1Introduction to MacroeconomicsI. Macroeconomics: What is it?Definition: Macroeconomics studies the economy as a whole –general equilibrium. It studies the outcomes of the interactions of all microeconomic agents.2II. Long-Standing Macroeconomic IssuesA. Long-Run Growth5000 25000 50000 1890 1910 1930 1950 1970 1990 2010yearReal GDP Per Capita in $20103B. Standards of LivingGDP Per Capita in 2008, PPP, from IMF$ 268Zimbabwe$34,205France$ 5,970China$36,358UK$14,495Mexico$47,440US$26,692Korea$53,738Norway4C. Business CyclesShaded areas are official recessions.-5 0 5percent1950 1960 1970 1980 1990 2000 2010Real GDP Deviations from Trend5D. InequalityIncome Share of the Top 10% of the Income Distribution,1917 - 200830 35 40 45 50top101920 1940 1960 1980 2000yearShare of Income Going to Top 10% of Distribution6D. Inequality - continuedBy education7D. Inequality - continuedBy education8III. Current Hot Macroeconomic IssuesA. House Prices9III. Current Hot Macroeconomic IssuesB. Stock Prices0 500 1000 1500nsp1880 1900 1920 1940 1960 1980 2000monthS&P Stock Price Index100 100 200 300 400 1880 1900 1920 1940 1960 1980 2000year(Adjusted for inflation, logarithmic scale)S&P 500 Stock Price Index- 34%, 2 yrs to recover peak- 67%, 20 yrs to recover peak- 81%, 29 yrs to recover peak- 53%, 16 yrs to recover peak- 46%, has not recovered peak- 48%Source: V. Ramey’s calculations based on Shiller’s data.Log Real S&P Stock Price Index11C. Unemployment12D. Interest Rates13E. Government: U.S. Federal Deficit as a % of GDP-5 0 5 10percent1950 1960 1970 1980 1990 2000 2010year14Bottom Line:The recent economic crisis is historic by any measure.It’s a very interesting time to be studying