Time: 134 hours
College Credit Recommended($25 Proctor Fee)
Consider how microeconomists and macroeconomists analyze price fluctuations. In microeconomics we focus on how supply and demand determine prices in a given market. In macroeconomics we focus on changes in the price level across all markets. Microeconomics studies firm profit maximization, output optimization, consumer utility maximization, and consumption optimization. Macroeconomics studies economic growth, price stability, and full employment.
Macroeconomic performance relies on measures of economic activity, such as variables and data at the national level, within a specific period of time. Macroeconomics analyzes aggregate measures, such as national income, national output, unemployment and inflation rates, and business cycle fluctuations. In this course we prompt you to think about the national and global issues we face, consider competing views, and draw conclusions from various perspectives, tools, and alternatives.
The study of microeconomics focuses on exchanges among consumers and firms that are in the market to purchase goods and services. In contrast, macroeconomics focuses on exchanges that take place across all of the markets within a country. We take the interrelated actions of consumers, businesses, government agencies, financial intermediaries, and global trading partners into account, as they exchange resources, goods, and services, and facilitate currency and quantity flows. Microeconomics studies how to achieve profit maximization, while macroeconomics studies how to achieve economic stability and growth on a national level.
Completing this unit should take you approximately 17 hours.
In macroeconomics we study the total output an economy generates. Economists use gross domestic product (GDP), the monetary value of all final goods and services produced within a country's borders in one year, to measure a country's total output. Macroeconomics tend to use real GDP, rather than nominal GDP, for their comparisons since real GDP removes the effect of inflation. Measuring growth in current dollars (which does not account for inflation), rather than constant dollars, might indicate a false sense of economic growth or decline.
Governments focus on three key indicators of economic growth: an increase in real GDP over time, full employment, and price level stability. In unit 5, we explore how governments form, implement, and evaluate their fiscal and monetary policies to achieve these three goals. In this unit we uncover scenarios and philosophical debates about government's role in a market-based economy. We examine whether GDP is an accurate measure of societal well-being, quality of life, and the standard of living.
Completing this unit should take you approximately 17 hours.
Most of us are familiar with unemployment and inflation: the unemployment rate reflects the number of people out of work who are actively seeking work; inflation indicates an overall rise in the price level of most, but not all, goods and services. In this unit we delve into these concepts and study their interrelationship.
First, consider that inflation erodes the purchasing power of the dollar, or other currency unit (euro, rupee, naira, dinar, or pound). Macroeconomics helps us measure the effects inflation has on an economy and the standard of living when it distinguishes between nominal income (the dollar amount received), and real income (the amount of goods and services the income can buy).
Secondly, consider the different types of employment. The labor force includes employed and unemployed workers, such as those who are able and willing to work, but not able to obtain employment. The labor force does not include full time students, nonworking spouses, and retirees who are not looking or unable to work. We examine three types of unemployment: frictional or temporary unemployment, structural unemployment which affects entire sectors of the economy, and cyclical unemployment which is caused by downturns in the economy.
Let's consider a hypothetical event to show how unemployment and inflation levels are often interrelated. Suppose everyone who is looking for a job gets hired tomorrow and begins earning income. Unemployment levels fall. Our newly-employed group is flush with cash and wants to spend their income immediately. However, it would take some time for retail stores to make new products available to purchase to meet this demand. More money is available to purchase the limited number of goods available. Prices rise as retailers try to benefit from the rise in consumer demand. Inflation increases. Our scenario shows how employment and inflation levels often follow each other.
Completing this unit should take you approximately 20 hours.
In this unit we explore the forces affecting growth, inflation, and unemployment at the aggregate level, such as output, income, or the set of components within GDP.
Aggregate demand is the total amount of goods and services people want to purchase. It measures what people want to buy, rather than what is actually produced. The aggregate demand is the sum of consumption, investment, government expenses, and net exports.
Aggregate supply is the total output an economy produces at a given price level. As we studied in microeconomics, firms achieve equilibrium when they produce the quantity of goods and services consumers want to buy—at a macro level equilibrium is the point where aggregate supply equals aggregate demand. In this unit we examine shifts in aggregate supply and aggregate demand, and the short-term and long-term effects for the entire economy.
Completing this unit should take you approximately 27 hours.
Governments use various policies and tools to steer the macroeconomy toward three main goals: full employment, price stability, and economic growth. In the remaining three units, we explore the conflicts and complexities of these policies and tools. First, let's study fiscal policy, which involves taxing and spending policies, including the fiscal legislation Congress enacts in the United States and similar legislative bodies promote in other countries.
Completing this unit should take you approximately 12 hours.
Monetary policy includes the methods government agencies, such as the U.S. Federal Reserve, engage in to encourage banks, businesses, and individuals to change their interest rates, the supply of money, and the demand for money. Money serves as a medium of exchange, a store of value, and a unit of account. These three functions enable individuals to avoid a bartering system (we pay a business money for providing a service, rather than with a goat or loaf of bread). The ways we use to define and measure money are important to managing an economy. Savings and investment are key elements within the circular flow model and are a function of interest rates.
Completing this unit should take you approximately 32 hours.
Aside from the exchange of goods and services on a global level, trade among countries serves many functions. For example, it trading partners make a greater variety of goods available. In short, these gains from trade promote the concepts of specialization, comparative advantage, and export activities. Trade also facilitates movement and exchange of foreign currencies, such as when imports are paid for in the unit of the exporting country's currency.
However, international trade can be an emotional and politically-charged issue, that cuts across microeconomics and macroeconomics. In this unit we examine trade from an economic, rather than political, perspective. We direct our attention to trade balances, exchange rates, and other aspects of a country's macroeconomic performance.
Completing this unit should take you approximately 9 hours.
This study guide will help reinforce key concepts in each unit as you prepare to take the final exam. Each unit study guide aligns with the course learning outcomes and provides a summary of the core competencies and a list of vocabulary terms. Our study guides are not meant to replace the readings and videos that make up the course.
The vocabulary lists include terms that may help you answer some of the review items, and terms you should be familiar with to successfully complete the final exam for the course.