Course Introduction
Economists divide their discipline into two areas of study: microeconomics and macroeconomics. In this course, we introduce you to the principles of macroeconomics, the study of how a country's economy works, while trying to discern among good, better, and best choices for improving and maintaining a nation's standard of living and level of economic and societal well-being. Historical and contemporary perspectives on the role of government policy surround questions of who gains and loses within a small set of key interdependent players. These beneficiaries include households, consumers, savers, firm owners, investors, government officials, and global trading partners.-
Time: 60 hours
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College Credit Recommended
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Free Certificate
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.
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Course Syllabus
First, read the course syllabus. Then, enroll in the course by clicking "Enroll me". Click Unit 1 to read its introduction and learning outcomes. You will then see the learning materials and instructions on how to use them.
Unit 1: Introduction to Economics
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 12 hours.
Upon successful completion of this unit, you will be able to:
- analyze resource allocation based on the principles of scarcity, opportunity cost, and making decisions at the margin;
- distinguish microeconomics from macroeconomics;
- understand models and other tools used to carry out economic analysis;
- apply the Production Possibilities Curve to identify production combinations that are efficient, inefficient, and unattainable;
- explain the classification of economic systems, the role of government in different economic systems, and the strengths and weaknesses of different systems
- define demand and supply and market equilibrium;
- explain how changes in the demand and supply determinants affect the demand and supply curves and alter the equilibrium prices and quantities
- describe the circular flow model, identifying linkages between the markets for goods and resources as well as the exchanges between businesses and households; and
- analyze price controls and the way they create product shortages or surpluses in the markets.
- Keep the following two comprehensive study guides handy throughout your macroeconomics course study. They provide brief oulines for many of the major macroeconomics topics studied in this course and can help prepare you for your final economics exams.
1.1: The Economic Way of Thinking
- Read this chapter to learn about the economic way of thinking and the principles of scarcity and opportunity cost. Be sure to click through each of the sections. Note how individuals and businesses make everyday decisions at the margin. Learn about the differences between macroeconomics and microeconomics.
- Watch these two videos to learn about resources, scarcity and how we make choices when resources are scarce. As we know, satisfying unlimited wants is impossible. Finding ways to use our scarce resources in ways that optimize society's well-being is one of the most important tasks of the science of economics.
Read this introduction to Macroeconomics, which provides a brief overview of the overall science of economics. Pay attention to the key the differences between microeconomics and macroeconomics.
- The following two videos show you the economist's toolkit and explain how economists test hypotheses, develop economic theories, and use models in their analysis.
1.2: Choices in Production and the Production Possibilities Curve
- Read this chapter to learn about the factors of production and the way they are combined in production. Use the production possibilities curve to represent the alternative combinations of goods and services that an economy can produce. Make sure to understand how the curve represents efficient, inefficient, and unattainable levels of production. Pay attention to how economic growth can be represented by shifts in the curve. Also in this chapter, learn about how economic systems compare.
- Watch these two videos to learn how a production possibilities curve is constructed. Pay close attention to the way changes in resources affect the PPC curve. As you will see, some combinations of products may be unattainable, given the limited existing resources, whereas other combinations of products may be inefficient as they leave some unused resources. The PPC curve helps us find levels of production that utilize all of the available resources in the economy.
1.3: Demand, Supply, and Market Equilibrium
- Read this chapter and attempt the "Try It" exercises. Also, complete the concept problems and the numerical problems at the end of the chapter. This chapter will help you gain familiarity and competencies with regard to basic demand and supply concepts. At a minimum, you should be able to list the factors that shift the demand curve and those that shift the supply curve. Make sure to carefully study the difference between demand and quantity demanded (and the difference between supply and quantity supplied).
- Watch these three videos to learn about Demand, the Law of Demand, and the variables that shift the Demand curve. Make sure to understand the difference between Demand and Quantity Demanded. Knowing this difference will help you determine if a change in a specific variable causes a movement along the Demand curve or a shift of the curve.
- Watch these two videos to learn about Supply, the Law of Supply, and the variables that shift the Supply curve. Note that, similarly to the discussion of the difference between Demand and quantity demanded, here we have to distinguish between Supply and quantity supplied. As you will see, a change in quantity supplied causes a movement along the supply curve, whereas a change Supply is a shift of the entire curve.
