Introductory Macroeconomics, Hilary Term 2026
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Tutor
Tutorials
Tutorials take place in my room at the top of Staircase 1.
| Th. 11:15 - De Nonneville, Murray, Zhang |
| Th. 2:00 - Doepke, Lee, Sulaiman |
| Th. 3:15 - Gupta, Li |
| F. 11:00 - Holland-Kaye, Whichello, Dias |
| F. 2:00 - Easton, Jones, Nicholl |
| F. 3:15 - Tucker, Nakatani, Garner |
Schedule overview
| Week | Topic | ||
| 1 | GDP | ||
| 2 | Economic Growth | ||
| 3 | Growth and technical progress | ||
| 4 | Building blocks: money & inflation, the labour market | ||
| 5 | Building blocks of aggregate demand: consumption and investment | ||
| 6 | A model for the short run: IS-LM | ||
| 7 | The supply side: the Phillips Curve | ||
| 8 | The open economy |
Teaching
Assignments
Preparing - by completing the assignments in advance - is a requirement for attending the
tutorial. If you think you will not be able to complete an assignment on time, contact me
in advance to discuss the possibility of an extension.
Essays
Essays should be about 1500 words, should have a bibliography listing any sources
used, and should be submitted by 12:00 on the day before your tutorial.
Please submit your essays in pdf format by e-mail.
Essays are about both substance and style - style in the sense of crafting a persuasive argument,
not in the sense of ornament. A good essay will display lucid economic reasoning, will make
use of tools like diagrams as appropriate, and will bring relevant evidence to bear.
Feel free to start your research with websites and journalistic sources,
but try to consult a few sources authored by professional researchers
and published in academic journals (or working papers) or policy reports.
Problem sets
Some weeks you will be set some mathematical or diagrammatic problems to solve. Unlike the essays,
problem sets do not need to be submitted in advance. Bring your problem sets to the tutorial.
Please attach a cover sheet on which you indicate and briefly describe
any difficulties you have had. This helps me know where to focus my attention when I look
over your work, what feedback you most want. You are a large group of students this term,
so I will not be able to review in detail every answer to every question.
Textbooks
As in the microeconomics course, there is not one unique textbook. There are lots of good options and they all present basically the same material. I will rely on, and refer you to, three main texts:
N. Gregory Mankiw & Mark P. Taylor, Macroeconomics. 2nd European Edition.
I will give chapter numbers and titles from the above, but there are several
functionally-equivalent versions of this book in the College library.
Olivier Blanchard, Alessia Amighini, and Francesco Giavazzi, Macroeconomics. A European Perspective.
We will rely on this one for developing aggregate supply and the Phillips curve based on a model of the
labour market. There are again several versions of this text that are essentially equivalent. We have
2 copies of the 2010 1st edition in the College library. Other editions are available at various
Oxford libraries (e.g. Social Sciences). The core of the book is the same as what you will find in
Olivier Blanchard & David Johnson, Macroeconomics, global edition. We have 5 copies of the 6th global
edition in the College library. You will find single-authored (Blanchard only) macro textbooks that
develop the labour market, Phillips curve, and aggregate supply in the same way; they are equally good.
The CORE Econ Team, The Economy 2.0: Macroeconomics (2023). Open access e-text available online
here. Print version available soon.
A note on Jones. The lectures will be closely based on Charles Jones' textbook. I do not use that book because I don't like the way it mixes a model of how the economy works with a model of how policy responds to the economy; it becomes hard to tell which is which. I also prefer other expositions of aggregate supply. Finally, I am not (yet) persuaded that it's better to define variables in terms of deviations from long-run values rather than in absolute terms. There are no contradictions between what we will do in tutorials and what will be presented in lectures (and in the Jones book). There are differences in notation and exposition, but you will be learning the same models.
Week by week schedule
Week 1: GDP
This week we consider gross domestic product, the measure of output and income that
macroeconomists typically focus on. We will also look at a simple model of how incomes
are determined and how it comes to be that aggregate expenditure equals aggregate
output in a model with flexible prices and market-clearing.
Textbook readings:
Mankiw & Taylor, Chs. 1-3 ('The Science of Macroeconomics', 'The Data of Macroeconomics',
'National Income: Where It Comes From and Where It goes').
CORE, Unit 3 ('Aggregate Demand and the Multiplier Model'), sections 1-4.
No problems for this week - be prepared to discuss equilibrium in a classical (flexible price, market clearing) economy
Essay topic:
Is GDP an imperfect but workable measure of welfare, or fundamentally flawed?
