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Learn macroeconomics by scrubbing through the shock

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.

Choose a shock and scrub forward: short-run supply walks back to potential, but the price level does not come back.

The AD-AS diagram is taught as two pictures, before and after, but you are examined on the path between them. A supply shock and a demand shock can look alike afterwards and behave nothing alike on the way there. The block below makes the quarters a slider, and which curve is moving at each stage is often what the exam question is really asking.

What people come here to do

You describe the goal in your own words and the plan asks questions back until it is one you would follow. Goals usually look like these.

  • “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

There is no fixed syllabus. The plan is built around your goal and drops what it does not need. These are the topics it draws from.

  • 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