- Watch this video to put together Demand and Supply on the same graph and determine equilibrium quantity and price. Learn about the ways in which changes on the demand and/or supply side of the market affect the equilibrium outcome.
This exercise will help you understand demand, supply, and equilibrium; identify the determinants of demand and supply; and describe how changes in demand and supply lead to changes in a market's equilibrium price and quantity.
- This assessment does not count towards your grade. It is just for practice!
- You will see the correct answers when you submit your answers. Use this to help you study for the final exam!
- You can take this assessment as many times as you want, whenever you want.
1.4: The Circular Flow of Income and Expenditures
- Read this section on the Circular Flow of Economic Activity. Learn about the how the circular flow model provides a link between the demand and supply in the product and factor markets.
- Watch this lecture about the circular flow of income and expenditures in a closed economy. Note that goods and services are exchanged in product markets and factors of production are exchanged in factor markets.
- Receive a grade
Take this quiz to check your understanding of the circular flow model. You should understand the kinds of actors in an economy, and how money can transfer among them.
- This assessment does not count towards your grade. It is just for practice!
- You will see the correct answers when you submit your answers. Use this to help you study for the final exam!
- You can take this assessment as many times as you want, whenever you want.
1.5: Applications of Demand and Supply
- Read this chapter and attempt the "Try It" exercises. This chapter will help you gain familiarity and competencies with regard to basic demand and supply concepts. At a minimum, you should be able to list the factors that shift the demand curve and those that shift the supply curve after completing these chapters. This will help you prepare for similar types of analyses in the units ahead.
- Watch this video to learn about the way in which government price controls (price floors and price ceilings) can sometimes alter the market outcome. Note if price controls are set at levels that make them ineffective. Some notable examples of real world price controls are also discussed.
Unit 2: Macroeconomics: Gross Domestic Product, Inflation, and Unemployment
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 10 hours.Upon successful completion of this unit, you will be able to:
- define and distinguish nominal gross domestic product and real gross domestic product;
- identify the components of the business cycle and track real GDP over time;
- define inflation and track it over time;
- compute inflation by calculating the price of a basket of goods and the corresponding price index;
- distinguish between the various types of price indexes in the economy compute real variables using the corresponding price index;
- define unemployment and discuss how economists measure it;
- distinguish between frictional, structural, and cyclical unemployment and their impacts on the economy's production;
- analyze and apply the concepts of natural rate of unemployment and full employment;
- identify and analyze the four elements of GDP - Consumption, Investment, Government Purchases and Net Exports;
- compare the expenditure and the income approaches to the measurement of GDP; and
- analyze the problems associated with using GDP as a measure of well-being.
2.1: Defining GDP and the Business Cycle
Read this chapter and attempt the "Try It" exercises. Also, complete the concept problems and the numerical problems at the end of the chapter. In the first section of this chapter, you will read about the definition of Gross Domestic Product and some of the issues around measuring it. You will also learn about the 4 phases of the business cycle. As you will see, the economy goes through naturally alternating periods of economic growth and recession. You will review certain sections of this chapter later in the unit.
- Watch these three videos to analyze the definition of Gross Domestic product and the ways in which this definition avoids double-counting and the effects of price changes.
- Watch these two videos to explore the components of the business cycle. As you will see, the business cycle is largely driven by the emotions of the market participants. Bouts of optimism can spur demand and increase economic activity whereas negative expectations can precipitate economic decline.
- Explore the Bureau of Economic Analysis website to find out current real time measures of economic indicators such as GDP, unemployment, inflation, etc.
2.2: Inflation, Nominal GDP, and Real GDP
- Review section 2 of the Macroeconomics chapter assigned in Unit 2.1, which defines and discusses the concept of Inflation. Learn what hyperinflation and deflation are and identify the method of calculating inflation. Pay attention to the meaning and calculation of the term "Price Index" and the way it is used to calculate inflation.
- The following 3 episodes from Dr. McGlasson's Macroeconomics Modules video series explore inflation, the price indexes, and the way real variables such as real income and real GDP are derived.
- Watch these two videos, which show the distinction between real GDP and nominal GDP and introduce the GDP deflator, which is the price index calculated on all goods and services that are included in GDP.
