deficits
  • Compare the U.S. trade surpluses and deficits to other countries’ trade surpluses and deficits
  • Explain the connection between trade balances and financial capital flows
  • Calculate comparative advantage
  • Explain balanced trade in terms of investment and capital flows
  • Explain the determinants of trade and current account balance
  • Identify and calculate supply and demand for financial capital
  • Explain how a nation’s own level of domestic saving and investment determines a nation’s balance of trade
  • Predict the rising and falling of trade deficits based on a nation’s saving and investment identity
  • Identify three ways in which borrowing money or running a trade deficit can result in a healthy economy
  • Identify three ways in which borrowing money or running a trade deficit can result in a weaker economy
  • Identify three factors that influence a country’s level of trade
  • Differentiate between balance of trade and level of trade

 

Module 11: The Aggregate Demand/Aggregate Supply Model

  • Explain Say’s Law and understand why it primarily applies in the long run
  • Explain Keynes’ Law and understand why it primarily applies in the short run
  • Explain the aggregate supply curve and how it relates to real GDP and potential GDP
  • Explain the aggregate demand curve and how it is influenced by price levels
  • Interpret the aggregate demand/aggregate supply model
  • Identify the point of equilibrium in the aggregate demand/aggregate supply model
  • Define short run aggregate supply and long run aggregate supply
  • Explain how productivity growth changes the aggregate supply curve
  • Explain how changes in input prices change the aggregate supply curve
  • Explain how imports influence aggregate demand
  • Identify ways in which business confidence and consumer confidence can affect aggregate demand
  • Explain how government policy can change aggregate demand
  • Evaluate why economists disagree on the topic of tax cuts
  • Use the aggregate demand/aggregate supply model to show periods of economic growth and recession
  • Explain how unemployment and inflation impact the aggregate demand/aggregate supply model
  • Evaluate the importance of the aggregate demand/aggregate supply model
  • Identify the neoclassical zone, the intermediate zone, and the Keynesian zone in the aggregate demand/aggregate supply model
  • Use an aggregate demand/aggregate supply model as a diagnostic test to understand the current state of the economy

 

Module 12: The Keynesian Perspective

  • Explain real GDP, recessionary gaps, and inflationary gaps
  • Recognize the Keynesian AD/AS model
  • Identify the determining factors of both consumption expenditure and investment expenditure
  • Analyze the factors that determine government spending and net exports
  • Evaluate the Keynesian view of recessions through an understanding of sticky wages and prices and the importance of aggregate demand
  • Explain the coordination argument, menu costs, and macroeconomic externality
  • Analyze the impact of the expenditure multiplier
  • Explain the Phillips curve, noting its impact on the theories of Keynesian economics
  • Graph a Phillips curve
  • Identify factors that cause the instability of the Phillips curve
  • Analyze the Keynesian policy for reducing unemployment and inflation
  • Explain the Keynesian perspective on market forces
  • Analyze the role of government policy in economic management

 

Module 13: The Neoclassical Perspective

  • Explain the importance of potential GDP in the long run
  • Analyze the role of flexible prices
  • Interpret a neoclassical model of aggregate demand and aggregate supply
  • Evaluate different ways for measuring the speed of macroeconomic adjustment
  • Discuss why and how economists measure inflation expectations
  • Analyze the impacts of fiscal and monetary policy on aggregate supply and aggregate demand
  • Explain the neoclassical Phillips curve, noting its tradeoff between inflation and unemployment
  • Identify clear distinctions between neoclassical economics and Keynesian economics
  • Evaluate how neoclassical economists and Keynesian economists react to recessions
  • Analyze the interrelationship between the neoclassical and Keynesian economic models

 

Module 14: Money and Banking

  • Explain the various functions of money
  • Contrast commodity money and fiat money
  • Contrast M1 money supply and M2 money supply
  • Classify monies as M1 money supply or M2 money supply
  • Explain how banks act as intermediaries between savers and borrowers
  • Evaluate the relationship between banks, savings and loans, and credit unions
  • Analyze the causes of bankruptcy and recessions
  • Utilize the money multiplier formulate to determine how banks create money
  • Analyze and create T-account balance sheets
  • Evaluate the risks and benefits of money and banks

 

Module 15: Monetary Policy and Bank Regulation

  • Explain the structure and organization of the U.S. Federal Reserve
  • Discuss how central banks impact monetary policy, promote financial stability, and provide banking services
  • Discuss the relationship between bank regulation and monetary policy
  • Explain bank supervision
  • Explain how deposit insurance and lender of last resort are two strategies to protect against bank runs
  • Explain the reason for open market operations
  • Evaluate reserve requirements and discount rates
  • Interpret and show bank activity through balance sheets
  • Contrast expansionary monetary policy and contractionary monetary policy
  • Explain how monetary policy impacts interest rates and aggregate demand
  • Evaluate Federal Reserve decisions over the last forty years
  • Explain the significance of quantitative easing (QE)
  • Analyze whether monetary policy decisions should be made more democratically
  • Calculate the velocity of money
  • Evaluate the central bank’s influence on inflation, unemployment, asset bubbles, and leverage cycles
  • Calculate the effects of monetary stimulus