This is a big topic, with issues ranging from the nitty-gritty of calculations to
important philosophical considerations, from the home to the environment, the internet,
and the financial sector. While you should show an awareness of this range of
issues, you cannot develop more than a couple of ideas in any depth in a short essay.
That is fine.
A nice starting point could be Diane Coyle's GDP: A Brief But Affectionate History
(Princeton: Princeton UP, 2014), esp. Chs. 1, 2, 5, and 6. This is a short volume that
you could read in an afternoon. It is discursive and a little short of detail, but
motivates the topic very well. One review is
here. Coyle has other, shorter pieces, and a recently published new book, The Measure
of Progres. Counting What Really Matters.
Another route into the topic could be the articles in the Journal of Economic Perspectives
"Symposium: Are Measures of Economic Growth Biased?" (vol. 31 no. 2, 2017),
accessible here.
Further, accessible overviews are an Economist article of 2016, "The Trouble with GDP",
here, and a 2010
New York Times article, "The Rise and Fall of the G.D.P."
here.
A quick search should yield more recent, similar articles.
Piketty and coauthors have worked on 'distributional national accounts'. Brynjolfsson is the
name most associated with valuing digital goods.
2018 Nobel Prize winner William Nordhaus made a number of important contributions to the
measurement of output and welfare. One of these was Nordhaus, William and James Tobin,
"Is Growth Obsolete?" in Economic Research: Retrospect and Prospect, vol. 5:
Economic Growth, NBER, 1972.
This week we study the Solow model of economic growth. When I say 'the Solow model'
I mean a model with the following elements: a constant returns to scale aggregate
production function with inputs capital, labour, and a technology parameter; capital accumulation;
an exogenous investment rate; exogenous population growth; and exogenous technical progress. It is
common to first present a simplified version where technology, and sometimes the labour force, are held constant.
That is not the full Solow model.
Textbook readings:
Mankiw & Taylor Chs. 8-9.
Blanchard, Amighini & Giavazzi, Chs. 11-13.
Jones, Chs. 4-6.
Burda & Wyplosz, Macroeconomics. A European Text (7th ed.), Ch. 3.
CORE, Unit 9. (Good but less useful for the pure mechanics of the Solow model.)
Problems for this week: here.
No essay this week.
This week we continue to discuss economic growth, now considering technical change in
greater detail.
Textbook readings: as last week. Consider also C. Jones, Introduction to Economic Growth
2e (London: Norton, 2002). Some of it is too technical for our purposes, but it does have
a chapter on natural resources, for example.
A recent, interesting-looking growth accounting exercise is Fernald,
Inklaar, and Ruzic, "The Productivity Slowdown in Advanced Economies: Common Shocks or
Common Trends?" Federal Reserve Bank of San Francisco Working Paper 2023-07
(Feb. 2023).
Problems for this week: here.
Essay topic: pick one of the following.
a. How successfully does the Solow model with exogenous population growth and technical change explain why some countries are rich and others poor? Does it predict the poor will catch up with the rich?
b. Population growth is considered a major threat to prosperity in poorer countries. China famously adopted a one-child policy to reduce population growth. Does the Solow model with technological progress justify such worries?
c. In his much-discussed Capital in the Twenty-First Century,Thomas Piketty predicted
that inequality in the advanced economies will get worse in decades to come: the capital/income
ratio will rise, and capital's share of income will grow bigger and bigger. According
to the Solow model with exogenous population growth and technical change,
is this a likely prospect?
This topic is potentially difficult. You will quickly find many reviews of Piketty's
book, which could be good starting places, for example Robert Solow's "Thomas Piketty
Is Right. Everything You Need to Know About Capital in the Twenty-First Century,"
New Republic, 23 April 2014. Or (then) MIT graduate student M. Rognlie's critique
"A note on Piketty and diminishing returns to capital". Piketty has an article in the
Journal of Economic Perspectives, vol. 29 no. 1 (Winter 2015).
This week we lay foundations for modelling the supply side of the aggregate economy,
focussing on on the labour market. The relationship between wages and unemployment
set out in the "competing claims" or "WS-PS" model in the CORE Macroeconomics book,
is how we will later derive a Phillips Curve relating inflation and output.
It will serve you well in the second year macro course.
Readings:
The labour market
CORE, The Economy 2.0, Macroeconomics, Unit 1,
Unit 2.
(See also Unit 6 in the
Microeconomics volume.)