- Watch this lecture about calculating real GDP with a deflator. This is one among many approaches to removing the effect of inflation from nominal or current values. Watch for other approaches, some of which draw from a base broader or narrower relative to that under current consideration.
- Read this article, which discusses how inflation can distort the allocation of resources and adversely affect economic efficiency.
- Inflation is the rise in the general price level in the country. One of the measures of inflation in the U.S. is the Consumer Price Index (CPI). Find the official published CPI levels on the Bureau of Labor Statistics site below. Pay attention to the way food and energy prices contribute to the overall price level.
- The following video introduces inflation, defined as an increase in the price level over time. The video shows how inflation is calculated using the consumer price index (CPI).
- Watch this lecture, which discusses hyperinflation. Hyperinflation is defined as inflation rates in excess of 200 percent for a period of one year or longer.
After reviewing the unit materials, please post and respond to the following topics on the course discussion board. Feel free to start your own related posts and respond to other students' posts as well.
Compare and contrast the inflation rate and the changes in prices that occur within markets. Including borrowers and savers, which groups benefit and which lose as a consequence of inflation? Provide an example of a situation in which there are too many dollars chasing too few goods.
- Receive a grade
Take this quiz to see how well you understand nominal GDP, real GDP, and growth rates.
- This assessment does not count towards your grade. It is just for practice!
- You will see the correct answers when you submit your answers. Use this to help you study for the final exam!
- You can take this assessment as many times as you want, whenever you want.
2.3: Unemployment
- Review these sections from the Macroeconomics chapter assigned in Unit 2.1, which define and discuss the concept of unemployment. As you will find out, there are specific characteristics that have to be present for for someone to be considered "unemployed". The mere fact of a person not having a job is not sufficient for that determination. Read this section of the text to find out more.
- These episodes from Dr. McGlasson's Macroeconomics Modules video series give you a different angle on the meaning of unemployment and the main types of unemployment: frictional, structural, and cyclical.
- Learn about the meaning of "natural rate of unemployment". As it turns out, our goal is not to achieve 0% unemployment - that is impossible, but a certain rate of low unemployment (aka "the natural rate of unemployment") is not only possible but desirable.
- Read this article to learn about some of the shortcomings of the available unemployment statistics and some alternative metrics to see a more full picture.
As you saw, we can measure unemployment in many ways. This article gives a few additional measures of unemployment that were not discussed in the textbook. In the United States, we use six measures of unemployment. The table and numbers in this resource come from the Bureau of Labor Statistics, the federal agency that monitors and reports on unemployment. After you read this resource, you will confirm your understanding of the BLS unemployment categories in a quiz. You will need to reference the figures on this page as you take the quiz, so be sure to come back to it.
- In the U.S., unemployment statistics is collected and compiled by the Bureau of Labor Statistics of the Department of Labor. The unemployment reports are published monthly and available on the following web site. Explore the website and identify the current level of unemployment in the U.S. How does it compare to the natural rate of unemployment?
- Receive a grade
Take this quiz to see how well you understand the six measures of unemployment used by the Bureau of Labor Statistics.
- This assessment does not count towards your grade. It is just for practice!
- You will see the correct answers when you submit your answers. Use this to help you study for the final exam!
- You can take this assessment as many times as you want, whenever you want.
- Read this article, which includes data from the United States Bureau of Labor Statistics, to learn how to calculate the unemployment rate.
2.4: GDP Components: Consumption, Investment, Government Purchases, and Net Exports
- Read this chapter, to learn about measuring domestic output, and attempt the "Try It" exercises. The material in this chapter concentrates on the four components of GDP: consumption, investment, government purchases, and net exports. Pay attention to the definition of these components as it may differ from your expectations. For example, note that Investment does not refer to the common knowledge definition of investment as in the trading of stock and bonds. Instead, the Investment component refers mainly to the purchase of physical machinery and equipment needed in the production of goods and services. You will revisit certain sections of the chapter later in this unit.
- Watch these two videos which discuss the components of GDP and the income and expenditure approaches to measuring GDP.
Read this chapter for an overview of the concepts that are associated with the business cycle. The business cycle provides information on the causes and characteristics of the economic problems associated with unemployment and inflation. Be sure to complete the assessment in this subunit that accompanies this reading.
Download and examine this table, which contains statistics on various components of the GDP from 2013 to 2015 broken down by quarter. Observe how the United States has gone through growth and contraction at various points during this time period.