 

Module 16: Exchange Rates and International Capital Flows

  • Define “foreign exchange market”
  • Describe different types of investments like foreign direct investments (FDI), portfolio investments, and hedging
  • Explain how appreciating or depreciating currency affects exchange rates
  • Identify who benefits from a stronger currency and benefits from a weaker currency
  • Explain supply and demand for exchange rates
  • Define arbitrage
  • Explain purchasing power parity’s importance when comparing countries.
  • Explain how exchange rate shifting influences aggregate demand and supply
  • Explain how shifting exchange rates also can influence loans and banks
  • Differentiate among a floating exchange rate, a soft peg, a hard peg, and a merged currency
  • Identify the tradeoffs that come with a floating exchange rate, a soft peg, a hard peg, and a merged currency

 

Module 17: Government Budgets and Fiscal Policy

  • Identify U.S. budget deficit and surplus trends over the past five decades
  • Explain the differences between the U.S. federal budget, and state and local budgets
  • Differentiate among a regressive tax, a proportional tax, and a progressive tax
  • Identify major revenue sources for the U.S. federal budget
  • Explain the U.S. federal budget in terms of annual debt and accumulated debt
  • Understand how economic growth or decline can influence a budget surplus or budget deficit
  • Explain how expansionary fiscal policy can shift aggregate demand and influence the economy
  • Explain how contractionary fiscal policy can shift aggregate demand and influence the economy
  • Describe how the federal government can use discretionary fiscal policy to stabilize the economy
  • Identify examples of automatic stabilizers
  • Understand how a government can use standardized employment budget to identify automatic stabilizers
  • Understand how fiscal policy and monetary policy are interconnected
  • Explain the three lag times that often occur when solving economic problems
  • Identify the legal and political challenges of responding to an economic problem
  • Understand the arguments for and against requiring the U.S. federal budget to be balanced
  • Consider the long-run and short-run effects of a federal budget deficit

 

Module 18: The Impacts of Government Borrowing

  • Explain the national saving and investment identity in terms of demand and supply
  • Evaluate the role of budget surpluses and trade surpluses in national saving and investment identity
  • Discuss twin deficits as they related to budget and trade deficit
  • Explain the relationship between budget deficits and exchange rates
  • Explain the relationship between budget deficits and inflation
  • Identify causes of recessions
  • Apply Ricardian equivalence to evaluate how government borrowing affects private saving
  • Interpret a graphic representation of Ricardian equivalence
  • Explain crowding out and its effect on physical capital investment
  • Explain the relationship between budget deficits and interest rates
  • Identify why economic growth is tied to investments in physical capital, human capital, and technology

 

Module 19: Macroeconomic Policy Around the World

  • Analyze GDP per capita as a measure of the diversity of international standards of living
  • Identify what classifies a country as low-income, middle-income, or high-income
  • Explain how geography, demographics, industry structure, and economic institutions influence standards of living
  • Analyze the growth policies of low-income countries seeking to improve standards of living
  • Analyze the growth policies of middle-income countries, particularly the East Asian Tigers with their focus on technology and market-oriented incentives
  • Analyze the struggles facing economically-challenged countries wishing to enact growth policies
  • Evaluate the success of sending aid to low-income countries
  • Explain the nature and causes of unemployment
  • Analyze the natural rate of unemployment and the factors that affect it
  • Identify how undeveloped labor markets can result in the same hardships as unemployment
  • Identify the causes and effects of inflation in various economic markets
  • Explain the significance of a converging economy
  • Explain the meaning of trade balance and its implications for the foreign exchange market
  • Analyze concerns over international trade in goods and services and international flows of capital
  • Identify and evaluate market-oriented economic reforms

 

Module 20: International Trade

  • Define absolute advantage, comparative advantage, and opportunity costs
  • Explain the gains of trade created when a country specializes
  • Show the relationship between production costs and comparative advantage
  • Identify situations of mutually beneficial trade
  • Identify trade benefits by considering opportunity costs
  • Identify at least two advantages of intra-industry trading
  • Explain the relationship between economies of scale and intra-industry trade
  • Explain tariffs as barriers to trade
  • Identify at least two benefits of reducing barriers to international trade

 

Module 21: Globalization and Protectionism

  • Explain protectionism and its three main forms
  • Analyze protectionism through concepts of demand and supply, noting its effects on equilibrium
  • Calculate the effects of trade barriers
  • Discuss how international trade influences the job market
  • Analyze the opportunity cost of protectionism
  • Explain how international trade impacts wages, labor standards, and working conditions
  • Explain and analyze various arguments that are in support of restricting imports, including the infant industry argument, the anti-dumping argument, the environmental protection argument, the unsafe consumer products argument, and the national interest argument
  • Explain dumping and race to the bottom
  • Evaluate the significance of countries’ perceptions on the benefits of growing trade
  • Explain the origin and role of the World Trade Organization (WTO) and General Agreement on Tariffs and Trade (GATT)
  • Discuss the significance and provide examples of regional trading agreements
  • Analyze trade policy at the national level
  • Asses the complexity of international trade
  • Discuss why a market-oriented economy is so affected by international trade
  • Explain disruptive market change