Blanchard, Amighini & Giavazzi: Ch. 7.
Mankiw & Taylor Ch. 7; Jones Ch. 7. These textbook chapters provide a useful overview
of data, definitions, and theories of unemployment. They do not develop the competing
claims/WS-PS model.
Money and inflation
Mankiw & Taylor, Chs. 4-5.
Jones, Ch. 8.
Core, The Economy 2.0, Macroeconomics,
Unit 6. Not all of this is strictly relevant for this week's discussion, but it is all good.
Problems for this week: here.
Essay topic:
No essay this week.
This week we turn to the foundations of a theory of aggregate demand. We examine the microeconomics of consumption and investment, which are, respectively, the biggest and the most volatile components of aggregate demand.
Readings:
Jones: Chs. 16-17
Mankiw & Taylor: Chs. 18-19.
Blanchard, Amighini & Giavazzi: Ch. 16 ("Expectations, Output, and Policy")
CORE, The Economy 2.0, Microeconomics,
Unit 9
Problems for this week: here.
Essay topic:
"The life-cycle and permanent-income models of consumption teach us that household
expenditure is very stable, hence not important in business cycle fluctuations."
Do you agree or disagree?
In addition to the textbook readings given above, have a look at the recent
Journal of Economic Perspectives article by Mian and Sufi: "Finance and Business Cycles: The
Credit-Driven Household Demand Channel" (vol. 32, no. 3, Summer 2018).
Also useful are the Bank of England's 2014 Q3 Quarterly Bulletin
(here)
and the 2018 Parliamentary Briefing Paper on household debt
here. This non-technical early summary of research published in 2025 is also intertesting:
How Much Does Household Consumption Impact Business Cycles? by Matthes and Schwartzman.
If you wish to write about investment instead, e-mail me with a proposed topic.
Building in part on last week's work on consumption and investment, we develop a model of the economy in the short-run. Output is now determined by demand, rather than by full employment of the factors of production in an aggregate production function. The IS-LM model looks slightly different to what is presented in the Jones textbook and the lectures, but is not substantively different. Jones replaces the LM relationship, which describes equilibrium in financial markets and which is moved by monetary policy, with a simple choice of interest rate by the central bank. Jones also expresses variables in deviations from long-run values rather than as absolute magnitudes.
Readings:
Mankiw & Taylor (1e): Chs. 10-11 ("Aggregate Demand I" and "Aggregate Demand II") .
CORE, The Economy 2.0, Macroeconomics,
Unit 3 ("Aggregate demand and the multiplier model")
Blanchard, Amighini & Giavazzi: Ch. 5 "Goods and Financial Markets: the IS-LM Model"
Problems for this week: here.
Essay topic:
No essay this week.
The IS-LM model is a useful tool for understanding the demand side of macroeconomic
equilibrium, but it simply assumes that sufficient supply will be forthcoming, at
constant prices. We need to do better than that. So this week we look at aggregate
supply, as captured by the Phillips curve (PC). We build the PC on the foundation of
the 'competing claims'/'WS-PS' model of the labour market.
Other derivations are possible (see Mankiw & Taylor), but they arrive at the same place.
Readings:
CORE, The Economy 2.0, Units 4-5 ("Inflation and Unemployment", "Macroeconomic Policy")
Blanchard, Amighini & Giavazzi: Chs. 9 ("The Natural Rate of Unemployment and the Phillips Curve")
and 10 ("Inflation, Activity and Nominal Money Growth").
Blanchard and Johnson, Macroeconomics (6 ed.), Chs. 7-8 ("Putting All Markets
Together: The AS-AD Model," "The Phillips Curve, the Natural Rate of Unemployment, and
Inflation").
Mankiw & Taylor, Ch. 13 ("Aggregate Supply and the Short-Run Tradeoff between
Inflation and Unemployment"). M&T offer alternative derivations of the PC.
Problem for this week: here.
Essay topic:
Pick one of the following.
a. Do economies have a 'natural' rate of unemployment? Can policymakers know what it is?
The textbooks are the right place to start. Consider Howell, Baker, Glyn, and Schmitt,
"Are Protective Labor Market Institutions at the Root of Unemployment? A Critical Review
of the Evidence," Capitalism and Society, vol. 2, no. 1 (2007), for a nice survey of
empirical work on the determinants of unemployment (here).
Heckman has a comment on the paper in the same issue.There are a number of useful,
accessible articles in the Journal of Economic Perspectives.
