L E C T U R E S U M M A R Y
Lecture 1:
Macroeconomics is the study of the economy as a whole, therefore it looks at growth in incomes, the
changes in the overall level of prices and the unemployment rate.
Macroeconomists attempt to explain the economy and to devise policies to improve its performance.
To do this they use different models to examine different issues. There are predominantly two types of
models. Models with flexible prices describe the economy in the long run where as models with
sticky prices describe the economy in the short run.
Macroeconomic events and performance arise from many microeconomic transactions, so
macroeconomists use many of the tools of microeconomics.
Lecture 2 & 3:
National income.
Models that are appropriate in this case look at a closed economy. Factors of production play a key
role and in this case capital and labour are key. Furthermore the factors of production highlights the
need and effectiveness of technological progress.
▲Constant returns to scale, increasing returns to scale and decreasing returns to scale. Means
the labour income plus capital income equals total income (output)