Econ 101 (Macroeconomics)

Study Guide

Topic 1 Introduction to Macroeconomics

No. of Weeks: 1
Subtopics: A. Macroeconomics: Issues and Goals
B. Policy Instruments
C. Business Cycle and Output Gap

Let’s Start!
This unit will introduce you to the core topics of macroeconomics: its definition, nature
and scope, and basic macroeconomic concepts. Also discussed are basic macroeconomic
questions, and various approaches in building economic models.
Learning Outcomes
At the end of this module, you will be able to:
• Discuss how macroeconomics as a branch of economics came
to be;
• Identify different issues and goals macroeconomics tackles;
• Identify various policy instruments macroeconomists use in
addressing national economic issues; and
• Determine how the business cycle work.

Think about it…

• How did Macroeconomics become a distinct field of
economics?
• What issues does Macroeconomics tackles, and how are these
issues being addressed?
• What policy instruments macroeconomists use in addressing
national economic issues?
• How is the business cycle defined? How does it work?

Watch and Read

Before proceeding to the main reference for this topic (Mankiw, Chapter 1 and Dornbusch,
Chapter 1), allow yourself to be acquainted to Macroeconomics by reading the following
articles or watching the video that can be accessed through the links below:
• (WATCH) Top 9 Importance of Macroeconomics – Discussed:
https://www.youtube.com/watch?v=nQXD5Mhv5Q8
• (WATCH) Macroeconomics explained in simple way:
https://www.youtube.com/watch?v=nQXD5Mhv5Q8

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 • (READ) ppt of Mankiw Ch 1:
https://is.muni.cz/el/1456/jaro2011/MPE_AMA2/um/Lecture_1
_chap01_02.ppt

The Birth of Macroeconomics (optional)

The severe economic downturn of the 1930s known as the Great Depression paved the way
for macroeconomics to be recognized as a distinct branch of economics. Learn what
happened during that time and its contribution to the modern macroeconomics we know
today by reading or watching the materials below:
• (READ) The Great Depression:
https://www.history.com/topics/great-depression ; or
• (WATCH) The Great Depression: 5-minute history
lesson: https://www.youtube.com/watch?v=62DxELjuRec

A. Macroeconomics: Issues and Goals

This section highlights the nature and scope of macroeconomics. It begins with identifying
economic variables, use of multiple models for macroeconomic analysis, price behavior,
and how microeconomic thoughts become strong foundation for macroeconomic models.
Various economic concerns and issues on output, employment, prices, and international
trade arPe likewise presented.
• (READ) An alternative reading material for this section can be
accessed here: Macroeconomics:
https://www.investopedia.com/terms/m/macroeconomics.asp#:~
:text=Macroeconomics%20in%20its%20modern%20form,of%2
0thought%20have%20developed%20since.
B. Policy Instruments
Economists and policy makers have different approaches in tackling economic concerns.
These approaches involve using different policy instrument to manipulates certain
economic conditions. Under this section, we identify and briefly discuss these policy
instruments:
Fiscal policy International economic policy
(trade)
Monetary Income policy
policy
C. Business Cycle and Output Gap
Business cycle is a basic macroeconomic concept which relates the relationship between
inflation, growth, and unemployment. It basically illustrates the regular pattern of
expansion and contraction in economic activity around a path of trend growth. Through the
business cycle, we can also identify the output gap, which measures the deviation of actual
output from the potential output level an economy can produce. Reading material for this
subtopic is DFS Macroeconomics Chapter 1-2.
An alternative reference for this subtopic by the Macroeconomics course in Lumen
Learnings can be accessed in the provided link below:
https://courses.lumenlearning.com/wmopen-macroeconomics/chapter/business-
cycles/

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 For class discussion
The business cycle highlights the regular pattern of expansion and
contraction in economic activity of a certain country. Given this
definition, answer the following questions:
1. Is recession something inevitable? Why or why not?
2. Is there an instance where recession is beneficial for a
particular economy?

References

Dornbusch R., S. Fisher and R. Startz, 2018. Macroeconomics, 13th ed., McGrawhill. (or any
edition)
Mankiw, G., 2002. Macroeconomics, 5th ed., Worth Publishers. (or any edition)

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