These readings are not especially up-to-date; I'd be happy if you found more recent work
for your essays!
b. Why don't governments use fiscal policy aggressively to fight economic contractions? Did
they ever?
A good essay will probably have at least some empirical (= real world)
content. The "did they ever?" part of the question is an invitation to consider
historical experiences rather than only the recent Great Recession. Just a suggestion.
A couple of useful starting points for fiscal policy are:
Auerbach, Gale, and Harris, "Activist Fiscal Policy," Journal of Economic Perspectives,
vol. 24 (2010), no. 4. Ramey, V., "Can Government Purchases Stimulate the Economy?" Journal of Economic
Literature, vol. 49 (2011) no. 3.
An example of historical work on fiscal policy is
Crafts and Mills, "Self-defeating austerity? Evidence from 1930s' Britain,"
European Review of Economic History, vol. 19 (2015). (Some of
the econometrics get a bit hairy in this paper, but you can skip those bits and still get
a lot out of it.)
c. In an economy where artificial intelligence can perform an increasing range of productive
tasks, under what conditions could the real wages of most workers fall substantially?
Use an aggregate production framework in your answer.
This topic is not closely related to the course content, but I don't want you to feel
that there's no opportunity in the course to discuss the big issues you care about. And this
is a topic I think is important and would like to learn more about. "Use an
aggregate production function" (with tasks) doesn't mean you have to do any derivations or
find any solutions yourself, just that you should understand how such a function works and
how its parameters determine/describe the nature and pace of technical change, the elasticities
of substitution, the way labour's share of income evolves, and so on. Acemoglu has made
important contributions in this area. See for example Acemoglu and Restrepo, "Automation
and New Tasks: How Technology Displaces and Reinstates Labor", Journal of Economic
Perspectives, vol. 33, no. 2 (Spring 2019). A recent review article is Acemoglu and
Restrepo, "A task-based approach to inequality,"Oxford Open Economics, vol. 3 (2024),
pp. i906-i929.
This week we turn back to aggregate demand, now focussing on net exports and their counterpart in the balance of payments, net capital flows. A new question that arises when we imagine an integrated global financial market is whether interest rates in individual economies can differ from those prevailing in the rest of the world. The simplest approach is to assume they cannot, which gives us the Mundell-Fleming model as set out in Mankiw & Taylor. You should start there. A more sophisticated treatment allows for temporary deviations, if the exchange rate also deviates temporarily from a long-run value, such that currency market traders anticipate a depreciation or appreciation offseting the interest rate differential. This version is explained in Blanchard & Johnson or Blanchard, Amighini & Giavazzi. (Jones, meanwhile, offers a sort of hybrid: the home interest rate can vary relative to international rates, but the mechanics of how and why and for how long are not spelled out.)
Readings:
Mankiw & Taylor (2nd European ed. 2014), Ch. 6 ("The Open Economy") and 13 ("The Open Economy Revisited")
Chapter 6 defines the relevant variables (e.g. the real exchange rate) and sets out
how foreign trade fits into the classical model of an economy with perfectly competitive markets
and perfectly flexible wages and prices. Chapter 13 considers the same issues in
an IS-LM context, assuming a small economy in a big world. In the first European edition,
the relevant chapters are 5 and 13.
Blanchard & Johnson (6e), Chs. 18-20, or Blanchard, Amighini & Giavazzi, Ch. 6, 18.
Blanchard et al. investigate the issues in greater detail and with more sophistication, in
particular regarding the interest-rate -- exchange-rate connection. The material is
correspondingly more difficult than in Mankiw & Taylor. Chapter 18 defines variables
and discusses uncovered interest rate parity. Chapter 19 is relatively self-contained
and looks at how the exchange rate and net exports influence output. Chapter 20 puts this
all together into an open-economy IS-LM model. Moving along the IS curve, the interest
rate affects not only investment (and possibly consumption), but also the exchange rate,
and thus net exports.
Jones (4e, international student edition) covers the open economy in chapters 19 (definitions
and basic ideas) and 20 (a model in which interest rates can vary, with little explanation).
CORE, The Economy 2.0, Unit 7 ("Macroeconomic Policy in the Global Economy").
As the unit
title suggests, the CORE textbook starts from real world data and policy challenges, and
works back towards the assumptions and reasoning that can make sense of them, without
ever presenting a full, explicit model in diagrams and equations. (The others proceed in
the opposite direction, starting with definitions, introducing assumptions, building a model,
and then discussing policy in the real world.)
Problems for this week: here.
Essay topic:
No essay this week