ECON 102 Lecture Notes - Lecture 1: Macroeconomics, Falsifiability, Microeconomics
Document Summary
Microeconomics = looking at small set of household and firms. Macroeconomics = looking at the whole economy, focus on growth/ fluctuations/ optimal policy. Both micro and macro apply standard neoclassical theory, and use an equilbrium approach. Equilibrium approach = agents optimise given preferences/ technology. = agents actions are compatible with one another. For equilibrium approach to work, need to be explicit about assumptions, make models, confront theory with data. =theories cannot be vague, predictions must be falsifiable. Macroeconomics is important because it impacts our daily life, helps us understand the world, policy makers need it to implement good policy, basic understanding, helps to inform us about our politicians. Use survey of americans and economists on the economy. Systematic biases (bias from the system that averages out), explained only by factors other than economic formation. Public rely on emotion rather than analytical responses. Agree on growth theory, less agreement on business cycle theory.
