Introduction to Macroeconomics

• Macroeconomics describes and explains economic processes that concern aggregates.
• An aggregate is a multitude of economic subjects sharing common features.
• Microeconomics, in contrast, deals with economic processes that concern individuals.
• The decision of a firm buying an office chair is not a macroeconomic problem.
• The reaction of Austrian households to increased capital taxation is a macroeconomic problem.
• Macroeconomics is more complex than just the sum of microeconomics.
• It is not possible to describe the entire economy by modeling every firm and person.
• Macroeconomics investigates aggregate behavior by using simplifying assumptions.
• Macroeconomic models typically have a 'story', a mathematical model, and a graphical representation.
• Macroeconomics is ‘non-experimental’ and focuses on pure observation.
• Historical events allow diverse interpretations, so macroeconomic conclusions aren't definitive.
• Politicians should be advised on how to control the economy to meet specific targets optimally.
• Traditional policy targets include economic growth, stable prices, full employment, external equilibrium, and just income distribution
• According to the EMU criteria, policy targets focuses on inflation (around 2%), public debt, and a balanced budget
• According to BLANCHARD, policy targets include low unemployment (around 5%), good economic growth, and inflation (0-3%).
• Achieving several conflicting targets simultaneously is desired.
• Examples of typical questions in macroeconomics include what causes business cycles, can the central bank increasing monetary supply have real effects, long-run economic growth, stable currency exchange rates, and the correlation between inflation/unemployment
• There are three large economic blocks: Europe, USA+Canada, Japan+Far East.
• The remainder are mostly developing countries.

USA Economics

• Good growth and low inflation
• Tolerable unemployment rate and persistent external deficit
• Increasing income inequality

EU Economics

• Moderate growth and low inflation
• Some countries have high unemployment, inconspicuous external balance, or large public debt
• Currently undergoing important unification process, convergence and heterogeneity of individual countries.
• 'Richest' EU countries Luxembourg, Denmark, then 'mid-field' with Austria, IRL, B, NL, UK, D, F, FIN, I, S; slightly below E, GR, SLO, P.
• Last come most 'new' (2004 accession) countries (from Malta down to Latvia).
• Very ‘rich' non-EU countries Norway, Iceland, and Switzerland.

Japan Economics

• Recently weak growth and large external surplus
• Deflationary tendencies