This document summarizes the key information from the first lecture of an introductory macroeconomics course. It introduces the professor and their contact details. It outlines the relevant course information resources and homework assignments. It discusses why studying economics is important for understanding world events, economic data, and policy decisions. It provides examples of key macroeconomic indicators and concepts.

1. Lecture 1
Principles of Macroeconomics
Econ 2

2. Relevant Info: Me
• Professor Rupert
• 3044 North Hall
• Office Hours:
• None (Don’t come by)
• Phone:
• None (Don’t call me)
• Email
• None (Don’t email me)

3. Just Kidding
• Professor Rupert
• 3044 North Hall
• Office Hours:
• Tuesday, 9:30-10:30
• Phone: 893-3902
• Email: rupert@econ.ucsb.edu

4. Relevant Info: Class
• All Course Information
• GauchoSpace
• Student Response System
• Iclicker
• Homework
• Aplia
• support@aplia.com

5. Why Study Economics?
• The world is a mess right now
• Recession
• Housing
• Bailouts

6. Tracking the Economy
• Each class we will look at how the
economy is doing:

7. Tracking the Economy

8. Tracking the Economy

9. Why Study Economics?
• 1. Better understanding of the world
• Why are some countries so rich
and others so poor?
• An Inquiry into the Nature and
Causes of the Wealth of Nations,
• Adam Smith, 1776.

10. Why Study Economics?
• Most commonly used measure of
economic well-being:
• Real, per capita Gross Domestic
Product (GDP)
• Real: quantities
• Per capita: per person
• GDP: stuff we produce

11. Real GDP per capita

12. Real GDP per capita: Europe

13. Real GDP per capita: Africa

14. Why Study Economics?
• 2. Learn how to think about data
• What does 2% inflation mean?
• What does an increase in productivity
measure?
• What should the unemployment rate
be?
• Should you save or consume more
today?

15. Why Study Ecnomics?
• We will see lots of data in class
• Need to KNOW some numbers:
• For example, U.S. Population
–Year: 1790:
»A) 1,000,000
»B) 4,000,000
»C) 10,000,000
»D) 20,000,000

16. Data
• Need to KNOW some numbers:
• U.S. Population
• Year 2007:
– A) 100,000,000
– B) 200,000,000
– C) 300,000,000
– D) 400,000,000

17. Data
• Answers:
• U.S. Population
• 1790: B) 4,000,000
• 2007: C) 300,000,000
• Note: population growth rate, 2007:
• 1.00 %

18. Data
• Sex ratios (U.S., 2007)
• At birth:
• 1.05 males/female
• Total population:
• 0.97 males/female

19. Historical Real GDP
• Some people have calculated real
GDP back a long time
• Brad DeLong--one million years
B.C.
• What were things like one million
years B.C?

20. • This is what
things looked
like ONE
MILLION YEARS
B.C.

22. World GDP
• Another way to look at world GDP

23. HOW THE WORLD LOOKS
(IN TERMS OF GROSS DOMESTIC PRODUCT)
Global Perspective of GDP
Source: http://www.lib.utexas.edu/maps/world.html

24. Economic Well-being
• What do we learn from the pictures?
• Economic well-being very disperse
across the world

25. Economic Well-being
• Richest country is about 30 times
richer than poorest country
• Many countries have experienced
tremendous growth over the past
half century, others have not.

26. Why Study Economics?
• Why are some countries so rich and
others so poor?

27. Why Study Economics?
• Why are most Americans so much
better off than their parents and
grandparents?

28. U.S. per capita GDP and Trend
8x increase

29. Why Study Economics?
• What are business cycles and why
should I care?

30. Deviations in GDP
• GDP moves substantially from its
trend

31. wwII
Great
Depression

32. Co-Movement
• Many economic variables move
together over the cycle

34. Why Study Economics?
• What’s up with unemployment?

36. Why Study Economics?
• And the labor force?

38. Why study economics?
• What is inflation?
• The Federal Open Market
Committee? (FOMC)
• And who is Ben Bernanke?

40. Why Study Economics
• FOMC
• Monetary policy
• Controls money supply
• Interest rates
• Bernanke is the Chairman of the Fed,
he took over from Alan Greenspan

41. Why Study Economics?
• Lots of talk about “Globalization”
• What does it mean?
• What is a trade imbalance?
• Should I care?

44. Net exports=
exports-imports

46. We’d Also Like to Understand
Statements like:
Fed Statement

47. • And….

48. A Not-so-Good Reason to
Study Economics

49. A Not-so-Good Reason to
Study Economics
• Angelina Jolie and
• A) Brad Pitt
• B) Alan Greenspan
• C) Ben Bernanke
• D) Jeff Sachs

50. A Not-so-Good Reason to
Study Economics
• Angelina Jolie and
• A) Brad Pitt
• B) Alan Greenspan
• C) Ben Bernanke
• D) Jeff Sachs

51. Why study economics?
• A really good reason:
• To get more stuff from your
parents 
• Here’s how

52. At the Breakfast Table
“Mom, The FOMC surprised us and others with
its announcement it will begin purchasing
Treasuries, up to $300 bln over the next six
months. Dad, The Fed will also be buying an
additional $750 bln in MBS to bring the total up to
$1.25 bln this year; it will also purchase another
$100 bln in GSE debt, bringing the total up to
$200 bln. The Committee of course left the funds
rate target range unchanged at 0% to 0.25%, and
said economic conditions are likely to warrant
exceptionally low levels of the federal funds rate
for an extended period.”

53. Our Mission
To make sense of such statements.
1. Need to understand how output and
prices (and other stuff) are
determined.

54. Our Mission
2. Figure out what it means to set the
funds rate at 1.00 percent (or 4-3/4
percent or anything else).

55. Our Mission
3. Help policy
makers and the
FOMC get it
right next time.
After all, it is your
future!

56. What is Macroeconomics?
• Micro vs. Macro
• Micro: individual decision making:
firms and consumers

57. What is Macroeconomics?
• Micro vs. Macro
• Macro: study the behavior of the
aggregate economy
• Require that the observed
outcomes in the aggregate
economy are consistent with
utility maximization and
profit maximization.

58. What is Macroeconomics?
• Make sense of government policy
• Fiscal policy
• Taxing and spending
• Monetary policy
• Inflation, monetary aggregates
and interest rates

59. What is Macroeconomics?
• Get a better understanding of:
• International trade and finance
• Female labor force participation
• Crime and the labor market

60. Politics and Economics
• Positive vs. Normative
• Positive: how the world is
• Normative: how we think it should be

61. Politics and Economics
• Decentralized vs. Centralized
Markets
• Decentralized: prices and quantities
determined by individuals in the
market
• Centralized: government
determination of prices and quantities

62. Other Class Stuff
• Need to register your Iclicker
• Wait until you have used it in class first
though!
• Go to:
http://www.iclicker.com/registration/