📈 Macroeconomics

What you’ll learn

1. Thinking in AggregatesDefine macroeconomics, distinguish it from microeconomics, and meet the three numbers it watches.Microeconomics studies individual markets — one firm, one price, one consumer — while macroeconomics studies the economy as a whole: total output (GDP), the overall price level (inflation), and the share of workers without jobs (unemployment). The field was born from catastrophe: the Great Depression defied existing theory, and John Maynard Keynes's 1936 General Theory launched the systematic study of economy-wide slumps. Macroeconomics exists because the whole economy can fail in ways no single market explains.
2. GDP: Measuring EverythingDefine GDP, its components, what it excludes, and the difference between nominal and real.Gross domestic product is the market value of all final goods and services produced within a country in a period — counting only final sales to avoid double-counting, and only current production. Spending splits into consumption (roughly two-thirds of U.S. GDP), investment, government purchases, and net exports. Nominal GDP uses today's prices, so it can rise from inflation alone; real GDP holds prices constant, which is why growth is always quoted in real terms.
3. Growth: The Power of CompoundingGrasp why small differences in long-run growth rates transform living standards, and what drives growth.Long-run growth in real GDP per person — driven by productivity: better tools, skills, technology, and institutions — is what separates today's living standards from the 19th century's. Compounding does the heavy lifting: by the rule of 70, an economy growing 2% a year doubles in ~35 years, while 7% growth doubles in ~10, which is how South Korea vaulted from postwar poverty to rich-country status within two generations. Over decades, the growth rate matters more than any recession.
4. The Business CycleDescribe expansions and recessions, how the NBER dates them, and why cycles ride on top of the growth trend.Real GDP doesn't climb smoothly — it rises along its long-run trend in expansions and periodically falls back in recessions, a pattern called the business cycle, though it is irregular in both timing and depth. In the U.S., recessions are dated by the NBER's Business Cycle Dating Committee: a significant decline in activity spread across the economy lasting more than a few months, judged from jobs, income, output, and sales — not just the folk rule of two negative GDP quarters. Expansions have no expiration date; the 2009–2020 expansion was the longest on record at 128 months.
5. Unemployment: Counting the JoblessLearn how the unemployment rate is actually measured and why it can never usefully be zero.The U.S. unemployment rate comes from the Current Population Survey — about 60,000 households interviewed monthly — and counts as unemployed only those without a job who actively looked in the past four weeks; discouraged non-searchers fall out of the labor force entirely. Economists split joblessness into frictional (normal search time), structural (skills or locations mismatched to jobs), and cyclical (recession shortfall). Because search and reallocation never stop, 'full employment' means roughly 4–5% unemployment, not zero.
6. Inflation: The Price of EverythingUnderstand how the CPI is built, what inflation costs, and why central banks aim for about 2% rather than zero.Inflation is a rise in the overall price level, measured in the U.S. mainly by the Consumer Price Index: BLS staff track prices on tens of thousands of items weighted by a representative household basket. Moderate inflation redistributes quietly — eroding cash and fixed incomes, rewarding borrowers over lenders — while making planning harder; high inflation does all that violently. Central banks target about 2% rather than zero partly because deflation is worse: falling prices raise real debt burdens and reward waiting, feeding slumps.
7. Hyperinflation: Money DiesSee what happens when inflation runs to extremes, and what every hyperinflation has in common.Hyperinflation — conventionally, prices rising more than 50% per month — has one recurring cause: governments printing money to cover spending they cannot tax or borrow for. Weimar Germany in 1923 saw the mark collapse until a U.S. dollar bought trillions and notes worked better as kindling than currency; Zimbabwe in 2008 printed a hundred-trillion-dollar bill; Hungary in 1946 holds the record, with prices doubling roughly every 15 hours. The cures are as uniform as the cause: stop the printing, fix the budget, and restore a currency people can believe in.
8. Money and BanksDefine money and its functions, contrast commodity and fiat money, and see how banks create money by lending.Money is whatever a society generally accepts for payment, and it does three jobs: medium of exchange, unit of account, and store of value. History moved from commodity money (gold, with value of its own) to fiat money (paper and deposits valuable by decree and shared confidence) — the dollar has had no gold backing for decades. Most money today isn't cash but bank deposits, and banks create it: lending out deposited funds puts the same dollars in two places at once, which multiplies money — and creates the vulnerability to runs that deposit insurance exists to stop.
