# Macroeconomics ## Key Elements - Data - Models - Economic system is extremely complex. - There are approx. 300M decision makers in the US making economic decisions on a daily basis - Without simplification, economics is hopeless - Milton Friedman: map-analogy. An economic model is a picture of the economic system that leaves certain features out and highlights others, which are relevant for the question at hand. - Models are mathematically formulated, but experiments are difficult/impossible. Relies mostly on passive observations. (akin to astronomy and climatology) - A social science, deals with human behavior. akin to [[psychology]]. - [[microeconomics-principles|Micro]]foundation - Lucas critique: if something is the economy changes, economic agents may change their behavior, so that we have to be explicit about what is stable/structural. - Dynamics and expectations - Agents are forward-looking, expectations matter. - Agents do not make systematic mistakes? -- they sometimes do - Systemic interdependence ## Concepts - [[national-accounting|National Accounting]] and [[gdp|GDP]], [[inflation|Inflation]], and [[saving|Saving]].