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1、Macroeconomics1The TA The TA is your friend Any question or concern, please contact TA2Organization 15 minutes break Strictly English in class, but no language restriction after class Students participation highly encouraged Interruption with questions is welcome, but please identify yourself if I c
2、annot remember you Cell phone silent3Assessment Class participation: 5% Homework: 15% (5 assignments, 3% each) Midterm: 30% Final exam: 50%4Definition of Economics Economics is the social science that studies the choices that individuals, businesses, governments, and societies make as they cope with
3、 scarcity and the incentives that influence and reconcile those choices. In general, economists study how agents make decisions under certain constraints.5Economic Issues in Your Life Issues related to microeconomics Issues related to macroeconomics Are macroeconomic issues important to your busines
4、s or your life?6What do we study in macro? Can I find a good job after graduation? Why is there inflation? Why is inflation bad? What will be the GDP growth of China this year? Why do we care? What happened to US economy a few years ago? What happened to the state of California? Should Chinese curre
5、ncy appreciate? Is Chinas economic growth sustainable? Why GDP per capita in Shanghai is tens of times that in Guizhou? Why GDP per capita in US is hundreds of time that in some African countries?7Definition of Micro- and Macro-Economics Microeconomics (managerial economics) Microeconomics is the st
6、udy of choices made by individuals and businesses, and the influence of government on those choices. Macroeconomics Macroeconomics studies economics as a whole Two major topics in macroeconomics: Economic Growth: long-run trend Business cycles: short-term fluctuations around trend 8Four Goals of Mac
7、roeconomics Economic growth Full employment Inflation Balance of international payment9TEN PRINCIPLES OF ECONOMICS How do people make decisions? 人们面临权衡取舍People face tradeoffs. 机会成本The cost of something is what you give up to get it. 理性的人用边际概念思考Rational people think at the margin. 人们接受激励People respon
8、d to incentives.TEN PRINCIPLES OF ECONOMICS How do people interact? 交易使得每个人变好Trade can make everyone better off. 市场是组织经济活动的好方法Markets are usually a good way to organize economic activity. 政府有时候能够改进经济的结果Governments can sometimes improve economic outcomes.TEN PRINCIPLES OF ECONOMICS The Economy as a w
9、hole生活水平取决于一个国家的生产能力The standard of living depends on a countrys production.当政府印刷太多货币的时候，价格水平会上升Prices rise when the government prints too much money.短期内，通货膨胀和失业有一个交替关系Society faces a short-run tradeoff between inflation and unemployment.Essence of Economics: Critical ThinkingCritical thinking clari
10、fies goals, examines assumptions, discerns hidden values, evaluates evidence, accomplishes actions, and assesses conclusions.A logical way to tackle a question: the way to analyze issues and write thesisExample: How to measure the value of life?Why do we care?Insurance claims Wrongful-death lawsuits
11、Environmental Protection Agency (EPA): justifying cost of environmental regulation Ideas: We can ask individual directly Individuals contribution to the societyLife-time earning projection, discounted to present value (what if people dont work?) How much one is loved and needed by their friends and
12、family How do economists think of the problem?(1)How much people need to be compensated if you want them to take a riskier job? (Black and Kniesner, 2003)(2)How much states raise their speed limit? (Ashenfelter and Greenstone, 2004) Example: Traffic JamTraffic Jam is a serious problem for many big c
13、itiesWhat is the short-run solution?What if we levy a fee for traffic jam?More “crazy” problems can be found in Steven Levitt and Stephen J. Dubners top selling book Freakonomics, where you can learn how to detect cheating behavior among sumo wrestlers just by sitting in your living room and look at
14、 the match results. The scope of economics has been expanding:- All kinds of social and economic behavior and phenomena (e.g., crime, law, the family, prejudice, tastes, irrational behavior, politics, sociology, culture, religion, war, etc.)- Tools of economics are adopted by other social sciences.-
15、 So-called “Economic imperialism”Economics is a powerful analytical tool that can help you see the world in a smarter wayThe key essence: CRITICAL THINKINGCausalityCausality vs CorrelationE.g., does weightlifting make people shorter?With the same amount and strength of muscle, short people only need
16、 to move a weighted bar through a short distance to complete a liftAll else equal, shorter people are more likely to win. They are preferred by the weightlifting teams.Challenges to Make Causal Arguments1. Reverse CausalityWhich came first.the chicken or the egg: Did a chicken cause the egg to come into existence or was it the egg that caused the chicken to come into existence?Do improvements in health boost economic growth?Similarly: democracy and growth2. Missing VariableReturn to education: w
