Leitner

Learn macroeconomics by scrubbing through the shock

The AD–AS diagram is taught as two pictures, before and after, and the thing you are examined on is the path between them. A supply shock and a demand shock end up looking similar in the after picture and behave nothing alike on the way there. So the block below makes the quarters a slider, and the curve that is moving at each stage is the answer to most exam questions in this subject.

Choose a shock and scrub forward. Short-run supply walks back to potential; the price level does not come back.

Macroeconomics · shocksQ0 · GAP -3.2%
ADSRASLRAS · POTENTIALπ 3.5%GAP -3.2%
output gap-3.2%inflation3.5%

Quarter zero: a supply shock: costs rise at every level of output, so short-run supply moves up and left. Output is below potential by 3.2% and inflation is at 3.5%. Nothing has adjusted yet — this is the picture the textbook draws second.

Start a macroeconomics planThe first lesson of every plan is free

What people come here to do

You describe the goal in your own words and it asks questions back until the plan is one you would actually follow. These are the shapes that goal usually takes.

  • Pass a macroeconomics paper in a few weeks
  • Follow the argument about interest rates in the news
  • Get the macro a finance or policy job assumes
  • Understand why inflation did what it did

What a macroeconomics plan covers

Not a fixed syllabus — the plan is built around your goal and cuts what does not serve it. These are the topics it draws from, and whatever you get wrong comes back until it stops coming back.

Output, inflation and the output gap
AD, SRAS, LRAS and shocks to each
Monetary policy and the transmission mechanism
Fiscal policy, deficits and debt
Expectations and why they move everything
Open economies and exchange rates

Other subjects

The mechanics are the same whatever the subject — a slider is a slider whether it is moving a coefficient or a rate of return. What changes is what it is a slider for.

Or see how it works and what it costs.