9. Central Banks and Monetary PolicyExplain what the Federal Reserve is, its dual mandate, and how interest-rate policy steers the economy.The Federal Reserve, created in 1913 after the Panic of 1907, is the U.S. central bank: banker to banks, lender of last resort, and manager of monetary policy under a congressional dual mandate — maximum employment and stable prices (interpreted as 2% inflation). Its main lever is the federal funds rate, set by the Federal Open Market Committee eight times a year and transmitted to mortgages, business loans, and asset prices: cheaper credit spurs spending, dearer credit cools it. When rates hit zero in 2008, the Fed added quantitative easing — large-scale bond purchases — to keep easing.
10. Fiscal Policy: The Government's LeversUnderstand how government taxing and spending steer demand, what automatic stabilizers do, and how deficits become debt.Fiscal policy is the legislature's macroeconomic toolkit: spending and taxes change aggregate demand directly, amplified (modestly, and debatably) by the multiplier as recipients respend. Much stabilization is automatic — unemployment insurance and progressive taxes cushion downturns with no vote needed — while discretionary stimulus fights big slumps. The cost side is the deficit: annual shortfalls accumulate into federal debt now roughly the size of U.S. annual GDP, sustainable only as long as growth, interest rates, and lender confidence cooperate.
11. Case Study: The Great DepressionUse the 1929–1933 collapse to see every macro concept — demand spirals, bank runs, monetary contraction — operating at once.Between 1929 and 1933, U.S. output fell by roughly a quarter or more, prices fell about a quarter, unemployment reached 25%, and thousands of banks failed in successive panics that shrank the money supply by about a third — the mechanism Friedman and Schwartz indicted as the Depression's great amplifier. The gold standard transmitted the collapse worldwide and handcuffed the response; countries recovered roughly in the order they abandoned it. The catastrophe produced modern macro policy: deposit insurance, securities regulation, automatic stabilizers, and a Federal Reserve that now knows what not to repeat.
12. Case Study: The Great Inflation and VolckerLearn how 1970s inflation took hold, what stagflation broke in economic thinking, and what the Volcker disinflation cost and proved.From the late 1960s through the 1970s, loose policy, oil shocks (the 1973 embargo and the 1979 Iranian revolution), and rising inflation expectations pushed U.S. inflation to a peak near 15% — alongside high unemployment, a 'stagflation' combination the reigning Phillips-curve thinking said shouldn't persist. Paul Volcker's Fed, from 1979, forced inflation down with brutally tight money: interest rates near 20%, a deep 1981–82 recession with unemployment over 10%, and inflation around 3% by 1983. The episode's legacy is the modern creed: inflation expectations matter, and central-bank credibility is the anchor.
13. Case Study: 2008 and the Great RecessionTrace the housing bust into a financial panic and see the Depression playbook deployed in real time.A nationwide housing bubble, inflated by lax mortgage lending and Wall Street's appetite for mortgage-backed securities, peaked in 2006; as prices fell, defaults gutted securities held with enormous leverage across a lightly regulated 'shadow' banking system. Lehman Brothers' bankruptcy on September 15, 2008 turned strain into panic — a modern bank run among institutions. The response was the Depression playbook at speed: rates to zero, quantitative easing, bank backstops and stress tests, and fiscal stimulus. The Great Recession (December 2007–June 2009) was the deepest postwar slump, with unemployment peaking at 10% — but it was not a second Depression.
14. Trade and Exchange RatesUnderstand why countries trade, what exchange rates do, and how trade deficits connect to capital flows.Countries trade for the same reason people specialize: comparative advantage — produce what you're relatively best at and trade for the rest — raises total output even when one country is absolutely better at everything (Ricardo, 1817). Exchange rates are the prices connecting currencies: a stronger dollar makes imports cheap and exports dear, so it helps American consumers and squeezes American exporters. A trade deficit is not a scorecard of loss; by accounting identity, it is matched dollar-for-dollar by foreign investment flowing in — the two faces of one balance.
15. Reading the Economy YourselfKnow where the macro numbers come from, when they arrive, and how to read them like a practitioner.Everything in this course arrives on a public calendar: the BLS jobs report on the first Friday of each month, CPI at mid-month, BEA's quarterly GDP estimates (revised twice), and the Fed's eight FOMC decisions — all free, and charted instantly in the St. Louis Fed's FRED database. Read like a practitioner: prefer trends to single prints, expect revisions, watch leading indicators (claims, yield curve, sentiment) for direction, and remember markets move on surprises versus expectations, not on good versus bad. The tools of the professionals are a browser away.

Questions this course answers

Grounded in trusted sources

• N. Gregory Mankiw, Macroeconomics (Worth Publishers)
• U.S. Bureau of Labor Statistics — CPI and Current Population Survey documentation
• U.S. Bureau of Economic Analysis — NIPA / GDP methodology
• Federal Reserve — Monetary Policy: What Are Its Goals? How Does It Work?
• NBER — Business Cycle Dating Committee
• Milton Friedman & Anna Schwartz, A Monetary History of the United States (1963)
• Federal Reserve Bank of St. Louis — FRED database

Every Wunder lesson is built from real, reputable sources — never invented.

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