Each quarter the BEA produces an estimate of the annual GDP for that year. As the year progresses their estimate of the GDP becomes better and more refined. The fourth quarter estimate is the best estimate, although that number is modified in the following year, as "actual" numbers become available for the previous year. For the fourth quarter of 2014, the GDP is given as "17,615.9." The numbers in this table are expressed in Billions of US Dollars. What it means in words is 17 trillion, 615 billion, 900 million dollars. The US GDP today is heading for 18 trillion dollars.
When you search for this information, you will see slight differences from the numbers reported on various sites to that of the BEA. This slight difference happens because other sites reconcile/modify quarterly estimates to arrive at an annual estimate of GDP, while the BEA just reports quarterly estimates of the annual GDP.
2.5: Problems Using GDP as a Measure of Well-Being
- Review section 3 of the Macroeconomics chapter assigned in 2.1. Learn about the shortcomings of GDP as a measure of well-being. As we will see, GDP is an imperfect measure of happiness as it focuses exclusively on the material well-being of a country's citizens. Factors such as the quality of healthcare, education, and the environment, are not explicitly covered by GDP.
Unit 2 Discussion
After reviewing the material in this unit, please post and respond to the following topics on the course discussion board. Feel free to start your own related posts and respond to other students' posts as well.
Identify the two basic approaches to measuring GDP. How do they differ? Explain why the amounts of the two approaches are unequal. What are the three major goals of macroeconomics? Explain which goal is the most important to you and/or someone you know. Why is GDP an inappropriate measure of well-being?
Unit 3: Aggregate Demand and Aggregate Supply
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. We consider aggregate supply in the short-run and in the long-run.
Completing this unit should take you approximately 9 hours.
Unit 4: Aggregate Equilibrium and Economic Growth
In this unit, we explore aggregate economic equilibrium in the short run and the long run. At a macro level, equilibrium is the point where aggregate supply equals aggregate demand. We examine shifts in aggregate supply and aggregate demand, and the short-term and long-term effects for the entire economy.
Also in this unit, we explore economic growth. Economic growth is the process of increasing the potential level of GDP (the level of production occurring at the natural rate of unemployment)Completing this unit should take you approximately 4 hours.
Unit 5: Money, Banking, and Monetary Policy
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 11 hours.
Unit 6: Fiscal Policy and the Relationship Between Inflation and Unemployment
Governments use various policies and tools to steer the macroeconomy toward three main goals: full employment, price stability, and economic growth. In this unit, we study fiscal policy, which involves taxing and spending policies, including the fiscal legislation Congress enacts in the United States.
Completing this unit should take you approximately 10 hours.Unit 7: International Trade and Finance
This unit examines the macroeconomic effects of international flows of financial capital, and goods and services. The determinants of exchange rates are identified and the connection is made between financial capital flows and the trade balance. The unit explores the effects of exchange rates on a country's economy and the economies of its trading partners. The welfare effects of trade are also studied.
Completing this unit should take you approximately 4 hours.
Study Guide
This study guide will help you get ready for the final exam. It discusses the key topics in each unit, walks through the learning outcomes, and lists important vocabulary. It is not meant to replace the course materials!
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Certificate Final Exam
Take this exam if you want to earn a free Course Completion Certificate.
To receive a free Course Completion Certificate, you will need to earn a grade of 70% or higher on this final exam. Your grade for the exam will be calculated as soon as you complete it. If you do not pass the exam on your first try, you can take it again as many times as you want, with a 7-day waiting period between each attempt.
Once you pass this final exam, you will be awarded a free Course Completion Certificate.
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Saylor Direct Credit
Take this exam if you want to earn college credit for this course. This course is eligible for college credit through Saylor Academy's Saylor Direct Credit Program.
The Saylor Direct Credit Final Exam requires a proctoring fee of $5. To pass this course and earn a Proctor-Verified Course Certificate and official transcript, you will need to earn a grade of 70% or higher on the Saylor Direct Credit Final Exam. Your grade for this exam will be calculated as soon as you complete it. If you do not pass the exam on your first try, you can take it again a maximum of 3 times, with a 14-day waiting period between each attempt.
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Once you pass this final exam, you will be awarded a Credit-Recommended Course Completion Certificate and can request an official transcript.
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