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Principles of Macroeconomics (Video)

Marginal Revolution University

We’ll cover fundamental questions such as: Why do some countries grow rich while others remain poor? How important is a country’s banking system — and what happened during the recent financial crisis? How did Zimbabwe end up with an inflation rate that rose into the quadrillions?

  • What Is Gross Domestic Product (GDP)?
    Picture the economy as a giant supermarket, with billions of goods and services inside. At the checkout line, you watch as the cashier rings up the price for each finished good or service sold. What have you just observed? The cashier is computing a very...
  • Costs of Inflation: Price Confusion and Money Illusion
    The inflation rate can be somewhat volatile and unpredictable. For example, let’s take the period between 1964 and 1983 in the U.S. The inflation rate jumped around from 1.3% in 1964 to 5.9% in 1970, and all the way up to 14% in in 1980, before dipping...
  • Changes in Velocity
    What happens when aggregate demand shifts because of a change in the velocity of money? You’ll recall from earlier videos that an increase or decrease in velocity means that money is changing hands at a faster or slower rate. Changes in velocity are...
  • The Short-Run Aggregate Supply Curve
    In this video, we explore how rapid shocks to the aggregate demand curve can cause business fluctuations. As the government increases the money supply, aggregate demand also increases. A baker, for example, may see greater demand for her baked goods,...
  • Sticky Wages
    Imagine you’re an employer during a recession, and you desperately need to cut labor costs to keep your firm afloat. Are you more likely to cut wages across the board for all employees, or institute layoffs for only some? While it may seem that wage cuts...
  • The Long-Run Aggregate Supply Curve
    We previously discussed how economic growth depends on the combination of ideas, human and physical capital, and good institutions. The fundamental factors, at least in the long run, are not dependent on inflation. The long-run aggregate supply curve,...
  • The Aggregate Demand Curve
    The aggregate demand-aggregate supply model, or AD-AS model, can help us understand business fluctuations. We’ll start exploring this model by focusing on the aggregate demand curve. The aggregate demand curve shows us all of the possible combinations of...
  • Why Governments Create Inflation
    Inflation can carry with it quite a few costs. But some governments, like Zimbabwe under President Robert Mugabe in the early 2000s, will go out of their to way to create inflation. Why? Well, in the Zimbabwe example, the government printed the money and...
  • Costs of Inflation: Financial Intermediation Failure
    In the previous video, we learned that inflation can add noise to price signals resulting in some costly mistakes from price confusion and money illusion. Now, we’ll look at how it can interfere with long-term contracting with financial intermediaries....
  • Causes of Inflation
    In the last video, we learned the quantity theory of money and its corresponding identity equation: M x V = P x Y For a quick refresher: - M is the money supply. - V is the velocity of money. - P is the price level. - And Y is the real GDP. In this video...
  • Office Hours: Costs of Inflation
    Inflation can throw a kink in your savings plans. To accurately know your rate of return, you need to do a little more than calculate what you’ll receive off of the nominal interest rate. First off, returns on savings are taxed. Depending on where you...
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