20 Macroeconomic Principles in 140 characters or less

By Crystal Y.

Welcome to Economics 101, Twitter-style! Bite-sized bits of knowledge below:

1. Philips curve: unemployment up, inflation down. inflation up, unemployment down. If politicians say both down+lie, only true if we all die.

2. Factors of production: land, labor, capital, entrepreneurship. Memory tip: think entrepreneur brings together LLC (also ltd liability comp)!

3. Inflation: when prices go up, up, up. Could be due to (not full list): increase in money supply, unemployment down (short-term), etc.

4. Law of diminishing marginal utility: As you get more of a good thing, it becomes less good. Eating 1 burger is heaven, eating 20 is stupid.

5. Natural rate of unemployment: about constant 5%. People btwn jobs (frictional), mall Santas jobless in the summer (seasonal)…it’s natural.

6. Aggregate demand(AD)=GDP(gross domestic product)=C+I+G+E-M=consumption+investment+govt spending+exports-imports. Fiscal policy->G up, AD up

7. Say’s law says the supply creates its own demand. There will be no shortages and no surpluses. Supply will be equal to demand. Magic! :O

8. Monetary policy (control $ supply): Loose-Fed buys bonds&prices up, interest rates down Tight-Fed sells bonds&prices down, interest rates up

9. Opportunity cost-what you give up to get something else. For example, trade-off of watching TV is failing the econ test b/c of not studying

10. Fiscal policy (Keynesian): GOVT IS SUPER POWERFUL! Expansionary (deficit): spend $, cut taxes Contractionary (surplus): save $, raise taxes

11. Keynesian econ theory: Companies can sometimes be dumb. So let the way smarter govt fix things w/fiscal policy! @barackobama is Keynesian.

12. Production possibility curve: We can make 12 dice+0 cake, 10d+1c, 6d+2c, or 0d+3c. More=beyond current resources. Less=inefficient.

13. Demand (D): In 1996-Toy fad, more want Tickle Me Elmos->D up->scarcity (D>S)->price level up, adjust for S. $29 toy sold for $1500+

14. Supply (S): 1920-1933 in US-Prohibition, alcohol made illegal->S down->scarcity (D>S)->black market for alcohol and price level up.

15. Bimetallism: ratios of money against two commodities (ex. gold+silver). Money is expressed as gold+silver, like fractions with pizza+donuts

16. Politician: Reelect me! GDP is up! Economist: GDP is always up, dummy. GDP deflator=nominal GDP/real GDP->shows real price level+inflation

17. Recession: When there is less economic activity, GDP goes down, part of business cycle. Depression: When recession is v. long, banks fail.

18. Supply-side econ: Let’s change supply! If we cut income taxes and business taxes, consumers will get cheaper stuff. APUSHers:NOT Reagonomics

19. Tax: progressive (amt $ up,tax rate up->income tax), regressive (amt $ up,tax rate down->poll tax), proportional (tax rate fixed->sales tax)

20. Classical/laissez-faire econ: govt can be lazy+do nothing if econ bad/good, market will take care of itself magically (via invisible hand).